Founded in 1999, Gopal Snacks is an FMCG company dealing
in ethnic snacks, western snacks, and other products. The company offers a wide
variety of savory products under its brand ‘Gopal’, including ethnic snacks
such as namkeen and gathiya; western snacks such as wafers, extruded snacks and
snack pellets; and fast-moving consumer goods including papad, spices, gram
flour or besan, noodles, rusk and soan papdi. In H1 FY2024, ethnic snacks
contributed 56.08% to total revenue, western snacks 31.12%, and others 12.80%.
As of September 30, 2023, the product portfolio
comprised 84 products, with 276 SKUs across various product categories, thereby
addressing a wide variety of tastes and preferences. The products are sold in
over 523 locations in India across 10 states and two Union Territories.
In FY2023, the company
had approximately 20% market share in the ethnic savouries, approximately 8% in
western snacks, and approximately 6% in the papad industry in
Gujarat, including the organized and unorganized sectors. The company intends
to continue to gain market share and strengthen its position in the core market
of Gujarat.
The company intends to accelerate expansion in
its focus markets, comprising Maharashtra, Rajasthan, Madhya Pradesh, and Uttar
Pradesh. it has selected its focus markets based on geographical proximity to
existing manufacturing facilities and the potential for expanding its product
portfolio in those regions.
The company has a wide distribution network
comprising three depots and 617 distributors, complemented by a sales and
marketing team comprising 741 employees as of September 30, 2023. In addition, it
owns a fleet of 263 logistics vehicles to support its distribution network.
The company relies on channels such as ecommerce,
modern trade, and exports to sale its products.
The company operates six manufacturing facilities,
comprising three primary manufacturing facilities and three ancillary
manufacturing facilities. Its three primary manufacturing facilities are
located at Nagpur, Maharashtra; Rajkot, Gujarat; and Modasa, Gujarat. These
facilities primarily focus on the manufacturing of finished products. Its three
ancillary manufacturing facilities focus on producing besan or gram flour, raw
snack pellets, seasoning and spices, mainly used for captive consumption in the
manufacturing of finished products such as gathiya, namkeen, and snack pellets.
As of September 30, 2023, the aggregate annual
installed capacity of its six manufacturing facilities was 404,728.76 tonnes.
Of this, the aggregate annual installed capacity of the three primary
manufacturing facilities was 303,668.76 t and the aggregate annual installed
capacity of three ancillary manufacturing facilities (excluding the annual
installed capacity for papad) was 101,060.00 t.
In H1 FY2024, the capacity utilization of primary
manufacturing facilities was 28.64% and the utilization of ancillary
manufacturing facilities was 51.10%.
The company plans to add new products to its
portfolio, expand the wallet share, and grow the consumer base.
Offer and its objects
The IPO is entirely an
offer for sale, aggregating up to Rs 650 crore, by Bipinbhai Vithalbhai
Hadvani, Gopal Agriproducts, and Harsh Sureshkumar Shah.
The price band for the
IPO is Rs 381 to Rs 401 per equity share of face value Re 1 each.
The company will not
directly receive any proceeds from the offer. All the offer proceeds will be
received by the selling shareholders in proportion to the offered shares sold
by them.
Promoters of the company
are Bipinbhai Vithalbhai Hadvani, Dakshaben Bipinbhai Hadvani, and Gopal
Agriproducts. The promoters and promoter group hold an aggregate of 11,65,05,126
equity shares, aggregating 93.50% of the pre-offer issued and paid-up equity share
capital. The post-IPO shareholding for the same is expected to be around 81.49%.
The issue, through the
book-building process, will open on 6 March 2024 and close on 11 March 2024.
Strengths
The company recorded an
increase in its revenue from Rs 1128.86 crore in FY2021 to Rs 1394.65 crore in
FY 2023 at a CAGR of 11.15%. Additionally, due to its strategic location of
manufacturing facilities, the company had the lowest transportation cost as a
percentage of revenue in FY2023 in the snacks sector.
