Stove Kraft Limited IPO Review: Avoid, Not a proven business model yet

Purpose of Stove Kraft IPO

• Fresh Issue (Rs 95 Cr) to be utilized for corporate purposes
• Offer for Sale (Rs. 300 Cr) to be received by outgoing Shareholders

About the Stove Kraft Company

Incorporated on June 28, 1999, Stove Kraft is Rs. 700 Cr, kitchen solutions and an emerging home solutions brand.

Stove Kraft is engaged in the manufacture and retail of a wide and diverse suite of kitchen solutions under the Pigeon and Gilma brands and proposes to commence manufacturing of kitchen solutions under the BLACK + DECKER brand, covering the entire range of value, semi-premium, and premium kitchen solutions, respectively.

The kitchen solutions comprise cookware and cooking appliances across their brands, and the home solutions comprise various household utilities, including consumer lighting.

Pigeon branded products were amongst the leading brands in the market for certain products such as free-standing hobs, cooktops, non-stick cookware, LPG gas stoves, and induction cooktops. The Gilma portfolio comprises chimneys, hobs, and cooktops across price ranges and designs.

Stove Kraft has 2 manufacturing facilities, one each in Bengaluru, Karnataka, and Baddi, Himachal Pradesh. As of September 30, 2020, they manufacture 79.75% of their Pigeon and Gilma branded products (in terms of the number of units) at their well-equipped and backward integrated manufacturing facilities.

Stove Kraft has a separate distribution network for each of their Pigeon, Gilma, and BLACK + DECKER brands. Further, there is a separate distribution network for the Pigeon LED products. They have 651 distributors in more than 27 states of India and 5 union territories of India and 12 distributors for their products that are exported as of September 30, 2020.

Financials of Stove Kraft

Strengths

• Widespread, well-connected distribution network with a presence across multiple retail channels
• Focus on quality and innovation
• Strong manufacturing capability with efficient backward integration

Future prospects

• Expand geographically
• Scale-up branding, promotional and digital activities
• Invest in new plants and automation in existing manufacturing facilities
• Grow LED consumer lighting business

Weakness

• The small size might become a hindrance to growth in a competitive market
• Peers have a better product range, higher brand awareness, and a strong distribution channel.

MoneyWorks4me Opinion

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