IPO: Gopal Snacks

Gopal Snacks, an FMCG company selling various ethnic and Western snacks, launched its IPO (initial public offering) on March 6, 2024. Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality: Its three-year average ROE and ROCE are 26 and 25 per cent. It also reported positive cash flow from operations in each of the last three financial years. Growth: Its revenue grew 11 per cent annually between FY21-23. Also, its profit after tax compounded 131 per cent annually in the same period. Valuation: The stock is valued at a P/E and P/B of 43.1 and 14.4 times, respectively. Overview: Rapid urbanisation leading to growing demand for packed and processed foods should drive growth. However, the FMCG segment is highly competitive with multiple big players. About Gopal Snacks Gopal Snacks is a fast-moving consumer goods (FMCG) company selling ethnic and Western snacks under the brand name 'Gopal'. It has a diverse product range, including papads, noodles, spices, gram flour, etc. Strengths of Gopal Snacks It is the fourth-largest packaged ethnic namkeen manufacturer in India. High operational efficiency. As of March 31, 2022, it boasted the highest fixed assets turnover ratio (6.86 in Fiscal 2022) among its key peers. It is fully integrated both vertically and horizontally, providing high control over its products' quality and cost. Weaknesses of Gopal Snacks The FMCG segment is highly competitive. Revenue concentration. Gujarat and Maharashtra are its major revenue streams, with Gujarat accounting to 73 per cent of total revenue. Declining capacity utilisation. Capacity utilisation fell from 40 per cent in FY21 to 28 per cent in FY23. IPO details Total IPO size (Rs cr) 650 Offer for sale (Rs cr) 650 Fresh issue (Rs cr) - Price band (Rs) 381-401 Subscription dates Mar 06 to Mar 11, 2024 Purpose of issue Offer for sale Post IPO M-cap (Rs cr) 4997 Net worth (Rs cr) 346 Promoter holding (%) 81.5 Price/earnings ratio (P/E) 43.1 Price/book ratio (P/B) 14.4 Financial history Key financials 2Y CAGR (%) TTM FY23 FY22 FY21 Revenue (Rs cr) 11.2 1372 1395 1352 1129 EBIT (Rs cr) 108.9 161 159 64 36 PAT (Rs