In just 5 days, shares of cooking and kitchen appliance maker Stove Kraft tanked ~25%. And in today’s Finshots, we see why this may have happened.

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The Story

Pop into your kitchen and look around. What’s the brand name you see stamped on your stovetop, electric kettle, and cookware? Or on your chimney? Or on the toaster sitting neatly on the counter?

Well, it’s likely you’ll see the names Pigeon, Gilma, or Black+Decker* etched in bold. And Stove Kraft — a 23-year old Bengaluru headquartered company markets these brands in India. They’ve managed to sneak into most kitchens across the country and they’ve done it in such style.

First, they leveraged co-branded partnerships with LPG providers like Indian Oil and Hindustan Petroleum. By tapping into the existing distribution network, Stove Kraft automatically expanded its reach. Also, the pricing was a nice touch. As Indian aspirations grew, people wanted kitchenware they could recognise. They wanted a brand name. And Stove Kraft was the perfect alternative. It was not too pricey and it had the branded play going for it as well. These were “value for money” products and soon the company cornered a 25% share in cooktops and a 21% market share in electric kettles.

They were on pretty solid footing. And then the pandemic came along and offered another fillip. With people spending more time at home, kitchenware turned into essential items. And as one analyst noted, “Ease of convenience has become the dharma now.”

And Stove Kraft’s sales exploded. Between June and September 2020, the company’s revenues ballooned by over 150%. They even decided to ride the IPO boom. In January 2021, it listed its shares on the stock market. Investors lapped it up and the stock opened at a 30% premium to its issue price. By October, it had jumped nearly 150%. Everyone, including the analysts, was upbeat about the company’s prospects.

But then things took a drastic turn this month. The company announced the financial results for the period between October and  December 2021 and it wasn’t what people expected. Sales grew by only 1% compared to the same quarter last year. And everybody went — “What?”

This was a company that was firmly on the growth path. How could this have happened?

Well, the company management has a theory. They say and we quote: “This was primarily driven by a higher base in FY20 since Diwali was in the middle of November last year and consequently had a positive impact in third quarter of FY20. For this year, majority of the Diwali purchases occurred before 3rd quarter and as a result volumes were relatively muted when compared to last year.”

In simple words, here’s what they’re saying — Diwali came early in 2021. So most of our sales were packed into the preceding quarter, between June and August 2021. And festive sales didn’t contribute a lot to our top line between October and December.

However, if you were to look at the year before, Diwali came bang in the middle of November. So sales figures between October and December 2020, were substantial. And if you try to compare revenues, you’ll be measuring the growth on a high base already. So you won’t see any progress.

The end!

However, if that’s the case, this should be a common theme across the industry, no? We should see the same impact on their competitors' sales figures also, right?

Well, we do. Its nearest competitor Butterfly Ghandimathi Appliances saw its sales dip by 13%. However, their share price didn’t tank. In fact, it’s up 3% in the past month!

So what gives?

Well. some people believe this could have been a result of mismanaged expectations.

Let us explain.

When companies announce their financial results every quarter, they tell you what transpired in the past. But they also give you some guidance on what to expect in future. Now the problem with “guiding” investors is that there’s always a bit of uncertainty involved.

For instance, here’s a snippet from a conversation that took place just two months ago — during Stove Kraft’s conference call. One curious analyst asked if the company could grow its revenues by 25–30% in the next two years. And the MD Rajendra Gandhi replied — “I think that is a very longtime performance but you can definitely say in the next one or two quarters we are definitely on this growth trajectory.”


Also, there’s the bit about inflation. The company in the past had alleged that raw material prices were on the up and that they’d be initiating price hikes to protect their margins. However, margins haven’t improved and it doesn’t seem as if they’ve hiked prices either.

So yeah, the “guidance” could have played a part in the fallout. But if you have any other pointers, don’t forget to tweet at us.

Until then…

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*Black & Decker is an American brand that’s licensed by Stove Kraft Ltd in India