PC Jeweller IPO to open on Dec 10, should you subscribe?
The 609-crore initial public offering of PC Jeweller will be open for subscription from Monday, December 10 till Wednesday, December 12.
December 09, 2012 / 21:00 IST
The 609-crore initial public offering of PC Jeweller will be open for subscription from Monday, December 10 till Wednesday, December 12.
The company has fixed a price band at Rs 125-135 per share and a discount of Rs 5 per share for retail investors and employees. The 4.51-crore share-issue represents a dilution of 25.20 percent of the post issue paid up capital.PC Jeweller has finalised the allocation of 67,16,250 equity shares to 10 anchor investors at upper end of price band of Rs 125-135 per share, aggregating to Rs 90.67 crore) out of the total issue size of 4.51 crore.According to experts, the positives are that the company has strong financials, good network of strategically large format showrooms, established brand in northern & central India, wide product range with increasing focus on diamond jewellery that has higher margins and consistent demand for gold despite a significant increase in gold prices.However, the fall in gold & diamond prices, the competition from unorganised sector and significant working capital requirements (if it fails to secure adequate working capital then will have major impact on financials) are major concerns for the company, the research firms said.Also Read: PC Jeweller to invest Rs 517 cr on setting up new showroomsSP Tulsian of sptulsian.com says investors can apply for the issue. “Estimating Rs 310 crore as net profit for FY13, leading to EPS of close to Rs 21.25, shares are being issued to the public at a PE multiple of 5.9 times and 6.4 times, at lower and upper end of the price band respectively, which is reasonable in relationship to peers (Titan Industries & TBZ ruling at over 25 multiples and Gitanjali Gems at 7 times), given the company’s healthy net margins and strong brand recall,” Tulsian explained. Manish Bhatt of Prabhudas Lilladher feels the issue looks to be good. He advised subscribing for listing gains with short to medium term view. He expects the subscription of 2 times in retail category and 15 in high-networth investors.According to IPO Analyst, Arun Kejriwal, PC Jeweller is better than Tara Jewels. He too advised subscribing the issue.SBICAP Securities says PCJ is currently valued at 7.9x and 8.5x of its HIFY13 annualized earnings at lower and upper price band respectively whereas it is valued at 3.0x and 3.3x on P/BV multiple. After comparing to its closest peers, the company appears to be fairly valued on most of the valuation parameters, the firm adds.PCJ has a higher thrust to capture retail gems and jewellery market considering its present store network which is wider than its peers and its focus on further scaling up its store count from the issue proceeds. In view of factors like good demand for gold jewellery among Indians, higher scope for organized players in the jewellery space, improved sales and profitability over the years coupled with higher margins as compared to its peer group makes the issue worth investing,” SBICAP reasoned. Mehta Equities expects there is a huge growth opportunity for investors to park there money into a leading Gold Jewellery player. “As per the IPO proceeds said money raised would be utilised to ramp up new stores in high streets which inturn supports the growth plans. We foresee that the strong brand and growth in organised gold jewellery market would be the key success factor for PCJ going ahead,” the firm said.Ajcon Global too recommended investors to apply for the issue as it is a proxy for India’s consumption story.With due consideration to factors like a) established brand, b) network of strategically located large format showrooms, c) wide product range with increasing focus on diamond jewellery which would lead to improved margins, d) good demand for gold jewellery in India despite a significant rise in gold prices, e) cheaply valued as against listed peers like Gitanjali Gems, Titan Industries and Tribhovandas Bhimji Zaveri, Ajcon Global believes the stock is priced reasonably. The company manufactures, retails and exports jewellery has 30 showrooms under the brand “PC Jeweller”, and has presence in 23 cities with an area of over 1.64 lakh sq.ft. Out of these, 27 stores are large format with an area of more than 3,000 sq.ft. It offers wide range of products including gold, diamond and other precious metals made jewellery.
Jewellery manufacturer that expanded its retail network from one showroom in April, 2005 to 30 showrooms plans to increase the network across India with another 20 showrooms by FY14, which will be financed through net issue proceeds of Rs 517 crore.PC Jeweller has two manufacturing facilities located in Selaqui, Dehradun, Uttarakhand that caters to domestic business while two manufacturing facilities in Noida SEZ and Uttar Pradesh cater to exports.The company exports jewellery on wholesale basis mainly to international distributors in Dubai and Hong Kong, which accounts for 33 percent of total revenues. In addition, in November, 2011, it commenced manufacturing operations at an additional 34,000 sq.ft. jewellery manufacturing facility in Noida, Uttar Pradesh, to further increase manufacturing capabilities.For the year ended March 31, 2012, the company recorded net profit of Rs 229.68 crore on total income of Rs 3,673.84 crore. Net profit stood at Rs 142.34 crore on total income of Rs 2,064.61 crore for the six months period ended September 30, 2012.In the fiscal 2012, domestic gold jewellery, diamond jewellery and other jewellery contributed 72.5%, 26.7% and 0.8%, respectively, of revenue from domestic sales. In the first half of fiscal 2013, domestic gold jewellery, diamond jewellery and other jewellery contributed 67.1%, 32.6% and 0.3%, respectively, of revenue from domestic sales.The minimum bid lot has been fixed at 90 equity shares and in multiples of 90 equity shares thereafter. The issue has been graded by Credit Analysis and Research Limited and CRISIL as grade 3, indicating average fundamentals.The book running lead managers to the issue are SBI Capital Markets Limited and Kotak Mahindra Capital Company Limited. The co-book running lead manager to the issue is IDBI Capital Market Services Limited. The equity shares are proposed to be listed on the National Stock Exchange of India Limited and the BSE Limited.Also Read
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