Gopal Snacks IPO: Price Band Fixed, Issue Open on March 6

Gopal Snacks Limited Unveils IPO Details

Rajkot-based Gopal Snacks Limited, a distinguished player in the snack industry, recently revealed the price band for its eagerly awaited Initial Public Offering (IPO), positioning it at Rs 381-401 per share for a public issue worth Rs 650 crore.

Set to open its subscription on March 6, the IPO facilitates anchor investors to place their bids a day earlier on March 5, with the closing scheduled for March 11.

The shares of Gopal Snacks Limited are anticipated to hit the stock market on March 14. What distinguishes this IPO is its exclusive employment of a pure offer-for-sale (OFS) mechanism, implying that no new shares will be issued; instead, existing shares will be made available for purchase by the promoters.

The Offer for Sale (OFS) arrangement entails the promoters, namely Gopal Agriproducts and Bipinbhai Vitthalbhai Hadwani, divesting equity shares valued at Rs 520 crore and Rs 80 crore, respectively. Additionally, Harsh Sureshkumar Shah will be offloading shares amounting to Rs 50 crore.

At present, the promoters collectively hold an imposing 93.5 percent stake in the company, leaving a modest 6.5 percent for public shareholders. Among these public shareholders, Axis Growth Avenues AIF-I and Ashoka India Equity Investment Trust PLC each command a 1.48 percent stake.

The management of the IPO is entrusted to experienced merchant bankers, including Intensive Fiscal Services, Axis Capital, and JM Financial.

In terms of allocation, the IPO is structured to reserve 50 percent for qualified institutional investors, 15 percent for non-institutional investors, and the remaining 35 percent for retail investors.

In a laudable move, Gopal Snacks Limited has allocated shares worth Rs 3.5 crore specifically for its employees. The issue, following the deduction of this reserved portion for employees, will constitute the net issue available for public subscription.

Gopal Snacks Limited: A Brief Overview

Gopal Snacks Limited has established itself as a key player in the snack market, offering a diverse range of products, including ethnic snacks and western snacks, across 10 states and two union territories.

The company has carved a niche for itself under the popular brand ‘Gopal.’ Delving into the financials of Gopal Snacks, for the fiscal year 2023, the company reported a robust revenue of Rs 1,394.65 crore, accompanied by a net profit of Rs 112.4 crore.

Notably, the net profit for the April-September period of the fiscal year 2024 exhibited a noteworthy growth of almost 7 percent year-on-year, reaching Rs 55.6 crore.

However, it is essential to acknowledge a slight dip in revenue from operations during the same period, which recorded a 3.3 percent decline to Rs 676.2 crore. This nuanced performance reflects the inherent dynamism of the snacks market and broader economic conditions.

IPO Dynamics: An Exclusive OFS Approach

The decision to pursue a pure offer-for-sale (OFS) strategy in the IPO is a noteworthy aspect of Gopal Snacks Limited’s market debut.

In this setup, existing shares held by the promoters will be offered to the public without the issuance of new shares.

Consequently, the funds generated from the OFS will directly accrue to the promoters, namely Gopal Agriproducts, Bipinbhai Vitthalbhai Hadwani, and Harsh Sureshkumar Shah.

In the upcoming IPO, Gopal Agriproducts and Bipinbhai Vitthalbhai Hadwani are set to divest equity shares amounting to Rs 520 crore and Rs 80 crore, respectively.

Additionally, Harsh Sureshkumar Shah will be offloading shares worth Rs 50 crore. This collective divestment represents a significant financial move by the promoters, enabling them to leverage the capital market for value realization.

Promoters’ Current Stake and Public Shareholding

As of now, the promoters command an overwhelming 93.5 percent stake in Gopal Snacks Limited, underscoring their pivotal role in the company’s ownership structure.

The remaining 6.5 percent is distributed among public shareholders, indicating a comparatively modest float for public ownership.

Notable among these public shareholders are Axis Growth Avenues AIF-I and Ashoka India Equity Investment Trust PLC, each holding a 1.48 percent stake.

