Business: Gopal Snacks sells a variety of ethnic snacks including namkeen and gathiya and Western snacks like wafers and extruded snacks under the brand name ‘Gopal’ with Gujarat being its key market.
With around 31% market share in the organised gathiya market, the company claims to be the largest manufacturer of the Gujarati savoury in the country. It has two primary manufacturing facilities located in Gujarat and one in Maharashtra. As of September 2023, gathiya and namkeen each contributed 28% of the company’s revenues while Western snacks together accounted for 31% and the rest around 13% came from other items such as papad, besan and spices.
Packs priced at ₹5 contributed 75% of the company’s FY23 revenues and ₹10 packs accounted for 8%.
However, the company faces increased competition from the competing family business run by the promoter’s brother under the brand name of ‘Gokul Snacks’. Besides, the company has received eight notices from the Food Safety and Standards Authority of India (FSSAI) until 2022 regarding deficient packaging, misbranding and misleading advertising. According to the management, these notices are concerning routine matters.
AgenciesFinancials and Growth Prospects: The company’s revenues have grown at a three-year compounded annual growth rate (CAGR) of 11% from ₹1,129 crore in FY21 to ₹1,395 crore in FY23. Its net profit has grown five-fold to ₹112 crore during this period. The surge in profits is thanks largely to the company reducing the average grammage per pack while keeping the price unchanged. In the first quarter of FY23, the company reduced the grammage by 3 gm to 5 gm per pouch offered in its most popular ₹5 and ₹10 packs. This reduced the consumption of raw materials and the capacity utilisation of the manufacturing facilities – a benefit that translated into an unprecedented increase in the bottom line. Besides, the company also reduced retailers’ margin per pouch in the ₹5 SKU in Gujarat and Maharashtra. Further, there has also been a decrease in the prices of raw materials. Consequently, the Ebitda margin doubled from 7% in FY22 to 14% in FY23 and stood at 13.9% in the six months ended September 2023.Valuations: The IPO values the company at 45 times its estimated FY24 earnings – which is fully pricing in the size, portfolio, scale and reach of the company’s business compared to the listed snack companies. Investors can avoid subscribing to the issue.
Raises Rs 193 crore from Anchors
Gopal Snacks has garnered ₹193.94 crore from anchor investors, ahead of its IPO. The company allocated about 4.8 million shares at a price of ₹401 per share. Ashoka WhiteOak, WhiteOak Mutual Fund, DSP MF, Quant MF, 360 One Wealth and Asset Management, Nataxis, BNP Paribas, BoFA Securities were among investors who participated in the round.
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