Gopal Snacks IPO: All You Need To Know

(Source: Gopal Snacks website)

Gopal Snacks Ltd.'s initial public offering will open on March 6 as the promoters plan to raise capital to repay debt.

The promoters plan to sell 1.62 crore shares in the pure-play offer for sale in a price band of Rs 381–401 per share to raise up to Rs 650 crore.

Allotment is expected by March 12, while the tentative listing date for the maker of savouries is March 14.

The IPO's minimum lot size is 37 shares, requiring a minimum retail investment of Rs 14,837. Qualified institutional investors need a minimum investment of approximately Rs 2.08 lakh (14 lots), while non-institutional investors need to bid for at least shares worth approximately Rs 10.09 lakh (68 lots).

Issue Details

Issue opens: March 6
Issue closes: March 11
Face value: Re 1 per share.
Price band: Rs 381–401 per share.
Lot size: 37 shares.
Fresh issue size: Rs 650 crore.
Total issue size: Rs 650 crore.
Issue type: Book-built issue IPO
Listing: BSE and NSE.

Use Of Proceeds

The company will not benefit directly from the proceeds of the offer as all funds raised will go to the selling shareholders in proportion to the shares they offer to sell. The company's management told NDTV Profit that they plan to use the proceeds to repay debt it raised to buy out the stake of their family member in the company.

Business

Established in 1999 in Rajkot, Gujarat, Gopal Snacks is a maker of ethnic and western snacks, including gathiya, along with wafers, extruded snacks and snack pellets. They also offer a selection of fast-moving consumer goods, including spices, gram flour, noodles and rusk.

The company has an array of 276 stockkeeping units and 84 products across different categories, catering to a wide spectrum of tastes and preferences.

As of November, the company's reach spans 10 states and two Union territories, backed by a robust distribution network.

Financial Performance

Over the past three years, revenue growth has remained strong, although sales stagnated in the most recent fiscal. Net profit, however, rose fivefold in the last two years on adept cost management, improving its margins.

The operating profit margin stood at 14% in the first half of the current financial year. The company is expected to post a flat growth in net profit in the current fiscal as the family split impacted the sales of the company.

In the last fiscal, the net profit margin stood at an impressive 8.06%, marking a significant increase compared to the preceding two fiscals. This surge is complemented by robust return on equity at 38.63% and return on assets at 24.36%, all of which have exhibited substantial growth over the past three years.

The company has been able to consistently sweat its assets. The robust RoAs indicates potential for high RoE levels and improved valuations in the future.

Key Risks

Primary sales are focused on Gujarat and any disruptions there can harm business, finances and operations.
Since promoters' equity shares are pledged, potential execution can dilute their holdings, impacting overall business.
Failure to maintain and boost the 'Gopal' brand can disrupt operations.
Revenue heavily depends on small-pack SKUs, increased costs may lead to inflationary pressures.
A robust distribution network is vital. Challenges in expansion or management can disrupt cash flows.