Stove Kraft IPO: Upcoming IPO in 2021 👉In this Stove Kraft IPO Review, we tell you about Stove Kraft's business, analysed Stove Kraft's industry presence, talked about Stove Kraft's brands - Pigeon, Gilma, Black & Decker, IPO listing date, price band, IPO size, pros & cons of the investment in detail.
Stove Kraft Upcoming IPO in 2021
A new IPO is going to launch after Home first finance. The name of this company is Stove kraft. We will talk about it in detail. We will tell you about the entire industry, the company's business, and its financials. In the end, we will discuss the important dates that are important for you to know as an investor.
Without taking much time let's talk about the industry in which this company operates.
This company operates in the Kitchen appliances industry. This company works in the Kitchen appliances segment. It manufactures them through different brands and sells them to end customers.
Globally Kitchen appliances industry is valued at $253 billion. Let's evaluate India's appliances and consumer electronics. In 2017 the overall size of this market was Rs.20,500 cr. It is expected that by 2022 it will grow to Rs.31,500 cr. From here you can understand that growth has been witnessed in this sector in recent times. (also the growth is expected in the future) In 2017 Kitchen appliances market was valued at Rs.1,480 cr. It is expected that by 2022 growth will compound by 9.9%.(i.e. almost 10% growth every year) This market is expected to rise to Rs.2,300 cr by 2022. Stovekraft company mainly owns two brands-Pigeon and Gilma.
It manufactures different appliances and sells in the market. First, let's discuss about the company's market share in the cooktop segment. The market share of Pigeon and Gilma in cooktops is 25%. With a 25% share, Stovekraft is the market leader in the cooktop segment. Other players are Faber and Elica with 20.03% and 17.4% respectively. You can see other players and their market share as well. One thing is clear that Stovekraft is the market leader in this segment.
Now let's talk about the second part of goods that this company manufactures. It is a pressure cooker.
The company sells its components as end products to customers. Let's see the market share of the company in the pressure cooker segment. The market leader of this segment is Prestige that has a market share of 48%.
On the second number is Hawkins that has a market share of 34.7%. This market is hugely controlled by Prestige and Hawkins.
In recent times Stovekraft has started gaining a reasonable market share. As of now, Stovekraft has an 8.10% market share. So this was the discussion regarding the entire industry. Now let's discuss about Stovekraft. Stovektraft was incorporated as a company in 1999. It broadly manufactures kitchen appliances, equipment, and utensils. The company primarily manufactures these products. There are two manufacturing plants of this company- first in Baddi Himachal Pradesh and second in Bangalore. A distribution network is crucial for this industry so that products reach end customers. Stovekraft has 429 distributors that are spread across 24 states.
Stovekraft has mainly three brands under which it sells its products- Pigeon, Gilma, and Black+Decker. These are three different brands where it sells its products and markets them to customers.
Its Pigeon brand targets a value segment where the price range is normal. Maximum people are targeted over here. Let's understand Pigeon's importance for this company. This brand contributes 75% revenue to Stovekraft's total revenue. Its second brand Gilma is considered way more premium than the Pigeon brand. Here to keeps the price a little high. This product was launched to target the premium segment. Black+Decker purely targets a premium segment that has a high price tag. This brand was launched to target the premium segment. In India, this company has a presence in 24 states. Besides this, it also has a presence in counties like the USA, Srilanka, UK, etc. It has also tied up with brands. Let me give you an example in this regard.
If you go to Walmart there are chances that you will get to see Stovekraft products.
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Stove Kraft IPO Details
After discussing about the company now let's discuss its financials i.e. the performance of the company in recent years. Here you can see the company's revenue and profit.
In 2018 company's revenue was Rs.534 cr. At that time company used to operate at loss. Its loss was -Rs.12 cr. In 2019 company's revenue improved from Rs.534 cr to Rs.642 cr. While its profit reached the break-even point i.e. the company recovered the loss. While in 2020 the revenue and profit of the company were Rs.672 cr and Rs.3 cr respectively.
Let's discuss the half-year results of the company i.e. till 30 September 2020. The company booked revenue and profit of Rs.329 cr and Rs.28 cr respectively. The company's assets have improved recently. In 2018 company's assets were Rs.393 cr. This has currently improved to Rs.498 cr. The last 5 years' sales have compounded by 14% i.e. it has increased by 14% every year. The P/E ratio of the company as related to its valuation is 33.
