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Nov 21, 2012, 10.44 AM IST | Source: Moneycontrol.com

Tara Jewels IPO opens: Should you subscribe?

The Rs 179.5-crore IPO of Tara Jewels hit the capital market today with a price band of Rs 225-230 a share.

Moneycontrol Bureau

The Rs 179.5-crore IPO of Tara Jewels hit the capital market today with a price band of Rs 225-230 a share .

It is the first big ticket IPO in the last six months after Speciality Restaurants that came in mid May of the current year.

All jewellery stocks have ralllied anywhere between 4 and 7 percent a day before the IPO opened.

The initially issue size was Rs 220 crore, out of which the company successfully raised Rs 40 crore through pre-IPO placement route.

Experts feel the issue looks good for subscription, citing fairly pricing and the good track record.

SP Tulsian of sptulsian.com says the issue looks reasonably priced. He feels the IPO should see good response. Tulsian has recommended subscribing the IPO.

“If I take Rs 230 as the upper price band, shares are issued at a historic earning, PE multiple of close to about 7, while Gitanjali Gems, which looks reasonably valued, is ruling at a PE multiple of close to 9-10. Fund infusion (fresh issue size of Rs 110 crore and pre-IPO placement of Rs 40 crore) will improve the performance going forward and I won’t be surprised to see an EPS of close to about Rs 36-38 for FY14. I am not going by FY13. So, taking all into account the stock looks reasonably priced and the IPO should see good response,” Tulsian explained.

However, Manish Bhatt of Prabhudas Lilladher feels the issue is slightly overpriced. He advised investors to buy the issue with medium to long term perspective.

The broking firm Magnum Equity Broking too advised subscribing the issue for a medium to long term time frame.

The firm feels the sentiments have started changing from looking at jewellery product as luxury or traditional wear to investments options which could turn scenario going forward.

However, Hem Securities advised avoiding the issue as the company with significant working capital requirement, seasonal business and high dependence on export sales is looking expensive at current level.

An integrated jewellery player conducts its retail operations under the brand "Tara Jewellers" and currently operates 30 existing stores that spread over an aggregate area of 29,949.01 square feet.

Tara Jewels intends to launch 20 project stores across India by March 31, 2013. Fresh issue proceeds are proposed to be used for expenses of establishing retail stores and payment of loans.

Net profit of the company rose 33 percent year-on-year to Rs 54.13 crore in the year ended March 31, 2012. Total income increased 22.5 percent YoY to Rs 1,401.05 crore during the same year.

The issue will close on November 23, 2012.

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