IPO listed on 14 Mar'24
Gopal Snacks Ltd
Minimum Investment
₹ 14,837 / 37 shares
Grey market premium
₹ 65 (16% premium)
Issue price
₹ 401
Listing price
₹ 350
Listing day %
-10%
Listing on
March 14, 2024
Our Verdict:
Neutral
- Gopal Snacks Ltd, Gujarat's second-largest snack producer, markets both ethnic and western snacks under the 'Gopal' brand. The firm aims to roll out higher-priced/larger pack sizes, anticipating a rise in consumer acceptance due to easing inflation. This shift in product offerings is expected to improve profit margins. However, it is important to note that the Rs 5 pack size currently accounts for 75% of the company's revenue, which poses a significant risk (further discussed in the "Risk Factors" section).
- From a valuation standpoint, the IPO seems to be fully priced with a Price-to-Earnings (P/E) ratio of 44.5x based on FY23 earnings. Nonetheless, the positive grey market premium (GMP) predicts a favourable debut on the stock exchanges.
- GSL operates in an intensely competitive industry, contending with leading brands such as Bikaji and Haldiram, along with numerous smaller players. Additionally, the company has not yet effectively diversified its product range. Given these circumstances, risk-tolerant investors looking for immediate gains from the IPO might choose to subscribe, whereas long-term investors may opt to wait for better entry points post-listing.
About the company
Founded in
1 Apr'99
Managing director
Bipin Hadvani
- Gopal Snacks Ltd (GSL) is a leading player in the Fast-Moving Consumer Goods (FMCG) sector, specializing in a diverse range of snack options. Under the 'Gopal' brand, it presents an extensive selection of savory snacks, which includes traditional Indian snacks such as namkeen and gathiya, alongside western favorites like wafers, extruded snacks, and snack pellets. In addition to these, the firm also produces a variety of other items, including papad, spices, gram flour (besan), noodles, rusk, and soan papdi.
- GSL has six manufacturing facilities (including three raw material/ ancillary facilities), with a total aggregate annual installed manufacturing capacity of 404,728 MT. Its product portfolio features 84 distinct products, spanning across 276 Stock Keeping Units (SKUs) in various categories, catering to a broad spectrum of consumer tastes and preferences. Its distribution network extends to more than 523 locales across 10 states and 2 Union Territories within India.
STRENGTHS
- Impressive Financial Growth: GSL has demonstrated consistent growth in its financial performance, with a Compound Annual Growth Rate (CAGR) of 11% in revenue from operations from FY21 to FY23. This growth period also featured a notable 80% increase in EBITDA and a substantial 131% rise in net profit.
- Strong Return Metrics: GSL has seen a substantial improvement in its Return on Equity, escalating from 15.56% in FY21 to 38.63% in FY23. Similarly, its Return on Capital Employed rose from 13.48% in FY21 to 43.08% in FY23.
- Enhanced Profit Margins: GSL has effectively improved its EBITDA margin from 5.35% in FY21 to 14.07% in FY23. The Net Profit margin has also increased from 1.87% in FY21 to 8.06% in FY23, and it continued to grow to 8.22% by September 2023.
- Market Share: In FY23, GSL held a significant market share in Gujarat's ethnic savouries (20%), western snacks (8%), and the papad industry (6%), covering both organized and unorganized sectors.
RISK FACTORS
- Regional Dependency: A large portion of GSL's earnings originate from Gujarat, with 79.06% in FY23 and 76.49% in H1 FY24 coming from product sales within this region. Consequently, any negative occurrences impacting Gujarat's operations could detrimentally affect the firm’s overall business performance.
- Regulatory Notices: GSL has been the recipient of eight notices in accordance with the Food Safety & Standards Act, 2006, for reasons including the alleged inferior quality of its products, accusations of mislabelling or inadequate packaging, and for disseminating deceptive advertisements. An unfavourable resolution to any of these issues or failure to meet food safety standards could negatively influence the company's operations.
- Underused Production Capacity: GSL's inability to fully utilize its manufacturing capabilities has been evident, with a noticeable decline in the use of primary production facilities in FY23 compared to the previous years. During the first half of FY24, the utilization rate of these facilities was merely 28.64%, highlighting a considerable under-exploitation of manufacturing resources.
- High Contingent Liabilities: As of September 30, 2023, GSL reported contingent liabilities amounting to Rs 45.43 crore, which is approximately 82% of its net profit for the first half of FY24. The realization of these liabilities could negatively impact the firm’s financial health.
- Dependence on Low-Cost SKU Sales: GSL's revenue heavily relies on the sale of small package SKUs, particularly those priced at Rs 5, which constituted 77.31% and 70.41% of its total revenue in FY23 and H1 FY24, respectively. A rise in commodity prices without a corresponding increase in product prices, which is challenging for small package categories, could adversely affect the company's profitability.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 650 crore
Fresh Issue
₹ -
OFS
₹ 650 crore
Price range
₹ 381 - 401
Lot size
37 shares
Issue Objective
This is solely an Offer for Sale (OFS), which means that the company will not obtain any proceeds from the offer. Instead, all proceeds from the offer will be directed to the selling shareholders.
Dates
Bidding open
6 Mar'24
Bidding close
11 Mar'24
Allotment date
12 Mar'24
Refund date
13 Mar'24
Listing
14 Mar'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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