An interesting fact is that the company has a high debt level as currently, it has Rs.200+cr debt. The operating profit margin of Stovekraft is around 13%. All this was the information that is important for you to know. But if you have to understand the true picture then let's make a comparison of the company with the industry. Now, let's compare the important parameters of Stovekraft with other companies that trade on the share market.
We have taken different competitors like Prestige, Hawkins, Orient Electric, and Bajaj Electrical.
The P/E ratio of the company is going to get listed at 33. Its competitor- Prestige has a P/E ratio of 56. While Hawkins has a P/E ratio of 48. As compared to major competitors this company's P/E ratio is not quite high. The industry P/E ratio is 62. As compared to the industry this company's P/E ratio is 50% less. After this, the next important thing for a company is its operating profit margin as compared to the competitors.
The operating profit margin of the company is 13.88%. While major competitors like Hawkins have an operating profit margin in this range.
Hawkins is a bit better than this as it has an operating profit margin of 14.54%. While Prestige has an operating profit margin of 12.27%.
The electrical company- Bajaj Electrical has an operating profit margin of 4.22%. While Orient Electric has an operating profit margin of 8.91%.
Here we can see the difference as Bajaj Electrical and Orient Electric also make other products that are not in competition with Stovekraft.
Pros and Cons of Stove Kraft
Now let's discuss the pros and cons of investing in this company. First, I will talk about the pros.
The first pro is the turnaround of the company from being loss-making for several years. It is now a profit-making company. The operating profit margin of the company of 13.8% is quite healthy as compared to other competitors. The second pro is the company's low P/E ratio as compared to the industry. As I told you it is almost 40% less than the industry. This segment's demand improves when urbanization occurs. Urbanization can be seen as the key growth driver for the company in recent times. A shift from the unorganized players has been seen in recent times i.e. the preference has shifted from unorganized segment to branded segment. In the coming time if this continues then this company can benefit from this. But the company's benefit will be known in the future.
The next pro is that this company operates in an industry that has not entered the stagnation phase. There are growth and stagnation phases for every industry. After stagnation, it grows at a slow pace. The industry in which this company operates has seen growth. It is expected that this particular industry can see further growth. The brands of this company like Pigeon are quite common and people recognize them well.
The first con is that company's shareholder's equity is negative. An implication of this is that when a company's liabilities are more than its assets then its shareholder's equity goes negative. In this case, as well the total company's liabilities are more than its assets hence its shareholder's equity is negative. (if you view their financial statements)
The second important thing is that the outstanding debt of the company is quite huge. Currently, the company has a debt of Rs.205 cr. Its major brand Pigeon (that contributes 75% revenue) is the subject matter of litigation. If some unfavorable formation/news emerges for this brand then this company can face a negative impact. As this company has a high dependency on this brand from where it gets 75% revenue.
The next important point is the company's dependency on its distributors as they are ones that advance it's products further. In the coming time, we will get to know how the company reduces its dependency on its distributors. Its alternate strategies to sell products through different routes will be known in the future. Dependency on one thing in a business can be a point of failure. The company must focus on this. This is not just important for the company but it is also important for you to know about failure points as an investor. Furthermore, the sales of the company are concentrated in South India. Also, the sales amount is outstanding. When sales are concentrated at one place then company's face challenges. A company must look for different channels and regions to diversity itself.
Stove Kraft IPO Date and Price
Now let's talk about important dates that are important for you to know as an investor if you are bidding for this company's IPO.
The bid for this IPO from 25 January to 28 January 2021. The tentative listing date of the company is kept as 5 February. Let me again tell you that it can be changed anytime. If any such information is there then we will update you from time to time.
The price band of this IPO is between Rs.384-385. You can bid at this price range. If you want to apply for 1 lot then you will have to apply for a minimum of 38 shares. The lot size is 38 shares and the price band is between Rs.384-385.
The total IPO size of the company is around Rs.412 cr. Out of this fresh issue that will be used in the company is Rs.95 cr. While the remaining Rs.317 cr is for Offer for sale (where the promoters want to sell i.e. encash their stake) This information is quite important for you i.e. the % of fresh issue and Offer for sale out of the total issue.
I hope you liked this article and the information shared is enough for you to decide/analyze the IPO.
You can further read about the industry and company in detail so that you can make the right decision to invest/not invest in this IPO. If you want to invest then do it for the long term. Comment below- Whether one should bid for this company's IPO. Also, state your reason in the comment.
We bring all articles for purely educational purposes. We don't give any buy/sell recommendations.
We just want to offer the right information to you so that you can decide the usage of your funds.
Happy investing!
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