Gopal Snacks shares debut at 12.4% discount; reasons behind the weak listing

Gopal Snacks made a disappointing market debut today. The shares of snack and FMCG product maker listed at a 12.4% discount on NSE at ₹351 per share compared to the issue price of ₹381 to ₹401 per share.

Upon listing, Gopal Snacks shares saw some investor traction, gaining 9.6% on NSE compared to the open price of ₹351 per share. On Day 1, the stock hit a high of ₹384.8 per share and a low of ₹341.8, eventually closing 4.2% higher at ₹365.9 apiece.

Weak market sentiments

As per experts, weak market sentiments amid sell-off in mid and smallcap stocks may have resulted in the discounted listing for the company. Mid and smallcap stocks are facing the blunt after market regulatory SEBI called for tighter disclosure norms from the mutual funds industry.

Growth concerns

The ₹650 crore public issue, which was entirely offer for sale, was subscribed 9.02 times on the final day. The soft listing could be because the entire IPO was offer for sale with no funds coming to the company for growth, which is a bit negative for long-term investors, who plan to invest in the company's IPO for future growth prospects.

High dependency on key products and regions

Furthermore, Gopal Snacks is highly dependent on a narrow set of products and regions. Product sales are concentrated in Gujarat, which accounts for 79% of its revenue from operation in FY23.

Industry competition

Gopal Snacks operates in a highly competitive market, facing competition from companies like Bikaji Foods, Haldiram, Bikanervala Foods, Prataap Snacks, Balaji Wafers, PepsiCo India Holdings, and DFM Foods and other regional players. Because of high competition, this industry has very tight margins and profitability.

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