The company has a
diversified product portfolio capable of capturing the growing Indian snacks
market. As of September 30, 2023, the product portfolio comprised 84 products,
with 276 SKUs across product categories, including 31 and eight products in the
namkeen and gathiya categories, respectively.
Over the years, the company developed an
understanding of the preferences and tastes of consumers, enabling to
strengthen foothold in the Indian snacks industry.
The company has developed relationships with many
distributors. As of September 30, 2023, 69 distributors in Gujarat were
associated with the company for more than 10 years, representing 24.73% of
total distributors in Gujarat.
The growing popularity
of gathiya as a snack presents opportunities to expand in the gathiya segment.
In FYs 2021, 2022, 2023 and the six months ended September 30, 2022 and 2023,
sales of gathiya accounted for 32.10%, 33.01%, 30.39%, 31.80% and 27.64% of
revenue, respectively.
The company’s
manufacturing operations are vertically integrated, including in-house
manufacturing capabilities of certain key ingredients such as besan or gram
flour, raw snack pellets, spices, and seasoning. This allows the company to
control the production process enabling it to manage costs, achieve increased
operational efficiency, and exercise control over the quality of its
ingredients.
The company is led by a
qualified and experienced management team. It promoter, Bipinbhai Vithalbhai
Hadvani, is also the Chairman and Managing Director. He has over 29 years of
experience in the snacks industry.
Weaknesses
The company generates most of its revenue from
Gujarat. In FY 2021, 2022 and 2023 and the six months ended September 30, 2022,
and 2023, its revenue from sale of products in Gujarat accounted for 74.31%,
76.27%, 79.08%, 79.06% and 76.49% of total revenue, respectively. Any adverse
development affecting operations in Gujarat could have an adverse impact on the
business.
The company has received eight notices under the
relevant provisions of the Food Safety and Standards Act, 2006, (i) declaring
its products to be allegedly substandard; (ii) alleging misbranding or
deficient packaging; and (iii) issuing misleading advertisements. An adverse
outcome in any of these matters or inability to comply with food safety may
adversely impact the business.
The company’s manufacturing facilities are
under-utilized. The capacity utilization of primary manufacturing facilities
declined in FY 2023 as compared to FYs 2022 and 2021. In H1 FY2024, the capacity
utilization of primary manufacturing facilities was 28.64%. Under-utilization
of manufacturing facilities may have an adverse impact on the business.
The company is dependent on the sale of small
pack SKUs for its revenue. Revenue from the sale of SKUs available at Rs 5
accounted for 82.68%, 80.74%, 75.48%, 77.31% and 70.41% of the revenue in FY
2021, 2022 and 2023 and the six months ended September 30, 2022, and 2023,
respectively. If the cost of commodities rises and the company is unable to
pass on the increased costs, which is difficult to pass in small pack
categories, its business may be adversely affected.
As of September 30, 2023, the company had
contingent liabilities worth Rs 45.43 crore, representing about 82% of its PAT
in H1 FY2024. If these liabilities materialize, they could have an adverse
effect on the business.
The company, its promoters and directors are
involved in certain legal and regulatory proceedings (including criminal
proceedings). Any adverse decision in such proceedings may have an adverse
effect on the business.
The company’s products are semi-perishable in
nature. The average shelf life of its products ranges from three to six months.
Any inaccuracies in predicting demand could result in excess inventory and
wastage.
In the past, corporate promoter Gopal
Agriproducts had pledged its entire shareholding representing 95.00% of the share
capital to avail a term loan aggregating to Rs 540 crore. The shares were
released from the pledge prior to the filing of RHP.
Valuation
In H1 FY2024,
consolidated sales decreased 3.30% to Rs 676.20 crore as compared to H1 FY2023.
The OPM increased by 56 bps to 13.94%, leading to a 0.76% increase in OP to Rs
94.27 crore. Other income increased 38.80% to Rs 1.78 crore, while interest
cost fell 34.17% to Rs 4.07 crore and depreciation decreased 3.92% to Rs 17
crore. PBT increased 5.66% to Rs 74.98 crore. Tax expense was of Rs 19.41 crore
as compared to tax expense of Rs 19.01 crore. Net profit rose 6.94% to Rs 55.57
crore.
