Now this kitchen solution company Stove Kraft will be the fourth IPO of the month and year. Here are the details on the issue and which investors can bet on the issue and for how long?
The public issue of Stove Kraft comprises fresh issue of Rs. 95 crore together with OFS of 82.50 lakh equity shares by promoters and investors. Price band has been decided at Rs 384-385 per share. And the issue will close for subscription on January 28. Already, the company has raked Rs. 185 crore through anchor book.
About Stove Kraft:
The company manufactures kitchen appliance under the brand Gilma and Pigeon and also proposes to begin manufacturing of kitchen solutions under the BLACK + DECKER brand.
The proceeds from the issue will be put towards repayment of debt.
The company logged revenue CAGR of 13 percent over FY 18-20. Over the period from FY18-20, there had been low operating margin with EBITDA ranging between 2-5 percent. In the financial year 2019-20, Stove Kraft's profit rose to Rs 3.2 crore from Rs 0.7 crore in FY19 and loss of Rs 12 crore in FY18. The operating revenues in FY20 rose to Rs 669.9 crore from Rs 640.9 crore in FY19 and Rs 529 crore in FY19.
"The company has priced its issue at 34.5x PE on a trailing basis, its peers TTK Prestige and Hawkins Cookers are currently trading at 61.0x and 47.5x respectively. On FY20 basis, the company priced its issue at 301.5x PE. Due to cost cutting measures, company margins improved in the first half of FY21 which is not sustainable. Cost such as travelling, advertisement reduced in H1FY21 due to COVID-19 are going to come back once business comes back to normalcy," said Angel Broking.
So, as the valuations for the issue are deemed high in comparison to listed peers on FY20 earnings, lower brand value and likely unsustainability in the profitability logged in the H1FY21, brokerages are neutral are on the issue. Sustainability of improved profitability performance remains a critical factor, said ICICI Direct.
Should you subscribe to Stove Kraft IPO?
For small listing gains, investors can subscribe to the issue to only exit after listing as the issue does not seems attractive and this too can be betted on by investors who have a high risk profile. While, moderate to risk-averse investors can avoid the issue for now unless there is no clarification on the various issues raised around the public issue.