IPO Note : Gopal Snacks Ltd By Geojit Financial Services
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A prominent Gujarat based snack manufacturer
Gopal Snacks Ltd (GSL), established in 2009, is a rapidly expanding FMCG company in India. It offers a diverse range of 'ready to eat' packaged snacks, including ethnic namkeen, gathiya, wafers, snack pellets, and other products like extruder items, noodles, spices, and flour. GSL operates under brands such as "Gopal," "Cristos," "Shot Go," and "Cornigo," boasting a product portfolio of 84 items across 276 SKUs (Stock keeping units). With distribution through 617 distributors, GSL reaches customers in 523 locations across ten states and two union territories. The company operates manufacturing plants in Rajkot, Nagpur, and Modasa. In FY23, GSL held ~20% market share in ethnic savouries, 8% in western snacks, and 6% in the papad industry in Gujarat, encompassing both organized and unorganized sectors.
• The Indian market for savoury snacks is valued at Rs.796bn in FY23 and is expected to grow at a CAGR of 11% to Rs.1,217bn by FY27E owing to surge in demand for high-value, pre-packed ‘on-the-go’ and ‘ready-to-eat’ products.
• GSL is the largest manufacturer of Gathiya in terms of production volume and sales revenue in India and holds a market share of ~31% for FY23 in the organized gathiya market.
• Topline grew at ~11% CAGR (FY21-23) to Rs.1,395cr and EBITDA grew ~80% CAGR (FY21-23) to Rs.196cr in FY23 led by higher sales volume, favourable product mix and economical consumer packs.
• GSL produces its key ingredients like besan, raw snack pellets, spices, and seasoning in-house, enabling cost control, enhanced operational efficiency, and quality management.
• PAT grew at ~131% CAGR (FY21-23) to Rs.112cr in FY23 led by better operating performance.
• GSL boasts a strong balance sheet, witnessing a significant decline in its net debt/ equity ratio from 1.0x in FY21 to 0.1x in H1FY24.
• The return ratios RoE and RoCE are robust at ~26% and ~24% ( 3 Year Average) over FY21-23.
• At the upper price band of Rs.401, GSL is available at a P/E of 45x (FY23 EPS), which appears to be fully priced. Considering its strong topline and bottom line growth, emphasis on improving market presence, vertically integrated manufacturing facilities, lean balance sheet, healthy return ratios and promising industry outlook, we assign a “Subscribe” rating on a medium to long term basis.
Purpose of IPO
The IPO comprises only Offer for Sale (OFS) of Rs. 650 crore, with selling shareholders including Mr. Bipinbhai Vithalbhai Hadvani (Rs. 80 crore), Gopal Agriproducts Pvt Ltd (Rs. 520 crore), and Harsh Sureshkumar Shah (Rs. 50 crore). The objective of the offer is to achieve the benefits of listing the equity shares on the stock exchanges.
Key Risks
• Regional concentration: ~77% of revenue is derived from Gujarat in H1FY24. However, the company intends to expand to their focus markets like Maharashtra, Rajasthan, Madhya Pradesh, and Uttar Pradesh.
• Seasonal business: Revenue may dip during non-festive periods and school summer breaks due to lower customer activity.
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SEBI Registration Number: INH200000345
