About the company’s business

Senco Gold Limited is a pan-India jewellery retail player with a history of more than five decades and has a fourth-generation entrepreneur in the jewellery industry as their promoter and is the largest organised jewellery retail player in the eastern region of India.

The company specializes in selling gold and diamond jewellery and offers a wide range of jewellery made from silver, platinum, precious and semi-precious stones and other metals.

Additionally, it provides costume jewellery, gold and silver coins and silver utensils. Their products are marketed under the trade name "Senco Gold & Diamonds" and are available through various channels, including 75 company-operated showrooms, 61 franchisee showrooms and several online platforms including their website. The company offers a diverse collection of jewellery, catering to different price points ranging from ~₹ 2,000 to ₹ 5,00,000.

They have specific brands such as:

1) Everlite (lightweight jewellery for women);
2) Gossip (fast moving fashionable silver jewellery);
3) Aham (collection for men’s jewellery);
4) Vivaha (heavier / premium designer jewellery or a more luxurious shopping experience) etc.

Approximately 90% of the company's revenue is derived from the sale of gold jewellery, 6% from the sale of diamonds and precious / semi-precious stones and the remaining 4% from the sale of silver jewellery, platinum jewellery, fashion jewellery, novelties and accessories.

Showrooms of the company

Some brands and collections by the company:

Industry Overview

Annual gold demand surged 18% to 4,741 tonnes during CY22 on account of robust investment demand. Investment demand (excluding OTC) reached 1,107 tonnes – recording a growth of 10%. Higher central bank holdings for two consecutive quarters brought the annual holdings to 1,136 tonnes and contributed to the overall growth in demand.

China consumed 571 tonne of gold jewellery in CY22, down from 673 tonnes consumed in CY21, recording a fall of 15%. India too witnessed a drop in jewellery demand, but the fall was nominal at 2%. Resultantly, India emerged as the largest consumer of gold jewellery in the world. Together, India and China account for more than half of global gold consumer demand.

The domestic gems and jewellery market was roughly ~Rs. 4,700 billion in FY 2023 with gold jewellery dominating the overall market with a 66% share. Domestic jewellery demand has historically been dominated by consumption. Consumption of jewellery studded with diamond, pearls and other precious and semi-precious stones, has also been rising over the past five years but remains significantly lower than that of gold jewellery.

The organised players like Titan, TBZ and Thangamayil continued to grow faster than the industry and gained market share as evident from revenue growth at a 20% CAGR for organised players between fiscals 2017 and 2023 compared with 14% for the industry.

IPO Objectives

1. To fund working capital requirements &

2. General corporate purposes.

Financials

The company's revenue has shown significant growth, increasing from Rs. 266.04 crores in FY20-21 to Rs. 407.74 crores in FY22-23, with a CAGR of 23.84%. Similarly, the EBITDA and Net Profit have experienced notable growth. The ROCE did not exhibit significant improvement during the same period.

Valuation

The PE and PB ratios of Senco Gold Limited are 13.82 and 2.31 respectively, while the PE and PB ratios of the industry are 55.21 and 12.86 respectively, indicating undervaluation.

Key Risks

1. The company has experienced negative cash flows from operating activities in FY22 and FY23.

2. ~80-85% of the revenues from sale of products from showrooms was generated from the eastern and north eastern states, indicating geographic concentration in the eastern and north-eastern parts of India.

3. The company has been subject to a ‘search and seizure’ operation by the income-tax department in the past, which has resulted in taxation and criminal proceedings being initiated against the Company and Individual Promoter. Any adverse outcome of such proceedings might have an adverse effect on company’s business, financial condition and results of operations.

4. Company’s name and trademarks are have significant brand recognition. The use of their brand names or logo by third parties could adversely affect their reputation, which could in turn adversely affect the financial performance and the market price of the equity shares. The company has made applications for registration of trademark in relation to the Company, including company’s logo and other marks. The Company has received objections from the Registrar of Trademarks in relation to certain other applications made for the registration of trademarks. Accordingly, these registrations have not yet been granted as on the date of the RHP, including for “Senco Gold & Diamonds Craftsmanship for You” and ‘Senco Gold & Diamonds”.

IPO Details

The IPO subscription period will be from the 4th of July 2023 to the 6th of July 2023. The issue price will range from Rs. 301 per share to Rs. 317 per share. The total issue is valued at Rs. 405 crores, with a fresh issue of Rs. 270 crores and an offer for sale of Rs. 135 crores. Individuals are allowed to apply for a maximum of 13 lots, which amounts to Rs. 1,93,687. As of writing this blog, the GMP (Grey Market Premium) stands at 39.12%.