IPO-bound kitchen appliances brand Stove Kraft is looking to increase local production facility to ensure all its products are manufactured locally. The company currently has two manufacturing plants in Bengaluru and Baddi.
In an interaction with Moneycontrol just days before the IPO opens on January 25, Rajendra Gandhi, Chairman and Managing Director said, Stove Kraft currently manufactures 80 percent of its products while the rest is imported.
Stove Kraft sells kitchen products under the Pigeon and Gilma brands. It also has the licence to sell the US-based Black+Decker brand products in India. It also sells lighting solutions under Pigeon LED.
“There is enough opportunity to grow in our Bengaluru plant. So, we will be adding additional manufacturing lines in this facility in the near future,” said Gandhi.
The Bengaluru facility is spread across 46 acres with 30 acres available for future expansion. Stove Kraft has set up manufacturing lines for products like floor maps and vegetable chopper in the Bengaluru facility.
He said almost the entire Black+Decker range is currently imported and the idea is to manufacturer locally to get a competitive advantage.
Stove Kraft that began operations in 1999 has grown from a single-brand small LPG stove manufacturer to a large manufacturer of kitchen appliances.
The company had a network of over 45,475 retail outlets and over 651 distributors as of September 30, 2020.
The IPO
Stove Kraft will be launching its initial public offering (IPO) for subscription on January 25. The price band for the issue, which will close on January 28, has been fixed at Rs 384-385 per share.
The public issue comprises a fresh issue of Rs 95 crore and an offer for sale of 82.50 lakh shares by promoters and investors.
The offer for sale consists a 6,90,700 equity shares by promoter Rajendra Gandhi, 59,300 equity shares by promoter Sunita Rajendra Gandhi, 14,92,080 shares by Sequoia Capital India Growth Investment Holdings I, and 60,07,920 shares by SCI Growth Investments II.
As part of the IPO, promoters and private equity firm Sequoia Capital will be paring down their stake. Currently, promoters hold 61.3 percent stake while Sequoia and related entities hold 38.4 percent. Post the IPO, the promoter stake will come down to 54.5 percent, while Sequoia will hold 12.5 percent.
Gandhi said the IPO proceeds will be used to repay debt and for expanding its business. Currently, the total debt stands at Rs 114 crore and he said the company will become debt-free after the listing.
Expansion plans
Gandhi said while Pigeon continues to be the biggest brand for the company, the idea is to expand the revenue base of Gilma and Black+Decker which fall under the premium category.
For the company, 90 percent of the revenue comes from the domestic market while 10 percent is from exports.
As of H1FY21, Stove Kraft's revenue stood at Rs 329.5 crore compared to Rs 317.4 crore a year ago. EBITDA stood at Rs 45.1 crore and EBITDA margin was 13.7 percent in H1.
Around 70 percent of the revenue comes from offline distribution while 30 percent is from online channels.
Under the Pigeon brand, the company sells kitchen appliances like cookers, cookware sets, gas stove and mixer grinders, juicers. Under Gilma brand, it sells chimneys, hobs and cooktops.
Black+Decker products like blenders, juicers, toaster/grill, iron among others are sold as part of an agreement by Stove Kraft where the latter also provides after-sales service. In December 2017, US-based Black+Decker had tied-up with Stove Kraft.
Gandhi said the company is looking to expand the presence of its brands in India and abroad. Gilma which is currently a brand focussed in southern India will also be expanded across India, he added.
Stove Kraft is present in 14 countries like UAE, Kuwait, Tanzania, Nepal, Sri Lanka, Bangladesh, Ghana, USA, Mexico and Saudi Arabia among others.
The kitchen appliances market in India is estimated to be Rs 20,700 crore. Industry analysts estimate it would grow to Rs 35,000 crore by 2025.
While Stove Kraft's exact market share in this space was not disclosed, the company said it has 12.4 percent market share by volume in non-stick cookware segment.
Coronavirus impact
India was under nationwide lockdown from March 25 to prevent the spread of COVID-19. Gandhi said while the lockdown affected the import of products in the initial few weeks, the situation improved from June onwards.
In its prospectus filed with the regulator, Stove Kraft said its manufacturing facilities in Bengaluru and Baddi were closed for 42 and 34 days, respectively, which resulted in the ceasing of manufacturing and sales activities during that period.
The manufacturing activities at our Baddi facility resumed on April 26, 2020, and the manufacturing activities at the Bengaluru facility resumed on May 4, 2020.