Gopal Snacks makes disappointing debut; lists 13% below its issue price

Gopal Snacks made a disappointing stock market debut, with its shares listed at Rs 350, down 13 per cent when compared with its issue price of Rs 401 on the BSE on Thursday. The stock of the packaged foods company listed at Rs 351 on the National Stock Exchange (NSE).

Post listing, the stock hit a high of Rs 378 and a low of Rs 342 on the BSE. At 10:01 am; the stock was trading at Rs 375.50, up 7 per cent as against the stock's opening price, but down 6 per cent from its issue price. A combined 1.5 million equity shares had changed hands. so far, on the NSE and BSE.

The issue was subscribed nearly 10 times. The quota for qualified institutional bidders (QIBs) was booked 18.42 times. The quota reserved for non-institutional investors was subscribed 10 times. The portions reserved for retail investors and employees saw bidding for 4.22 times and 7.27 times, respectively.

Gopal Snacks, a Rajkot-based savory snacks player with dominance in gathiya snack, targets national presence, with enhanced thrust on the Indian savory snacks portfolio (market size: Rs 79,600 crore, as of FY23), which is likely to see 11 per cent FY23-27 CAGR (per a Frost & Sullivan report).

But the recent business slowdown is a concern – attributed to disruption in the company’s front-end team after a promoter exited the business in 2022.
The company rebuilding its sales team, along with healthy margins, ahead-of-time capacity, backward production integration, logistics capability, and healthy returns profile, would enable it to see better financial outcome in growth recovery, said analysts at Emkay Global Financial Services in IPO note.

The primary risk for Gopal Snacks would be difficulty in building a front-end team, its inability to succeed in non-Gujarat markets (~25 per cent of sales), high salience of impulse packs (consumer loyalty is low), regional concentration of production facilities (in West India), surge in competitive intensity hurting its margin profile, and IPO failure to have repercussion on promoter pledge position, the brokerage firm said.

Gopal Snacks is one of the largest and prominent FMCG players in India, offering Indian ethnic snacks and other products. The company intends to accelerate expansion in its focus markets, comprising Maharashtra, Rajasthan, Madhya Pradesh, and Uttar Pradesh. Gopal Snacks will be focusing on geographical markets which are proximity to existing manufacturing facilities. Therefore, this move will not only enable them to increase their topline growth but will also rationalize its operating expenses, said analyst at Anand Rathi Share and Stock Brokers.