??Gopal Snacks IPO ??

?? Are you ready to explore the dynamic world of Indian snack foods? Gopal Snacks is making waves with its upcoming Initial Public Offering (IPO), and here's why you should pay attention:

?? Key Details:

• Issue Size: Rs 650 crore
• Price Band: Rs 381 - Rs 401
• Lot Size: 37 Shares
• Issue Details: Only Offer for Sale
• Market Cap: At the upper price band, Rs 4,996.64 crore
• Minimum Investment: Rs 14,837

?? The Business: Gopal Snacks is an Indian FMCG company offering ethnic and western snacks along with other products in ten states and two Union Territories. Established in 1999 as a partnership firm and incorporated in 2009, they specialize in namkeen, gathiya, wafers, extruded snacks, papad, spices, gram flour, noodles, rusk, and soan papdi.

Their distribution network includes three depots and 617 distributors, along with e-commerce, modern trade, and export channels. The company operates six manufacturing facilities, with primary facilities in Nagpur, Rajkot, and Modasa, focusing on finished product manufacturing.

?? Industry Overview: The Indian market for savory snacks, encompassing both western and ethnic varieties, was valued at Rs 79,600 crore in FY23. Western snacks and ethnic savories contributed Rs 40,900 crore and Rs 38,800 crore respectively, comprising 51% and 49% of the total market.

The sector is expected to grow at a CAGR of approximately 11% to reach Rs 1,21,700 crore by FY27. The organized segment holds a 57% market share in FY23 and is projected to grow at a CAGR of 11.7%, reaching a 58% market share by FY27.

?? Financial Performance: In recent years, Gopal Snacks has demonstrated steady revenue growth, with a CAGR of 11.15% from FY21 to FY23, reaching Rs 1,394.65 crore in FY23. They held approximately 20% market share in ethnic savouries, 8% in western snacks, and 6% in the papad industry in Gujarat.

EBITDA has seen significant growth, reaching Rs 196.22 crore in FY23, with corresponding margins of 14.07%. Net profit (PAT) also increased over the same period, with PAT margins reaching 8.06% in FY23.

The company has reported an average EPS of Rs 5.90 and an average RoNW of 29.70% for the last three financial years. The ROCE has improved significantly, reaching 43.08% in FY23.

The asking price for FY24 annualized earnings, attributed to post-IPO fully diluted paid-up equity capital, stands at a P/E ratio of 44.96.

?? Competitive Strengths:

• Strong brand recognition as an ethnic savouries brand, particularly prominent in Gujarat, owing to their focus on quality and diverse offerings.
• Diversified product portfolio capable of tapping into the expanding Indian snacks market.
• Significant presence as a leading manufacturer of gathiya in India, aligning with the increasing popularity of gathiya as a snack, providing growth opportunities in this segment.
• Strategically located manufacturing facilities, enhancing operational efficiency and distribution capabilities.

? Risks:

• Heavy dependence on the sale of specific products, namely namkeen, gathiya, and snack pellets, which accounted for a significant portion of revenue from operations in FY21-FY23 (88.96%, 85.25%, and 81.66% respectively), posing revenue concentration risk.
• Concentrated sales in their core market of Gujarat, with revenue from Gujarat accounting for a substantial portion of total revenue from operations in FY21-FY23 (74.31%, 76.27%, and 79.08% respectively), indicating geographical concentration risk.
• Operations are susceptible to contamination-related risks such as improper storage of products and raw materials, labeling errors, and non-compliance with quality control standards, which could impact product quality and consumer confidence.
• Contamination or adulteration of products may lead to product liability claims, negative publicity, government scrutiny, investigations, interventions, and product returns, posing legal and reputational risks to the company.

?? Investment Opportunity: With its IPO, Gopal Snacks offers investors a chance to be part of India's snack food journey, backed by solid financials and promising growth prospects. Investors can capitalize on the company's strategic strengths and market potential, driving long-term value creation and wealth accumulation.

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