Gopal Snacks IPO: Should You Invest? Here's What Valuation Metrics Suggest

Rajkot-based Gopal Snacks Ltd. is set to raise Rs 650 crore through an initial public offering, adding to the growing list of regional brands make their way to getting listed on the exchanges.

The share sale is opening on Wednesday, that is, March 6 and will close on March 8. It is priced in the range of Rs 381–401 per share.

The public issue is purely an offer-for-sale of equity shares worth up to Rs 650 crore by promoters and other selling shareholders with no fresh issue of shares. This means the proceeds from the IPO will go to the selling shareholders.

The offer for sale comprises up to Rs 100 crore by Bipinbhai Vithalbhai Hadvani, up to Rs 540 crore by Gopal Agriproducts Private Ltd (promoter), and up to Rs 10 crore by Harsh Sureshkumar Shah (other selling shareholder).

Valuation Metrics

At the upper end of the price band, the company is valued at a price-to-earnings ratio of about 44 times, with an implied market capitalisation of Rs 4,997 crore.

Should you subscribe?

A first generation entrepreneur with strong understanding of the savouries markets, vertical manufacturing, backward integration of logistics and strong industry growth rates in existing and new markets will add multifold revenues and profitability in the coming years, according to analysts at Reliance Securities. "We recommend an 'subscribe' to the issue," it said.

Gopal Snacks is a maker of ethnic and western snacks, including gathiya, along with wafers, extruded snacks and snack pellets. The company has an array of 276 stockkeeping units and 84 products across different categories, catering to a wide spectrum of tastes and preferences.

The company reported a revenue of Rs 1,394.5 crore for FY23, compared with Rs 1,352 crore reported in FY22. The net profit surged to Rs 112 crore from Rs 41.5 crore during the same periods.

"Gopal Snacks targets national presence, with enhanced thrust on the Indian savory snacks portfolio (market size: Rs 79,600 crore as of FY23), which is likely to see 11% FY23-27 CAGR (per a Frost & Sullivan report)," said Emkay in a note on Feb 25.

But the recent business slow-down is a concern – attributed to disruption in the company's front-end team after a promoter exited the business in 2022.

"The company rebuilding its sales team, along with healthy margins, ahead-of-time capacity, backward production integration, logistics capability, and healthy returns profile, would enable it to see better financial outcome in growth recovery," the report said.