IPO #5 : Stove Kraft Limited
January has seen a flurry of IPOs, starting with IRFC, bouncing to Indigo Paints and Home First Finance and now, StoveKraft. And, there might be a few more in the pipeline.
StoveKraft's issue size is INR 413 crore out of which INR 95 crore is a fresh issue which will be used to prepay debt on the books. The rest is Offer for Sale - the major beneficiary of which is Sequoia Capital - the investor getting a sweet exit.
Rishabh & I discussed about the history of the Company and it's brands (Pigeon & Gilma). We spoke about the 2 major segments of the Kitchen appliance industry i.e. Large Kitchen appliances and Small kitchen appliances and the Companies that dominate these segments.
We also covered StoveKraft's fundamentals (which don't look very good) - looking at a huge pile of debt on the books and the fact that it has negative networth. The Company has only started to make profit since 2018 and the margins/return ratios also look very low. We discussed at length certain red flags - like Governance issues & a low capacity utilization.
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