Sequoia-backed Stove Kraft IPO: The hefty grey market premium is not in sync with what analysts have to say


  • The ₹412 crore IPO of kitchen appliances manufacturer Stove Kraft is now open for public subscription.
  • The IPO will remain open for subscription until January 28.
  • The shares were commanding a premium of ₹80-90 in the grey market over the set price band of ₹384-385 per share.
  • “Company’s brand value, margins and return on capital are lower than its peers so it won’t get such a premium valuation like its peers,” Angel Broking said in its report.

The ₹412 crore initial public offering of kitchen appliances manufacturer Stove Kraft is now open for public subscription. This would be the fourth company to launch an IPO this year and second stake sale by private equity firm Sequoia Capital, which recently pared stake in Indigo Paints.

The public issue has received mixed reviews from the brokerages, but the grey market is ready to pay a hefty premium for its shares. The shares were commanding a premium of ₹80-90 in the grey market over the set price band of ₹384-385 per share. However, the grey market is not an official measure of the market premium. But it is a fair indicator of demand for the shares in the market.

Streets View: Stove Kraft IPO

Brokerage Recommendation
Reliance Securities Neutral
Angel Broking Neutral
Axis Securities Not Rated
ICICI Securities Not Rated


Expensive valuation, weak financials, high manufacturing efficiency and others that led to mix reaction from analysts

Aggressively valued IPO

According to Angel Broking, the company has priced its issue at 34.5 times the earnings per share in the last 12 months. The metric is called price-to-earnings (P/E) ratio, which shows the price that the market is willing to pay for a stock based on its earnings. Higher the P/E, the more expensive the stock.

Bigger peers like TTK Prestige and Hawkins Cookers, get a multiple of 61 times and 47.5 times respectively. While Stove Kraft seems cheaper, analysts aren’t very excited. “Company’s brand value, margins and return on capital are lower than its peers so it won’t get such a premium valuation like its peers,” the brokerage said.

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Weak financials

According to Reliance Securities, the Stove Kraft financials have not been “encouraging” despite seeing a remarkable improvement in margins in the past fiscal year. Even Angel Broking said that the profit for the last financial year ending March 2020 was driven by cost-cutting, which is not “sustainable”.

Sequoia-backed Stove Kraft IPO: The hefty grey market premium is not in sync with what analysts have to say

The company’s net profit stood at mere ₹3.2 crore in FY20, which improved to ₹28.8 crore in the first half of 2021. However, Reliance highlighted that the company’s net worth stands at negative ₹30 crore as of September 2020.

Lags behind its peers

The analyst reports highlighted that despite being into operation for more than two decades and setting up a strong distribution network, it has not delivered up to the mark results. The company’s business performance is substantially dependent upon its Pigeon and Gilma brands’, which have been around for over 15 years.

But, according to ICICI Direct, the company’s inability to maintain and promote the brand portfolio can impact future revenue growth.

Sequoia-backed Stove Kraft IPO: The hefty grey market premium is not in sync with what analysts have to say
BI India

Positives for Stove Kraft’s ₹412 crore IPO

Diversified kitchen and home appliances portfolio

Since its inception, Stove Kraft has grown from a single brand small LPG stove manufacturing company to become one of India’s leading manufacturers of kitchen appliances.

Along with Pigeon and Gilma, the company has a Licensing agreement to manufacture small domestic appliances under the brand ‘Black and Decker’.

Expanding business

The company recently expanded its production capacity from 19.5 million units per annum to 38.4 million units per annum. The facilities are backwards integrated with the ability to in-house manufacture components required for its products, which reduces its dependence on third-party suppliers and OEMs for its components.

The company has an integrated facility at Bengaluru comprising 12 manufacturing units to manufacture pressure cookers, non-stick cookware, hard-odized cookware, mixer grinders, and induction cooktops LPG stove, glass cooktops, IR thermometer and handy vegetable chopper.

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