The IPO, therefore, presents an opportunity for public investors to gain a strategic foothold in a company that has demonstrated a robust presence in the snacks market.

The allocation structure, with specific reservations for different investor categories, aims to ensure a fair and transparent distribution of shares among various investor segments.

Merchant Bankers and IPO Management

The management of the IPO process is entrusted to renowned merchant bankers, including Intensive Fiscal Services, Axis Capital, and JM Financial.

These entities play a crucial role in orchestrating the IPO, from the regulatory filings and due diligence processes to the marketing and allocation of shares.

Their involvement adds a layer of expertise and credibility to the offering, instilling confidence in investors about the smooth execution of the IPO.

Reserved Portion for Employees: A Commendable Gesture

In a commendable move reflecting a commitment to employee participation, Gopal Snacks Limited has set aside shares worth Rs 3.5 crore for its employees.

This reserved portion acknowledges the role of employees in the company’s success and aligns with the broader trend in the corporate world, where companies increasingly recognize the importance of employee ownership and participation in the growth story.

This reserved portion for employees not only serves as a tangible acknowledgment of their contribution but also provides them with an opportunity to be a part of the company’s growth journey.

Employee ownership can foster a sense of belonging and motivation, contributing to enhanced organizational performance.

Allocation Breakdown: Catering to Diverse Investor Categories

The IPO’s allocation strategy is designed to cater to the diverse nature of investors in the market. Qualified institutional investors (QIBs) are allocated 50 percent of the shares, reflecting the significant interest and participation from institutional players in the IPO.

This segment includes various financial institutions, mutual funds, and other qualified entities with substantial financial expertise.

Non-institutional investors, representing a more diverse group of high-net-worth individuals and corporate entities, are allocated 15 percent of the shares.

This segment often seeks a more substantial stake in the company, given the larger investment capacities of these investors.

The retail investor segment, which includes individual investors looking to participate in the capital market, is allocated the remaining 35 percent of the shares.

This allocation ensures broader retail participation, aligning with the principle of democratizing access to capital markets and providing retail investors with an opportunity to invest in the company’s growth.

Financial Snapshot: Fiscal Year 2023 and H1 FY 2024 Performance

Delving into the financial performance of Gopal Snacks Limited, the fiscal year 2023 showcased robust results. The company reported a revenue of Rs 1,394.65 crore, indicative of its strong market presence and consumer demand for its diverse product offerings.

The net profit for the same period stood at Rs 112.4 crore, underscoring the company’s ability to translate its operational efficiency into tangible financial gains.

Examining the financial performance for the April-September period of the fiscal year 2024, Gopal Snacks Limited continued its impressive trajectory with a noteworthy year-on-year growth in net profit.

The April-September period of the fiscal year 2024 saw a net profit of Rs 55.6 crore, marking a substantial increase of almost 7 percent compared to the corresponding period in the previous year.

This growth in net profit is indicative of the company’s resilience and adaptability in navigating the dynamic market conditions.

However, it is essential to note a slight dip in revenue from operations during the same period, registering a 3.3 percent decline to Rs 676.2 crore. This nuanced performance underscores the impact of external factors and market dynamics on the revenue streams of snack companies.

As the company moves towards its IPO, investors may carefully assess the factors contributing to this revenue fluctuation and evaluate the management’s strategies for addressing market challenges.

Gopal Snacks Limited’s Market Presence and Product Portfolio

Gopal Snacks Limited has solidified its position as a key player in the snack industry, operating across 10 states and two union territories. The company’s diverse product portfolio encompasses both ethnic and western snacks, catering to a wide consumer base with varied taste preferences.

The brand ‘Gopal’ has become synonymous with quality and variety in the snack market, contributing to the company’s strong market presence.

The snacks industry is characterized by its competitive landscape and the need for continuous innovation to meet evolving consumer preferences. Gopal Snacks Limited’s ability to offer a range of products that appeal to diverse demographics positions it strategically in this competitive market.

IPO Strategy: Pure Offer-for-Sale (OFS) Approach

The decision to opt for a pure offer-for-sale (OFS) mechanism in the IPO distinguishes Gopal Snacks Limited’s market debut.

