GOPAL SNACKS LIMITED IPO: ISSUE SIZE, PRICE BAND AND MORE

We are in the last month of the current financial year, so we expect some IPO this month. The big IPO that opens for subscription this week is Gopal Snacks Limited (GSL), an FMCG company that deals in ethnic and Western snacks. The IPO opens for subscription on 6th March and closes on the 11th March. In this article, we look at the various aspects of GSL's business to help you evaluate the company. 

Gopal Snacks IPO: Key Details

Below are the key details related to the GSL IPO:

• Issue Size: Rs 650 crore
• Price Band: Rs 381 - Rs 401
• Lot Size: 37 Shares
• Issue Details: Only Offer for Sale
• Market Cap: At the upper price band, Rs 4,996.64 crore
• Minimum Investment: Rs 14,837

Gopal Snacks IPO: The Business

The company was established as a partnership firm in 1999 and subsequently incorporated as a company in 2009. They are a fast-moving consumer goods company in India that offers ethnic snacks, western snacks, and other products in ten states and two Union Territories.

Also, they offer a wide variety of savoury products under their brand ‘Gopal’, including ethnic snacks such as namkeen and gathiya, western snacks such as wafers, extruded snacks, and snack pellets, along with fast-moving consumer goods that include papad, spices, gram flour or besan, noodles, rusk, and soan papdi. 

Their distribution network comprised three depots and 617 distributors. They also rely on channels such as e-commerce, modern trade, and exports for the sale of their products. The company operates six manufacturing facilities comprising three primary manufacturing facilities and three ancillary manufacturing facilities. The three primary manufacturing facilities are located at Nagpur, Maharashtra; Rajkot, Gujarat; and Modasa, Gujarat, and these facilities primarily focus on the manufacturing of their finished products. 

Gopal Snacks IPO: Industry Overview

The Indian market for savoury snacks, which includes western snacks and ethnic savouries or traditional snacks is estimated to be valued at Rs 79,600 crore in FY23, of which western snacks and ethnic savouries (including gathiya) were estimated to be valued at Rs 40,900 crore and Rs 38,800 crore, contributing 51% and 49% of the overall Indian savoury snacks market, respectively.

The Indian market for savoury snacks is projected to grow at a CAGR of approximately 11%, reaching Rs 1,21,700 crore by FY27. Further, the organized market is estimated to hold a market share of approximately 57% in FY23 in the Indian market for savoury snacks and is forecasted to grow at a CAGR of 11.7% during FY23 to FY27, accounting for a market share of approximately 58% by FY27.

Gopal Snacks IPO: Listed Peers

The company has two listed peers - Bikaji Foods International and Prataap Snacks. Let us look at their FY23 numbers and compare the three companies to find where GSL stands. Here is the comparison:

• In revenue terms, Bikaji Foods International is the biggest player, followed by Prataap Snacks and Gopal Snacks.
• The Earnings Per Share (EPS) is the highest of Gopal Snacks, followed by Pratap Snacks and Bikaji Foods.
• Gopal Snacks is a clear winner if we look at the Return on Net Worth (RoNW) number, followed by Bikaji Foods.

For more details, you can check the table below.

Gopal Snacks IPO: Financials

Let us look at the financial performance of the company in recent years:

The revenue from operations grew at a CAGR of 11.15% from Rs 1,128.86 crore in FY21 to Rs 1,394.65 crore in FY23 and was Rs 676.19 crore in the six months ended September 30, 2023. 

In FY23, they had approximately 20% market share in ethnic savouries, approximately 8% in western snacks, and approximately 6% in the papad industry in Gujarat (including organized and unorganized sectors).

Gopal Snacks reported an EBITDA of Rs 60.35 crore, Rs 94.80 crore, and Rs 196.22 crore for FY21, FY22, and FY23, respectively. The EBITDA margins for the same period were 5.35%, 7.01%, and 14.07%, respectively. The margins have increased significantly in this period. 

They have reported a net profit (PAT) of Rs 21.12 crore, Rs 41.54 crore, and Rs 11.24 crore for FY21, FY22, and FY23. The PAT margins in the same period were 1.87%, 3.07%, and 8.06%, respectively.

For the last three financial years, GSL has reported an average EPS of Rs 5.90 and an average RoNW of 29.70%.

The Return on Capital Employed (ROCE) for FY21, FY22, and FY23 was 13.48%, 18.69%, and 43.08%, respectively.

If we attribute FY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 44.96. 

Gopal Snacks IPO: Competitive Strengths

Below are the competitive strengths of the company:

• Their position in the Indian snack food market as an ethnic savouries brand with a significant presence in Gujarat, coupled with their focus on quality and various offerings have helped them create brand recognition.
• The company has a diversified product portfolio capable of capturing the growing Indian snacks market.
• The company's position as a manufacturer of gathiya in India, and the growing popularity of gathiya as a snack, present opportunities for them to expand in the gathiya segment.
• They have strategically located manufacturing facilities.