Stove Kraft Limited IPO

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About Stove-Kraft

a. Founded in the year 1999, Stove-Kraft has grown from a single brand small LPG stove manufacturing company to become one of India’s leading manufacturers of kitchen appliances, with revenue from operations of ₹670 Crores in FY20.

Stove- Kraft Limited is a kitchen solutions and an emerging home solutions brand in India. It is one of the leading brands for kitchen appliances in India, and one of the dominant players for pressure cookers and amongst the market leaders in the sale of free standing hobs and cooktops (Source: F&S Report, sponsored by our Company).

b. Stove-Kraft is engaged in the manufacture and retail of a wide and diverse suite of kitchen solutions under Pigeon and Gilma brands, and propose to commence manufacturing of kitchen solutions under the BLACK + DECKER brand, covering the entire range of value, semi-premium and premium kitchen solutions, respectively.

c. The kitchen solutions comprise of cookware and cooking appliances across the brands, and the home solutions comprise various household utilities, including consumer lighting.

Brand wise sales in FY19-20

a) Pigeon (Semi-Premium) brand under which company sell free standing hobs, cooktops, non-stick cookware, LPG gas stoves and induction cooktops contributes 86% of the total sales.

b) Gilma (Semi-Premium) brand under which company sell chimneys, hobs and cooktops contributes 5% of the total sales.

c) BLACK + DECKER (Premium brand) under which company sells blenders and juicers, breakfast appliances, small cooking appliances and small domestic appliances contributes 3% of the total sales.

In 2016, they further diversified the Pigeon brand by launching LED products under it and in 2019, commenced manufacturing LED products at the Bengaluru Facility and in the same year, they have also entered the premium segment in 2016 pursuant to exclusive BLACK + DECKER Brand Licensing Agreement with Stanley Black & Decker, Inc. and The Black and Decker Corporation, which enables them to exclusively retail, and provide post-sales services in relation to, a wide range of products such as blenders and juicers, breakfast appliances, small cooking appliances and small domestic appliances (as defined under the BLACK + DECKER Brand Licensing Agreement) in India under the BLACK + DECKER brand, up to December 31, 2027.

Where they manufacture product?

Stove-Kraft has two manufacturing facilities at Bengaluru (Karnataka) and Baddi (Himachal Pradesh).

a) Bengaluru Facility is spread over approximately 120 46 acres and five guntas, out of which 30 acres and one gunta is available for future expansion. As of September 30, 2020, it had an installed annual production capacity of 38.40 million units, with the capability to manufacture products in the pressure cookers, non-stick cookware (roller coated and spray coated), LPG stoves, mixer grinders, LED bulbs, iron and induction cooktops categories.

b) Baddi Facility, focused on the Oil Company Business, which includes manufacturing and co-branding of products with such Companies, (“OCB”) has an installed capacity of 2.80 million units per annum, with the capability to manufacture products such as LPG stoves and inner lid cooker.

How they sell products?

As of September 30, 2020, they have separate distribution network for each Pigeon, Gilma and BLACK + DECKER brands. They have 651 distributors in 27 states and five union territories of India and 12 distributors for the products that are exported. The dealer network further comprising of over 45,475 retail outlets, which are driven through a sales force of 566 personnel.

Objects of the Stove Kraft Limited IPO:

The IPO consist of Fresh Issue and OFS. 1. Fresh Issue (95 Crores) and same will be utilized for following purpose a) To make the repayment or prepayment payment of company's borrowings fully or partially b) To meet general corporate purposes. 2. OFS (317 Crores) Here, existing investors are selling stakes.

Stove Kraft Limited IPO Details:

Open Date: Jan 25 2021
Close Date: Jan 28 2021
Total Shares: 10701298
Face Value: ₹ 10 Per Equity Share
Issue Type: book Building
Issue Size: 412 Cr.
Lot Size: 38 Shares
Issue Price: ₹ 384-385 Per Equity Share
Listing At: NSE,BSE
Listing Date: Feb 05 2021

Promoters And Management:

The Company was founded by the Promoter, Rajendra Gandhi, a first generation entrepreneur with over 21 years of experience in the kitchen appliances industry.

Financials of Stove Kraft Limited IPO:

P&L Statement
Particulars (Cr) 30-Sep-20 30-Sep-19 31-Mar-20 31-Mar-19 31-Mar-18
Revenue 329 316 670 641 529
COGS 160 153 323 318 241
Gross Margin 51% 52% 52% 50% 54%
Purchase of Stock in Trade 61 72 129 133 120
Interest Cost 10 10 21 18 17
Employee Cost 31 39 82 70 59
Other Expenses 38 52 121 103 101
EBITDA 46 21 37 31 15
OPM 14% 7% 6% 5% 3%
Other Income 0.7 2 3 1 5
Depreciation 7 6 12 12 11
Profit Before Tax 29 5 3 1 -13
Tax 0 0.4 0.4 0.5 -0.5
Net Profit 29 4 3 0.7 -12
NPM 9% 1% 0% 0% -2%
Shares 2.47 2.47 2.47 2.47 1.89
EPS 11.64 1.77 1.28 0.33 -6.35
Net Worth -30 -59 -60 -64 -180
RONW -97% -7% -5% -1% -7%
Balance Sheet
Particulars 30-Sep-20 30-Sep-19 31-Mar-20 31-Mar-19 31-Mar-18
Share Capital 24.7 24.7 24.7 24.7 18.9
Reserves -55 -84 -85 -89 -199
Borrowings 299 317 326 310 392
Other Liabilities 229 235 205 180 182
Total Liabilities 498 493 471 426 394
Fixed Assets 200 181 193 179 182
CWIP 0.7 0.3 4.2 0.9 0.6
Investments 0 0 0 0 0
Other Assets 297 312 274 246 211
Total Assets 498 493 471 426 394

Comparison With Peers:

The peers like TTK Prestige and Hawkins Cookers are currently trading at 61.0x and 47.5x respectively.

Recommendation on Stove Kraft Limited IPO:

Review and Recommendation of InvestorZone are 3/10 1. Stove-Kraft is asking valuation of 320x based on last 3 years average EPS. Way ahead as compare to its peers. 2. The OPM and NPM margins are looking really good in first 6MFY21. However, that is due to less employees and Other expenses due to COVID-19. This will come back again and so, the margins will not sustain. 3. Return ratios, and margins are very low as compared to peers. 4. Most of the money raised via IPO will go in promoters pocket.

Lead Manager of Stove Kraft Limited IPO:

  1. Edelweiss Capital Limited
  2. JM Financial Consultants Private Limited

Registrar of Stove Kraft Limited IPO:

  1. Kfin Technology Private Limited

Discussion on Stove Kraft Limited IPO:

    By seeing the JOSH or interest by retail investors, QIB and HNI both are also taking very interest to subscribe this issue and now retail is more than 4 x.

      Sorry, Retail only 2x. QIB & HNI subscription by mistake I have seen from Home First Finance IPO.

    Due to small quota for retail investors (10%), within 1 hour retail portion fully subscribed.

    Stove-Craft IPO is hitting the primary market next week.

    Just see the financials of 6MFY20 and 6MFY21.

    Gross margins are same. However, OPM and NPM are sky-high.

    How does it happens?

    See employees and other expenses, both have come down heavily.

    https://twitter.com/ZoneInvestor/status/1352580410274762753/photo/1

    This has resulted in improve performance.

    Most of the companies do this before launching IPO to get good valuation.

    The IPO money will mostly go in promoters pocket….

    Be careful in Stove-Kraft IPO.