Unlike traditional IPOs that involve the issuance of new shares, the OFS approach entails the promoters selling their existing shares directly to the public.

This strategy provides the promoters, namely Gopal Agriproducts, Bipinbhai Vitthalbhai Hadwani, and Harsh Sureshkumar Shah, with an avenue to realize the value of their holdings.

The OFS strategy allows the promoters to leverage the capital market for divesting their shares without diluting the company’s equity by issuing new shares.

This approach is often chosen when promoters seek liquidity or wish to unlock the value of their investments.

Investors, in turn, gain the opportunity to acquire shares directly from existing stakeholders, potentially influencing the market dynamics.

Promoters’ Divestment and Current Stake

As part of the IPO, Gopal Agriproducts and Bipinbhai Vitthalbhai Hadwani are set to divest equity shares worth Rs 520 crore and Rs 80 crore, respectively.

Additionally, Harsh Sureshkumar Shah will offload shares amounting to Rs 50 crore. This substantial divestment highlights the promoters’ confidence in the company’s future prospects and their strategic use of the capital market for realizing value.

As of now, the promoters collectively hold an imposing 93.5 percent stake in Gopal Snacks Limited. This concentrated ownership structure emphasizes the promoters’ significant role in shaping the company’s direction and underscores their long-term commitment.

The IPO, by introducing a public float, aims to strike a balance between retaining promoter control and providing an opportunity for public investors to participate in the company’s growth story.

Public Shareholding and Institutional Investors

The public shareholding in Gopal Snacks Limited currently stands at 6.5 percent, reflecting the modest float available for public ownership. Notable among the public shareholders are Axis Growth Avenues AIF-I and Ashoka India Equity Investment Trust PLC, each holding a 1.48 percent stake.

The limited public float underscores the exclusivity of the IPO and may attract investors seeking a strategic position in a company with a robust presence in the snacks market.

The IPO’s allocation structure reserves 50 percent of the shares for qualified institutional investors (QIBs), catering to entities with substantial financial expertise and investment capacities.

This allocation reflects the significant interest and participation from institutional players in the IPO, potentially influencing the overall market sentiment.

The non-institutional investor segment, allocated 15 percent of the shares, encompasses a diverse group of high-net-worth individuals and corporate entities.

This segment often seeks a more substantial stake in the company, given the larger investment capacities of these investors.

The retail investor segment, with an allocation of 35 percent, ensures broader retail participation, aligning with the principle of democratizing access to capital markets.

This allocation provides individual investors with an opportunity to participate in the growth of Gopal Snacks Limited and diversify their investment portfolios.

Merchant Bankers and IPO Management

The successful execution of the IPO is entrusted to experienced merchant bankers, including Intensive Fiscal Services, Axis Capital, and JM Financial.

These entities play a pivotal role in managing various aspects of the IPO process, from regulatory compliance and due diligence to marketing and allocation of shares.

Their expertise and credibility add value to the offering, instilling confidence in investors and stakeholders about the smooth conduct of the IPO.

Reserved Portion for Employees: Enhancing Stakeholder Participation

Gopal Snacks Limited’s decision to allocate shares worth Rs 3.5 crore specifically for its employees is a commendable move that underscores the company’s commitment to enhancing stakeholder participation.

This reserved portion not only acknowledges the significant role of employees in the company’s success but also aligns with the broader trend of recognizing the importance of employee ownership.

Employee ownership can foster a sense of belonging, motivation, and alignment of interests between employees and the company’s objectives.

By providing employees with the opportunity to own a stake in the company, Gopal Snacks Limited not only rewards their contributions but also encourages a shared commitment to the company’s growth journey.

In conclusion, Gopal Snacks Limited’s IPO unveils a unique combination of market dynamics, financial performance, and strategic decision-making.

The exclusive offer-for-sale (OFS) approach, coupled with reserved portions for employees and diverse investor categories, reflects a well-thought-out strategy to balance stakeholder interests.

As the IPO opens for subscription, investors are likely to scrutinize the company’s growth prospects, competitive positioning, and the ability of its management to navigate the challenges of the dynamic snacks market.