Tara's valuation appears expensive, avoid IPO: KM Global

KM Global Finserv has come out with its report on "Tara Jewels Limited IPO". The research firm recommends that, investors avoid subscribing to the issue as its valuation appears expensive compared to its listed peers such as Gitanjali Gems & Renaissance Jewellery . The firm has a solid set of customers but it requires large amounts of working capital which could lead to margin pressures.

Company Background
Tara Jewels is an integrated player as its operations range from designing to retailing of jewellery.  The business can be divided into three divisions namely manufacturing, exporting and retailing. The company has four manufacturing units, one of which is located in Panyu, China while the other three units are located in Mumbai.

Also Read: Listed jewels make Tara less attractive: VS Fernando

Strengths & Expansion Plans
Marquee Global Clients - Exports constitute over 80% of revenues and the company’s export income has grown at a CAGR of 13 % from FY08 to FY12. It has large customers such as Walmart which ensures that its products reach a large number of end users. The investment by Swarovski could also lead to strategic developments.

Adding 20 Retail Stores Across India - The retail business was started in 2008 and has quickly ramped up to 30 stores with a turnover of Rs 266 cr in FY12. Tara jewels plans to add another 20 stores in Tier II and Tier III cities across western and northern parts of India with an average store size of around 1,000 sq feet.

Management: Mr. Rajeev Sheth is,a commerce graduate from The Mumbai University and a diploma holder in gemology from Gemological Institute of America. He is the Chairman and Managing Director of the Company. Mr. Sheth has 31 years of experience in the jewellery business. He started his career by promoting Rose International and thereafter became the promoter and managing director of Intergold India Limited from 1989 to 1999.

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