1
Please refer to important disclosures at the end of this report
1
1
Emerging Home Solutions Brand
Stove Kraft is a kitchen solutions and an emerging home solutions brand. Further,
Company is one of the leading brands for kitchen appliances in India and is one of
the dominant players for pressure cookers and amongst the market leaders in the
sale of free standing hobs and cooktops.
Positives: (a) A one stop shop for well recognized, award winning portfolio of
kitchen solutions brands with a diverse range of products across consumer
preferences (b) Widespread, well connected distribution network with a presence
across multiple retail channels and a dedicated after-sales network
(c) Manufacturing capability with efficient backward integration (d) Professional
management and extensive experience in the kitchen solutions industry, and a
young and dynamic workforce.
Investment concerns: (a) The trademark for their marquee brand ‘Pigeon’ is the
subject matter of litigation (b) Company source their raw materials from third
parties with whom they do not have long term contract (c) Company rely heavily on
their brand portfolio, and their inability to successfully maintain and promote their
brand portfolio may adversely affect their results (d) There are various proceedings
involving the Company, their Promoters and their Director.
Outlook & Valuation: 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 H1FY21 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.
Company’s brand value, margins and return on capital are lower than its peers so
it won’t get such premium valuation like its peers, so we recommend "NEUTRAL"
rating to the Stove Kraft IPO issue.
Y/E March (` cr)
FY18
FY19
FY20
Net Sales
529.0
640.9
669.9
% chg
-
21.2
4.5
Net Profit
-12.0
0.7
3.2
% chg
-
-106.1
327.6
EBITDA (%)
1.9
4.6
5.1
EPS (Rs)
(6.4)
0.3
1.3
P/E (x)
NA
1,289.4
301.5
P/BV (x)
NA
NA
NA
ROE (%)
6.7
NA
NA
ROCE (%)
2.1
7.8
9.2
EV/EBITDA
111.4
41.3
37.2
EV/Sales
2.1
1.9
1.9
Neutral
Issue Open: January 25, 2021
Issue Close: January 28, 2021
Offer for Sale:0.83 cr share
QIBs 75% of issue
Non-Institutional 15% of issue
Retail 10% of issue
Promoters 54.4%
Others 45.6%
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: Rs 32.5 cr
Issue size (amount): Rs 412.6 cr
Price Band: Rs 384-385
Lot Size: 38 shares and in multiple thereafter
Post-issue implied mkt. cap: *Rs 1,250 cr - **Rs 1,253 cr
Promoters holding Pre-Issue: 61.3%
Promoters holding Post-Issue: 54.4%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: Rs 95 cr
Face Value: Rs 10
Present Eq. Paid up Capital: Rs 30.1 cr
Keshav Lahoti
+022 39357600, Extn: 6363
keshav.laho[email protected]elbroking.com
Stove Kraft Ltd
f
IPO Note | Kitchen Appliances
January 22, 2021
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Stove Kraft Ltd | IPO Note
January 22, 2021
2
Company background
Company is engaged in the manufacture and retail of a wide and diverse suite of
kitchen solutions under the 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. Their kitchen solutions comprise of cookware and cooking appliances
across their brands, and their home solutions comprise various household utilities,
including consumer lighting, which not only enables them to be a one stop shop
for kitchen and home solutions, but also offer products at different pricing points to
meet diverse customer requirements and aspirations.
During the six month periods ended September 30, 2020 and September 30,
2019 and for Fiscals 2020, 2019 and 2018 their Pigeon branded products
contributed 76.90%, 80.86%, 86.20%, 81.24% and 86.89% to their overall sales,
respectively and were amongst the leading brands in the market for certain
products such as free standing hobs, cooktops, non-stick cookware, LPG, gas
stoves and induction cooktops.
Issue details
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
18,443,920
61.3
17,693,920
54.4
Public
11,636,711
38.7
14,854,243
45.6
Total
30,080,631
100.0
32,548,163
100.0
Objectives of the Offer
Repayment/prepayment of the borrowings
General Corporate Purposes
Key Management Personnel
Rajendra Gandhi is the Managing Director of the Company. He has cleared the
S.S.L.C. examination conducted by the Karnataka Secondary Education
Examination Board. He is the founder of the Company and has been on the Board
since 1999. He is involved in the day to day affairs of the Company.
Rajiv Mehta Nitinbhai is a Whole Time Director designated as the Chief Executive
Officer of the Company. He holds a bachelors degree in chemical engineering
from University of Mumbai and masters degree in science from University of
Pennsylvania, and in business administration from INSEAD. He has previously
served as the chief executive officer of Arvind Limited and managing director of
Puma Sports India Private Limited. He also serves as a director on the board of
directors of Unicorn Contractors and Developers Private Limited and Kan Dfy
Sports Private Limited.
