PRATAAP SNACKS LIMITED IPO [RESEARCH REPORT ]

It’s pretty much obvious if you aren’t able to strike a chord when we mention Prataap Snacks Ltd or Prakash Snacks. However I’m definitely sure Yellow Diamond Potato Chips is something you may have heard of.

Since 2003 when it was started in Palda near Indore by brothers Amit Kumat and Apurva Kumat along with Arvind Mehta, a classmate of Apurva, the company has grown its revenues to over Rs.700 crore.

This, in fact, is a great achievement considering the fierce market competition from well-established brands like Lays, Kurkure, Bingo, etc.

Prataap Snacks Limited manufactures and sells snack foods under the Yellow Diamond brand name in India.

Its products include extruded snacks, fried and sliced chips/crisps made from potatoes, hummus, lentils, etc and namkeen. The company sells its products through distributors, stockiest, and retailers. Prataap Snacks Limited was incorporated in 2009 and is based in Indore, India.

In Fiscal 2012, the Company acquired the snack foods business of its Group Company, Prakash Snacks Private Limited, pursuant to a business transfer agreement dated September 28, 2011.

PRODUCTS:

Their diversified product portfolio includes three categories:

1) Extruded Snacks – Extruded snacks are processed, reconstituted and shaped potato or cereal-based snacks. Extruded snacks may be flavored or unflavoured. It includes puffed snacks.

2) Chips – Chips include fried, sliced chips/crisps made from potatoes, hummus, lentils etc. It includes flavored and unflavoured chips, and maybe standard chips, thick-cut and/or crinkle-cut. Potato Chips were introduced by the Company in Fiscal 2010.

3) Namkeen – Namkeen is a type of traditional savory Indian snack which includes products such as moong dal, masala or fried nuts, sev and bhujia. Namkeen under the Yellow Diamond brand was launched by the Company in Fiscal 2012, pursuant to the business transfer agreement dated September 28, 2011.

BUSINESS STRATEGY:

The main objects contained in the MoA of the Company are as follows:

“To carry on the business of manufacture, producer, processors, stockiest of and dealers in the processed foods, semi processed food, noodles & pasta, vegetable, fruits, including tinned vegetables and snacks prepared from any type of vegetable, fruits, cereals, wheat, rice and allied products including potato chips, potato wafers, potato fingers, puffs, various namkeen and to run cold storage for storage of vegetables, fruits, food products.”

The Company seeks to differentiate themselves from their competitors through the introduction of new products, including launching innovative flavours targeted at addressing consumer taste, market trends and providing superior value to consumers. Their diversified product portfolio enables them to cater to a wide range of taste preferences and consumer segments, including adults and children.

Their brand philosophy emphasizes delivery of maximum value to consumers and is reflected in their marketing campaign “Dildaar Hain Hum”.

The company aims for product innovation and cost efficiencies in their production and distribution operations, and offering a superior value proposition for consumers, through a wide range of consumer-driven flavours, and providing relatively high grammage, i.e., a relatively high volume to weight ratio, for our products.

The company’s key focus is to increase their penetration in the markets where they currently operate by replicating the same proposition that has helped them grow their brand. They have a strong presence in regional pockets and intend to proliferate their presence deeper into these to be able to serve all classes and customer segments.

While continuously reinforcing their position in India, they plan to explore select markets abroad, such as South Asia, to expand their sales in these regions and enhance their brand recognition internationally. They intend to exploit macroeconomic factors and the trends in the snacks market, which are similar to those of the Indian snacks market, in these proposed new geographies.

PROMOTERS:

  • Arvind Mehta,
  • Amit Kumat,
  • Apoorva Kumat,
  • Rajesh Mehta,
  • Naveen Mehta,
  • Arun Mehta,
  • Kanta Mehta,
  • Rita Mehta,
  • Premlata Kumat,
  • Sudhir Kumat,
  • Swati Bapna,
  • Rakhi Kumat and
  • Sandhya Kumat

INITIAL PUBLIC OFFER (IPO):

The company plans to raise INR250 crore (INR2.5 billion) by issuing new shares while existing investors will sell 2,982,000 shares through the IPO. The biggest chunk of 2,226,000 shares will be offered by two Sequoia group companies.

Proceeds from the public offering would be mainly used for funding capital expenditure requirements, repayment of borrowings, modernization of existing manufacturing facilities, marketing, and brand building activities.

Book Running Lead Managers: Edelweiss Financial Services Limited, JM Financial Institutional Securities Limited, Spark Capital Advisors (India) Private Limited

Registrar: Karvy Computershare Private Limited

KEY MANAGERIAL PERSONNEL:

1) Arvind MehtaCHAIRMAN AND EXECUTIVE DIRECTOR

Being their Promoter, he has been associated with their Company since its incorporation. He holds a bachelor’s degree in commerce from Devi Ahilya Vishwavidyalaya. He has over 13 years of experience in snack foods industry and over 13 years of experience in the financing business.