In FY2023, consolidated
sales were up by 3.14% to Rs 1394.65 crore as compared to FY2022. The OPM
increased by 706 bps to 14.07%, leading to 106.98% increase in Op to Rs 196.22
crore. OI decreased 9.94% to Rs 3.89 crore, while interest cost fell 22.12% to
Rs 10.84 crore. Depreciation increased 20.20% to Rs 37.42 crore. PBT went up
180.88% to Rs 151.85 crore. Tax expense was Rs 39.48 crore as compared to tax
expense of Rs 12.52 crore in FY2022. Net profit rose 170.49% to Rs 112.37
crore.
The TTM EPS on post-issue equity works out to Rs 9.31.
At the upper price band of Rs 401, the P/E works out to 43.
As of 4 March 2024,
listed peers such as Bikaji Foods International traded at TTM P/E of 69 and Prataap
Snacks at 40.
For FY2023, Gopal Snacks’
OPM and ROE stood at 14.07% and 38.63%, respectively, as compared to 10.84% and
13.36% for Bikaji Foods International and 3.78% and 3.13% for Prataap Snacks, respectively.
Gopal Snacks:
Issue Highlights
|
For Offer for Sale Offer size (in no of shares )
|
|
- On lower price band
|
1,70,60,367
|
- On upper price band
|
1,62,09,476
|
Offer size (in Rs crore)
|
650
|
Price band (Rs)
|
381-401
|
Minimum Bid Lot (in no. of shares )
|
37
|
Post issue capital (Rs crore)
|
|
- On lower price band
|
12.46
|
- On upper price band
|
12.46
|
Post-issue promoter & Group shareholding (%)
|
81.49
|
Issue open date
|
06-03-2024
|
Issue closed date
|
11-03-2024
|
Listing
|
BSE, NSE
|
Rating
|
38/100
|
Gopal Snacks: Restated Financials
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2209 (6)
|
2309 (6)
|
Sales
|
1,128.86
|
1,352.16
|
1,394.65
|
699.30
|
676.20
|
OPM (%)
|
5.35%
|
7.01%
|
14.07%
|
13.38%
|
13.94%
|
OP
|
60.35
|
94.80
|
196.22
|
93.55
|
94.27
|
Other inc.
|
0.98
|
4.31
|
3.89
|
1.28
|
1.78
|
PBIDT
|
61.33
|
99.12
|
200.11
|
94.83
|
96.04
|
Interest
|
10.88
|
13.92
|
10.84
|
6.18
|
4.07
|
PBDT
|
50.46
|
85.19
|
189.26
|
88.65
|
91.97
|
Dep.
|
23.96
|
31.13
|
37.42
|
17.69
|
17.00
|
PBT
|
26.50
|
54.06
|
151.85
|
70.96
|
74.98
|
Share of Profit/(Loss) from Associates/JV
|
-
|
-
|
-
|
-
|
-
|
PBT before EO
|
26.50
|
54.06
|
151.85
|
70.96
|
74.98
|
Exceptional items
|
-
|
-
|
-
|
-
|
-
|
PBT after EO
|
26.50
|
54.06
|
151.85
|
70.96
|
74.98
|
Taxation
|
5.38
|
12.52
|
39.48
|
19.01
|
19.41
|
PAT
|
21.12
|
41.54
|
112.37
|
51.96
|
55.57
|
Minority Interest
|
-
|
-
|
-
|
-
|
-
|
Net Profit
|
21.12
|
41.54
|
112.37
|
51.96
|
55.57
|
EPS (Rs)*
|
1.70
|
3.33
|
9.02
|
#
|
#
|
* EPS is annualized on post issue equity capital of Rs 12.46 crore of
face value of Re 1 each
|
|
|
# EPS is not annualised due to seasonality of business
|
|
|
|
|
EO: Extraordinary items. EPS is calculated after excluding EO and
relevant tax
|
|
|
|
Figures in Rs crore
|
|
|
|
|
|
Source: Capitaline Corporate Database
|
|
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|
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