Should you subscribe to Gopal Snacks IPO? Here's what analysts say

FMCG firm, Gopal Snacks initial public offering (IPO) has opened for subscription today and the window to subscribe will close on March 11. The company has garnered Rs 194 crores from anchor investors, the company notified the bourses on Tuesday. The company offers ethnic snacks, western snacks and other products in 10 States and 2 Union Territories. 

The IPO price band is set between Rs 381 to Rs 401 per equity share with a lot size of 37 shares and multiples thereof. The company has total IPO size of Rs 650 crores consisting only an offer for sale for the same amount.

Analysts have recommended subscribing to the IPO, as they bet on its significant presence in the Indian snack food market, strategically located manufacturing facilities and large distribution network. They contend that investors may apply for the issue with a medium to long-term view.

According to Anand Rathi Financial Services, the company has a major presence in Gujarat that accounted for more than 76 per cent of its revenues till September 2023. As of September 30, 2023, the company had three depots and 617 distributors, who helped them reach retailers located across India, including Gujarat, Rajasthan, Madhya Pradesh, Maharashtra and Uttar Pradesh. 

Here's what brokerages said on the company:

Anand Rathi Financial Services:

Gopal Snacks, a prominent FMCG player in India intends to accelerate expansion in its focus markets, comprising Maharashtra, Rajasthan, Madhya Pradesh, and Uttar Pradesh. GSL will be focusing on geographical markets which are close to existing manufacturing facilities. Therefore, this move will not only enable them to increase their top line growth but will also rationalise its operating expenses. At the upper price band, the company is valued at P/E of 44.5x. We believe that valuations of the company are fairly priced and recommend a “Subscribe-Long Term” rating to the IPO.

Swastika

Indian company Gopal Snacks (GSL) is the biggest producer of "gathiya" snacks. The company produces a variety of packed snacks that are ready to eat, such as ethnic namkeen, wafers, snack pellets, and other fast-moving consumer goods. Gujarat is a stronghold for GSL. However, some key risks require careful consideration that the business is subject to seasonality and the market is quite competitive. While It has posted growth in its top and bottom lines.

Mastertrust 

Gopal Snacks brand recognition allows it to stand out in the competitive market as evident from its market position.The company plans to leverage technology to further optimise operations and utilise its unutilised capacity and expand manufacturing capacity, expanding wallet share with consumers and grow its consumer base to enhance brand awareness. Investors looking to invest, can invest in this IPO with a medium to long term perspective.

Sushil Financial Services

Gopal Snacks revenue CAGR for the period FY21 to FY23 stood at about 11.15 per cent. The company operated on an EBITDA margin of 14.07 per cent and PAT margin of 8.06 per cent for FY23.Generating ROCE (return on capital employed) and ROE (return on equity) of 43.08 per cent and 38.63 per cent respectively for FY23. The debt to equity ratio has improved from 1.02x in FY21 to 0.37x in FY23 and further to 0.08 at H1FY24.