Stove Kraft issue aggressively priced | Economic Times

Mumbai: Investors with an appetite for high risk will likely apply for the IPO of Stove Kraft, which operates in the highly competitive kitchen appliances sector against more established rivals Hawkins Cookers and TTK Prestige.Stove Kraft’s increasing profitability in recent months, mainly from cost-cutting measures and improved investor sentiment about the kitchenware segment, may help the company with a positive listing. The three-day IPO opens on Monday.Of the Rs 412 crore that the company plans to raise at the higher end of the offer price band, Rs 95 crore will be used for general corporate purposes including pre-payment of debt.Business: Incorporated in 1999, Stove Kraft manufactures a range of kitchen appliances mainly under its flagship brands Pigeon and Gilma. While pressure cookers are the biggest contributor to its sales, other products include hobs, cooktops, non-stick cookware, gas stoves, induction cooktops, chimneys and LED products. Compared with its competitors, the company’s products are priced more aggressively. Its manufacturing facilities are located in Bengaluru and in Baddi, Himachal Pradesh, and it has a network of 651 distributors across India. 80438086Financials: Stove Kraft reported sales of Rs 670 crore in FY20, EBIDTA of Rs 37 crore and net profit of Rs 3.2 crore. A sharp reduction in costs, mainly other expenses including advertisement costs, helped the company to report a net profit of Rs 28.8 crore in the first six months of FY21 against Rs 4.4 crore a year earlier. Employee expenses fell by Rs 8 crore to Rs 31.2 crore, helping to boost earnings.Due to losses in previous years, Stove Kraft did not pay any tax on profit. Sales in the first half of FY21 grew 4 per cent year on year to Rs 329 crore. Total borrowings stood at Rs 300 crore at the end of September — of which Rs 205.4 crore was long term and Rs 94.1 crore short term.Valuations: After adjusting for a 25 per cent tax rate, the IPO is priced at 46 times its trailing 12-month earnings and 1.8 times sales. Given the financials, the IPO appears to be priced aggressively. Shares of larger peers including TTK Prestige and Hawkins are trading at 45 times and 42 times earnings, respectively.