Kitchen solutions and emerging home solutions brand Stove Kraft Limited is set to launch its IPO on January 25, 2021 [now live on Groww!]. The IPO will remain open for subscription till January 28, 2021. The price band for each equity share has been fixed at Rs.384 to Rs.385. Cover ahead are the details on the company’s financial health, strength, weaknesses etc that can help you decide whether to invest in Stove Kraft IPO or not. Read on!
Stove Kraft was founded by Rajendra Gandhi, a first-generation entrepreneur with over 21 years of experience in the kitchen appliances industry. The sector-specific experience and expertise of the company’s senior management have contributed significantly to its growth. The company has an extensive distributor and dealer network across the country and commercial arrangements with retail chains to ensure that its products reach the length and breadth of India.
Stove Kraft Limited started manufacturing kerosene wick stoves in 1994. By 1997, it became the largest manufacturer of LPG stoves in India. It was finally incorporated as a company in 1999 with brands like BPL, Marlex, and Inalsa as its OEMs.
Within the next two years, the company worked hard to reposition itself in the kitchen solutions market and launched the brands, Pigeon and Gilma in 2001. By 2003, the company had set up a cooktop manufacturing unit at Baddi in Himachal Pradesh.
Once its manufacturing processes were in place, the company tied up with petroleum marketing companies to increase its presence in the country. In 2007, Stove Kraft moved to India’s largest single-location manufacturing unit in Bangalore.
The company received a private equity infusion by Sequoia Capital in 2010 and the second round of infusion in 2013. In 2014, Stove Kraft bagged major orders from huge American chain stores like Walmart, Big Lots, etc. Apart from the USA, the company has also garnered an extensive global presence across the Middle East, Kenya, Uganda, Qatar, Sri Lanka, Fiji, Bahrain, Kuwait, Oman, and Tanzania.
Here is a quick look at the financial performance of Stove Kraft Limited over the last five years:
|Profit After Tax||3.17||0.74||-12.02||-18.5||-25.25|
All amounts in INR Crore
A quick glance at the financial performance of Stove Kraft over the last five years highlights the fact that there has been significant growth in revenue. During this period, the total income of the company showed growth at a CAGR of 14.16%. The assets of the company grew at a CAGR of 11.45%.
It is important to note here that the company’s Pigeon brand contributes to the majority portion of its revenue. As of 2019, Pigeon contributed to around 90% of Stove Kraft’s total revenue, Gilma contributed around 2.5% and Black + Decker contributed around 2.3%.
Also, if you look at the profitability of the company, until 2018, Stove Kraft was not booking profits. However, it has managed to reverse this trend since 2019. Its long-term debt has also grown at a CAGR of 57.85%. The company intends to repay a major part of its borrowings using the funds raised by the IPO.
The kitchen appliances market in India was around Rs.1485 crores in 2017 and is expected to cross the Rs.2300 mark by 2022. The expected growth is at a CAGR of 9.9%. The primary drivers of this growth are increased urbanization, a larger proportion of the young population, and a steady increase in consumer spending. Also, while there are many companies in the kitchen appliances industry, a few companies hold the majority market share.
Kitchen Appliance is a broad-level term and includes various things. These appliances can be categorized into two primary categories –
Let’s look at the valuation factors of Stove Kraft in comparison with its peers (for Fiscal 2020):
According to the RHP, the industry average P/E Ratio is 123.82. If we take the upper limit of the price band, i.e. Rs.385 as the market price for the sake of calculation, then the P/E Ratio would be 385/1.05 = 366.67.
Here are some things that you need to keep in mind before investing in the Stove Kraft IPO: