Stove Kraft Limited

Stove kraft limited company is a kitchen solutions and an emerging home solutions brand. Further, They are one of the leading brands for kitchen appliances in India, and are one of the dominant players for pressure cookers and amongst the market leaders in the sale of free standing hobs & cooktops. They are engaged in the manufacture and retail of a wide and diverse suite of kitchen solutions under their 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. Similarly, during the six month periods ended September 30, 2020 and September 30, 2019 and for Fiscals 2020, 2019 and 2018 their Gilma branded products contributed 5.43%, 2.36%, 2.54%,3.75% and 5.58% to their overall sales, respectively and their BLACK + DECKER products contributed 1.50%, 2.37%, 2.70%,2.67% and 0.88% to their overall sales, respectively. In addition to their established presence in the value and semi-premium segments through the Pigeon and Gilma brands, They also entered the premium segment in 2016 pursuant to their exclusive BLACK + DECKER Brand Licensing Agreement with Stanley Black & Decker, Inc. and The Black and Decker Corporation, which enables us to exclusively retail, and provide post-sales services in relation to, a wide range of products such as blenders and juicers, breakfast appliances, small cooking appliances and small domestic appliances in India under the BLACK + DECKER brand, up to December 31, 2027. They are yet to commence manufacturing under the BLACK + DECKER brand. As of September 30, 2020, They manufacture 79.75% of their Pigeon and Gilma branded products at their well-equipped and backward integrated manufacturing facilities at Bengaluru (Karnataka) and Baddi (Himachal Pradesh), which enables them to control and monitor the quality and costs. Their Bengaluru Facility is spread over approximately 46 acres and five guntas, out of which 30 acres and one gunta is available for future expansion. As of September 30, 2020, it had an installed annual production capacity of 38.40 million units, with the capability to manufacture products in the pressure cookers, non-stick cookware (roller coated and spray coated), LPG stoves, mixer grinders, LED bulbs, iron and induction cooktops categories. Similarly, as of September 30, 2020, their Baddi Facility, focused on the Oil Company Business, which includes manufacturing and co-branding of products with such Companies, (“OCB”) has an installed capacity of 2.80 million units per annum, with the capability to manufacture products such as LPG stoves and inner lid cooker. Competitive Strengths 1. A one stop shop for well recognized , award winning portfolio of kitchen solutions with a diverse range of products across consumer preferences.2. Widespread, well connected distribution network with a presence across multiple retail channels and a dedicated after-sales network.-        We believe that the integration of their supply chain and distribution network with their manufacturing facilities provides them with a competitive advantage over other players in the Indian kitchen appliances industry. As of September 30, 2020, their manufacturing facilities in Bengaluru and Baddi are well connected with nine strategically located C&F agents. Additionally, we have 651 distributors in 27 states and five union territories of India as of September 30, 2020. As of September 30, 2020, their Gilma brand products are sold exclusively through 65 Gilma stores located across 28 cities and towns in four states. Internationally, their products were exported to 14 countries including UAE, Qatar, Bahrain, Kuwait, Tanzania, Uganda, Nepal, Sri Lanka, Bangladesh, Oman, Ghana, United States of America, Mexico and Saudi Arabia in Fiscal 2020 and the six month period ended September 30, 2020. 3. Strong manufacturing capability with efficient backward integration. 4. Consistent focus on quality and innovation.5. Strong track record with consistent financial stability. As per financial performance, Stove kraft limited has posted total income/net profits of Rs. 534.58 cr. / Rs. (11.71) cr. (FY18), Rs. 642.59 cr. / Rs. 0.90 cr. (FY19) and Rs 672.91 cr / Rs 2.91 cr (FY20). For upto H1 of FY21, company has posted profit of Rs 30.08 Cr on total revenue of Rs 329.50 Cr. So company has shown average performance. Stove kraft limited has posted an average EPS of Rs. (0.21) and average RoNW of 1.46% for last three fiscals. Issue is priced at a P/BV of 7.42 as per NAV of 51.89 on 30.09.20. As per FY20 earnings, P/E is around 430. If we attribute latest annualised earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 21. As per RHP, comparison between the listed peers are shown in above table. On BRLM's front, two BRLMs are associated with this IPO, and have handled around 20 IPOs in last three fiscals, and from last 10 IPOs, 5 opened below issue price and remaining opened above issue price on the day of listing. As of now, from last 10 IPOs, 1 is trading below issue price and remaining are trading above issue price. ( As on 19.01.2021 ) As per financials, results are average, RoNW is 1.46% for last three fiscals and issue looks fairly priced with respect to current earnings, but if we ignore financials of H1 FY21, than issue looks very aggressively priced and it may be difficult for company to maintain same level of margins in future. The industry of kitchen appliances is growing at good rate, and expected to grow at good rate for next couple of years, but this segment is highly competitive due to availability of lot of organised and unorganised players. Performance of BRLMs are average. So, we give AVOID rating to this IPO.

• 1 Rajendra Gandhi
• 2  Sunita Rajendra Gandhi