2) Amit Kumat – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

he has been associated with their Company since its incorporation. He was appointed as an additional Director of their Company on May 12, 2011, and was regularised on September 30, 2011. He was appointed as the Chief Executive Officer on June 21, 2016. He holds a master’s degree in science from the University of Southwestern Louisiana.

3) G.V. RavishankarNOMINEE DIRECTOR

He holds a bachelor’s degree in engineering from Bharathidasan University and a post-graduate diploma in management from the Indian Institute of Management, Ahmedabad. He has 12 years of experience in management consultancy and private equity investments. He was appointed as an additional Director on May 12, 2011, and was appointed as Director of their Company on September 30, 2011.

4) V.T. Bharadwaj – NOMINEE DIRECTOR

He holds a bachelor’s degree in engineering from the Birla Institute of Technology and Science and a post-graduate diploma in management from the Indian Institute of Management, Ahmedabad. He was appointed as an additional Director of their Company on May 12, 2011, and was appointed as Director of their Company on September 30, 2011.

5) Anisha Motwani – INDEPENDENT DIRECTOR

She holds bachelor’s degree in science from Sophia Girls College, Ajmer and a master’s degree in business administration from the University of Rajasthan. She was appointed as an Independent Director on July 5, 2016. She has several years of experience in management consultancy. She is currently a partner in Storm the Norm Ventures.

6) Vineet Kumar Kapila – INDEPENDENT DIRECTOR

He was appointed as an additional Director of their Company on July 22, 2016, and was appointed as an Independent Director of their Company on August 3, 2016. He is currently working as the chief operating officer – RPC North of United Spirits Limited.

7) Dr. Om Prakash Manchanda – INDEPENDENT DIRECTOR

He was appointed as an Independent Director on July 5, 2016. He is currently the chief executive officer and director of Dr. Lal Pathlabs Limited.

8) Haresh Chawla – INDEPENDENT DIRECTOR

He was appointed as an additional Director of their Company on September 13, 2016, and was appointed as an Independent Director of their Company on September 24, 2016. He is currently a partner in India Value Fund Advisors Private Limited.

SHAREHOLDING PATTERN:

The following table and graph show the shareholding pattern of the company:


INDUSTRY ANALYSIS:

With a large population, the food market in India is seeing large investments. The current Indian foods market is estimated at INR 27 Crore and is expected to grow at a CAGR of 11%. The food industry has received FDI of about INR 45,434.84 Crore in the last 15 years with a further potential to receive over INR 2,23,769.37 Crore in the next ten years. Additionally, the food processing industry in India contributes about 14% to the GDP, while accounting for 6% of all industrial investments.

Indian Middle-Class Consumer Expenditure:


Indian Middle Class Consumer Expenditure: Split by Type, 2015


India Overall Snacks Market: Market Share by Type, 2015


India Organised Packaged Food Market: Split by Product Type, 2015


India Overall Snacks Market: Market Share by Type, 2015


India Organised Snack Market: 2010- 2015


India Organised Savouries and Snacks Market: Split by Type, 2015


India Organised Snacks Market: Split by Sales Channels

 

COMPANY ANALYSIS:

FINANCIAL OVERVIEW

                                                                                                       (All values are in INR Crore)

Notes:
1: Total Assets include Fixed Assets as well as Current Assets 
Note:

                2: Total Debts include only Loans from Banks (both, long term and short term)

Financial Overview

The following graph shows the company’s revenue and the rate of change over the years:

The graph below depicts the company’s expenditure and its rate of change over the years from 2012 to 2016:

The following graph shows the total assets of the company and records the rate of change:

The following graph shows the total debts and its rate of change between 2012 and 2016:

The graph below records the net profit of the company and its rate of change between 2012 and 2016:

STATISTICAL OVERVIEW:

The following table and graph shows the return on equity and earning per share between 2012 and 2016:

 


PRODUCT ANALYSIS


The extruded snacks hold the majority in their products segment followed by Potato Chips:

MAJOR INDUSTRY PLAYERS & COMPARISON

                                                                                                                                                    In INR Crore


Revenue Overview

Profit Overview

Total Assets Overview

Market Capitalization

MARKET SHARE

CONCLUSION:

Though the market share is minimal, Prataap Snacks’ revenue grew 30% in the financial year 2014 to Rs.446.9 crore from Rs.344.3 crore in the previous year. The extruded snacks division contributed Rs.211.9 crore to revenue, the highest, followed by the potato chips division with Rs.166.9 crore. The company has created a space for itself by targeting smaller mom-and-pop stores that were not the forte of larger companies like Pepsi-Co.

The company has also managed to keep its costs low as it spends little on advertising and promotions and is promoter-driven.



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