Stove Kraft IPO Oversubscribed on Day 2; Should you Subscribe?

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Stove Kraft IPO Oversubscribed on Day 2; Should you Subscribe?
Credit: © Reuters.

By Aditya Raghunath -- Stove Kraft Ltd (NS: STOVEKRAFT ), the company that manufactures and sells kitchen appliances, launched its Rs 412.62 crore IPO on Monday, January 25. The last for subscribing to the IPO was January 28. As of January 27, the IPO was oversubscribed by 2.93 times.

The price band for the IPO is in the range of Rs 384-Rs 385. Even though the IPO is oversubscribed, there is a healthy bit of risk when it comes to the company.

Analysts have said that the company’s brand value, returns, and margins are lower than its peers. Stove Kraft’s financials were in the red as of March 2018 but the company has improved its profitability since then. However, analysts still aren’t convinced about the company’s future. ICICI Securities Ltd (NS: ICCI ) is concerned about the company’s profitability.

Angel Broking isn’t convinced that Stove Kraft can sustain its profitability trend. It said, “Due to cost cutting measures, Company margins improved in the H1FY21 which is not sustainable. Cost such as travelling, advertisement reduced in H1FY21 due to Covid-19 are going to come back once business comes back to normalcy… so we recommend ‘Neutral’ rating to the Stove Kraft IPO issue.”

A neutral rating generally indicates that an IPO is suited for very aggressive investors who are prepared to take risky bets.

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