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Stove Kraft Ltd | IPO Note
January 22, 2021
3
Y/E March (` cr)
FY18
FY19
FY20
H1FY20
H1FY21
Total operating income
529.0
640.9
669.9
315.5
328.9
% chg
-
21.2
4.5
4.2
Total Expenditure
519.0
611.1
636.1
296.8
283.8
Cost of material consumed
353.5
438.7
441.9
205.2
214.5
Excise Duty
5.3
-
-
-
-
Employee benefit expense
59.1
69.8
82.0
39.3
31.3
Other Expenses
101.0
102.7
112.2
52.2
38.0
EBITDA
10.0
29.8
33.8
18.7
45.1
% chg
-
197.2
13.6
140.7
(% of Net Sales)
1.9
4.6
5.1
5.9
13.7
Depreciation & Amortization
11.2
12.3
12.4
5.8
6.9
EBIT
-1.2
17.4
21.4
13.0
38.3
% chg
-
-1,547.8
22.8
195.2
(% of Net Sales)
-0.2
2.7
3.2
4.1
11.6
Interest & other Charges
16.9
17.9
20.9
10.1
10.1
Other Income
5.6
1.7
3.0
1.9
0.6
(% of Sales)
1.1
0.3
0.4
0.6
0.2
Recurring PBT
-12.5
1.2
3.5
4.7
28.8
% chg
-
-109.8
187.1
509.5
Tax
-0.5
0.5
0.4
0.4
-
PAT (reported)
-12.0
0.7
3.2
4.4
28.8
% chg
-
-106.1
327.6
560.4
(% of Net Sales)
-2.3
0.1
0.5
1.4
8.7
Basic & Fully Diluted EPS (Rs)
-6.4
0.3
1.3
1.8
11.6
% chg
-
-104.7
327.6
551.7
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Stove Kraft Ltd | IPO Note
January 22, 2021
4
Y/E March (` cr)
FY18
FY19
FY20
H1FY20
H1FY21
SOURCES OF FUNDS
Equity Share Capital
18.9
24.7
24.7
24.7
24.7
Other equity
-199.0
-88.7
-84.9
-83.7
-54.7
Shareholders Funds
-180.1
-63.9
-60.2
-59.0
-29.9
Non Controlling interest
0.2
0.2
0.2
0.2
-
Total Loans
392.3
310.0
326.9
317.6
299.5
Other liabilities
18.2
14.2
17.1
16.3
13.8
Total Liabilities
230.6
260.5
284.0
275.1
283.4
APPLICATION OF FUNDS
Property, plant and equipment
182.1
178.7
192.9
181.5
199.6
Right-of-use assets
-
-
-
3.2
-
Capital work-in-progress
0.6
0.9
4.2
0.3
0.7
Intangible assets
0.6
0.5
0.3
0.4
3.4
Intangible assets under development
-
0.8
3.3
1.5
-
Current Assets
198.7
233.7
263.4
299.9
275.9
Inventories
105.1
97.4
116.6
128.5
136.6
Sundry Debtors
79.6
89.7
103.0
142.8
103.6
Cash & Bank Balance
3.8
31.5
19.4
10.2
10.1
Other Assets
10.2
15.1
24.4
18.4
25.5
Current liabilities
163.0
165.3
187.3
218.4
215.1
Net Current Assets
35.6
68.4
76.2
81.5
60.8
Other Non Current Asset
11.6
11.1
7.1
6.7
19.0
Total Assets
230.6
260.5
284.0
275.1
283.4
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Stove Kraft Ltd | IPO Note
January 22, 2021
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Y/E March (` cr)
FY18
FY19
FY20
H1FY20
H1FY21
Loss before tax
(12.6)
1.2
3.5
4.7
28.7
Depreciation
11.2
12.4
12.4
5.8
6.9
Change in Working Capital
(20.5)
(18.8)
(27.5)
(35.9)
2.5
Interest Expense
15.3
17.9
18.2
8.5
9.4
Direct Tax Paid
-
0.1
3.9
4.5
(0.4)
Others
17.9
0.4
5.1
2.7
2.5
Cash Flow from Operations
11.3
13.2
15.6
(9.7)
49.6
(Inc.)/ Dec. in Fixed Assets
(6.3)
(7.4)
(26.1)
(11.1)
(25.1)
Others
0.2
0.6
(1.2)
(1.0)
(0.2)
Cash Flow from Investing
(6.1)
(6.8)
(27.3)
(12.1)
(25.3)
Changes in Borrowings
9.5
40.3
15.6
7.7
(23.6)
Finance cost
(14.8)
(18.5)
(17.5)
(8.4)
(10.4)
Cash Flow from Financing
(5.3)
21.8
(1.9)
(0.7)
(34.0)
Inc./(Dec.) in Cash
(0.1)
28.2
(13.6)
(22.5)
(9.7)
Opening Cash balances
0.5
0.4
28.6
28.6
15.0
Closing Cash balances
0.4
28.6
15.0
6.1
5.3
Y/E March
FY18
FY19
FY20
Valuation Ratio (x)
P/E (on FDEPS)
NA
1,289.4
301.5
P/CEPS
NA
72.8
61.1
P/BV
NA
NA
NA
EV/Sales
2.1
1.9
1.9
EV/EBITDA
111.4
41.3
37.2
Per Share Data (Rs)
EPS (Basic)
(6.4)
0.3
1.3
EPS (fully diluted)
(6.4)
0.3
1.3
Cash EPS
(0.4)
5.3
6.3
Book Value
(18.0)
(6.4)
(6.0)
Returns (%)
ROE
6.7
NA
NA
ROCE
2.1
7.8
9.2
Angel ROIC (Pre tax)
NA
8.2
8.9
Turnover ratios (x)
Receivables (days)
54.9
51.1
56.1
Inventory (days)
72.5
55.5
63.5
Payables (days)
149.9
111.6
124.7
Working capital cycle (days)
(22.4)
(5.0)
(5.0)
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Stove Kraft Ltd | IPO Note
January 22, 2021
6
Research Team Tel: 022 - 39357800 E-mail: [email protected]angelbroking.com Website: www.angelbroking.com
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