The fourth IPO to launch this calendar comprises an offer for sale (OFS) of up to 6,90,700 shares by the company’s promoter, Rajendra Gandhi, up to 59,300 shares by promoter Sunita Rajendra Gandhi, up to 14,92,080 shares by Sequoia Capital India Growth Investment Holdings and up to 6,007,920 shares by SCI Growth Investments II, and a fresh issue of shares aggregating up to Rs 95 crore.
The price band for the IPO is fixed at Rs 384-385 apiece. At the upper end of the price band, the IPO is expected to fetch Rs 412.62 crore.
Grey market premium
Abhay Doshi, founder of UnlistedArena.com, who tracks grey market trends, said that the stock was surprisingly trading at a premium of Rs 100 in the grey market on Friday. However, as the market took a beating for the second straight session, that premium got erased fully.
Doshi said the market sentiment is hurt and that the issue is seen as the weakest among the ones that came of late.
“The company became profitable not so long ago and growth is not visible. Though the company has reported good numbers in the first six months, would that be sustainable? Nobody knows,” Doshi said.
The IPO is priced at 34.5 times PE on a trailing basis while peers TTK Prestige and Hawkins Cookers are currently trading at 61 times and 47.5 times, respectively.
Angel Broking said that the company has priced its issue at 301.5 times on FY20 basis.
“Due to cost cutting measures, the company margins improved in the H1FY21 which is not sustainable. Costs such as travelling, advertisement reduced in H1FY21 due to Covid-19 are going to come back once business comes back to normalcy,” the brokerage said.
The brokerage noted that the company’s brand value, margins and return on capital are lower than its peers and would not get such premium valuations as peers. It has a ‘neutral’ rating on the issue.
Analysts said that the trademark for their marquee brand ‘Pigeon’ is the subject matter of litigation. Besides, the company sources its raw materials from third parties with whom they do not have long term contracts.
Stove Kraft owns brands such as Pigeon and Gilma brands. As of September 30, 2020, Stove Kraft manufactures 79.75 per cent of Pigeon- and Gilma-branded products at backward integrated manufacturing facilities at Bengaluru (Karnataka) and Baddi (Himachal Pradesh).
The Bengaluru facility is spread over approximately 46 acres and 5 gunthas, out of which 30 acres and 1 gunthas is
available for future expansion. The company had an installed annual production capacity of 3.84 crore units, with capability to manufacture products in the pressure cookers, non-stick cookware, LPG stoves, mixer grinders and induction cooktops categories. The Baddi facility has an installed capacity of 0.28 crore units per annum, with capability to manufacture products such as LPG stoves.