Prataap Snacks IPO opens: A five-point guide whether you should subscribe

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Published: September 22, 2017 10:34:05 AM

Prataap Snacks' estimated Rs 482-crore public offer (IPO) has opened on Friday for the subscription. The Indore-based company, which manufactures and markets snacks under the Yellow Diamond brand, has fixed a price band of Rs 930-Rs 938 per equity share.

Prataap Snacks’ estimated Rs 482-crore public offer (IPO) has opened on Friday for the subscription. The Indore-based company, which manufactures and markets snacks under the Yellow Diamond brand, has fixed a price band of Rs 930-Rs 938 per equity share. The company expects to raise Rs 250 crore from a fresh issue of equity shares.

Should you subscribe?

  • The company has raised Rs 143.4 crore by allotting 1.53 million shares to 15 anchor investors at Rs 938 per share.
  • HDFC says the company has leveraged its understanding of target markets and consumer segments, product innovation capabilities, extensive distribution network, strategically located manufacturing facilities, and has focused its marketing and promotional activities to strengthen its product brands and establish the Yellow Diamond brand across India but any alleged contamination or deterioration of products or any negative publicity or media reports related to its products or raw materials will be one of the major key concerns.
  • The company’s offer consists of a fresh issue by PSL and an Offer for Sale. The Company will not receive
    any proceeds from the Offer for Sale. The Company proposes to utilize the Net Proceeds from the Fresh Issue towards funding repayment of borrowings, on capital expenditure, marketing etc.
  • The company has an innovation-driven product portfolio and a successful track record of professional management.
  • Angel Broking has kept a neutral rating to Prataap Snacks IPO given the high valuation and the low profitability, saying the company will need to show remarkable improvement in profitability to justify this high valuation.

Prataap Snacks is a Sequoia Capital-backed company, which clocked a revenue of Rs 903 crore last fiscal. Sequoia Capital’s stake would reduce to 49% post IPO from 63% at present, while the other three promoters Arvind Mehta, Amit Kumat and Apoorva Kumat’s shareholding will come down to approximately 24 % from around 33-34 % at present.

The equity shares offered through the RHP are proposed to be listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The company’s product portfolio includes extruded snacks, chips and namkeen. According to a report by Frost and Sullivan, Prataap Snacks is one of the top six Indian snack food companies in terms of revenues in 2016, and among the fastest growing companies in the Indian organized snack market between 2010 and 2016.

 

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