About the Company:

Established in October 2011 as a public limited company but the roots of the company dates back to 1997 in Jaipur. The company is engaged in jewellery business which includes sale of jewellery made of gold, diamond, kundan and sale of other jewellery products that include pearl, silver, platinum, precious, semi-precious stones and other metals.

The company sources finished jewellery from third party suppliers located across India. This includes all types of jewellery made of gold, diamond and other precious and semi-precious stones. Additionally, to cater to the increasing demand in the market, the company also engages artisans on job work basis and have their own manufacturing facilities located in Jaipur, Rajasthan for diamond and gem stone studded jewellery.

It outsources the work of making ornaments to various artisans. They offer a large variety of handcrafted jewellery, which are designed and manufactured by their in-house designers in close collaboration along with skilled local craftsman located across the country. To ensure optimum prices and mitigate the risk of suppliers' concentration, it procures raw materials from various suppliers across the country. This procurement process enables it to offer a wide range of products.

The below table provides a breakdown of the revenue from operations by product category:

It could be observed from the above table that the major revenue (~84%) of the company is driven by the trading business of Gold and diamond jewellery.

The company is a jewellery retail chain with 4 showrooms in Jaipur, Rajasthan. The gold jewellery is mostly manufactured by independent jewellery manufacturers who procure gold and thus we do not supply them raw materials.

Industrial Overview:

Global Gems & Jewellery Industry

After reaching a record 10-year high of 4,872 tonnes in 2019, the gold supply experienced a significant drop in the following years due to the economic disruptions caused by the COVID--19 pandemic. However, in 2022, the gold supply showed signs of rebound, with a year-on-year growth of 1.16%.

Here is the total gold supply in tonnes in previous years:

Global Gold Demand Scenario:
After nearly a decade, the global demand for gold witnessed a resurgence, reaching a notable high of 4,740.7 tonnes in 2022.

Jewellery Fabrication:
Jewellery fabrication is the art of transforming raw materials like precious metals and gemstones into intricate wearable pieces.
 Jewellery fabrication demand is majorly made up of two factors:
1. Jewellery Consumption
2. Jewellery Inventory.

Fabrication demand in 2022 was majorly driven by the consumption aspect, accounting for a 95% share in the total demand.

The three key markets driving the demand are India, China, and USA. Together, these countries account for 60% of the total market share for gold jewellery demand.

Indian jewellery consumption can be categorized into three distinct segments:
1. Bridal (50%)
2. Everyday Wear (40%)
3. Fashion Jewellery (10%)

Factors driving demand for gems & jewellery products in India are:
1. Growing Middle-class population
2. Improving Economic Landscape
3. Rising Disposable Income 4. Seasonal

IPO Objectives:
· Repayment of existing borrowings availed by the company from scheduled commercial banks.
· Funding the working capital requirements of the Company and
· General corporate purposes.

Financials:

The Company’s revenue from operations increased from Rs. 213.04 crores in FY 2020-21 to Rs. 366.19 crores in FY 2022-23 indicating a CAGR growth of 31.11%.

The company's EBITDA expanded from Rs. 31.12 Crores in FY 2020-21 to Rs.49.60 Crores in FY 2022-23, with a CAGR of 26.25%. However, the company’s EBITDA margin has decrease from 14.61% in FY 2020-21 to 13.55% in FY 2022-23.

The company's Net Profit expanded from Rs. 9.67 Crores in FY 2020-21 to Rs. 22.20 Crores in FY 2022-23. Also, the company’s Net Profit margin has increase from 4.54% in FY 2020-21 to 6.06% in FY 2022-23.

The company's ROCE has improved from 21.45% in FY 2020-21 to 30.04% in FY 2022-23.

The ROE has increased from FY 2020-21 to FY 2022-23 being 10.05% in FY 2020-21 to 17.56% in FY 2022-23.

Valuation:

The company's price-to-earnings ratio stands at 16.08, while the industry's PE ratio is 32.29. Additionally, the company's price-to-book ratio is 2.60, whereas the industry's PB ratio is 4.93.

Peer Comparison

Key Risks:

1. Litigation against the company’s promoters:

a. Two promoters of the company have been involved in proceedings related to betting in cricket matches of Indian Premier League. Though they have been duly discharged, any re-opening of matter could have an adverse impact on the company’s business and reputation. 

b. Multiple investigations undertaken by the securities market regulator SEBI, CBI, National Stock Exchange, Multi Commodity Exchange in which matters are pending with the authorities. Any ruling against the promoters can impact the business and the image of the company.

2. Dependent on third party suppliers 

The company heavily relies on third-party suppliers for product provision, and the inability to establish or maintain formal agreements with these entities could pose significant risks.

3. Lower cost of debt being repaid 

Company have availed unsecured loans from their promoters and members of promoter group carrying 11.60% Average Rate of Interest and secured loans from scheduled commercial banks and FIs carrying 8.58% Average Rate of Interest. Company is making prepayment of borrowings other than auto loans from scheduled commercial banks from the proceeds of IPO carrying lessor Rate of Interest over borrowings availed from promoter and promoter group.

IPO Details: