Will use IPO funds for more stores, repay debt: Tara Jewels

Rajeev Sheth, CMD, Tara Jewels explains to CNBC-TV18 that funds from the IPO will be used to set up an additional 20 stores and repay debt borrowed from the banks. Rajeev Sheth who is also the promoter holds 73.15 percent while Fabrikant H K Trading Limited and Crystalon Finanz AG hold 16 percent and 9 percent respectively. The IPO is slated to open on November 21 and the issue size is about Rs 220 crore.

Below is an edited transcript of the interview on CNBC-TV18 Q: Are you selling any of your shares or are they all new issues?
A: No. I am not selling off any of my shares, definitely not. Q: This entire fund of around Rs 180 crore is available for expansion?
A: Yes. The total IPO size is Rs 220 crore of which shares worth Rs 70 crore constitutes a portion owned by our partner in United States who is planning to sell his portion of the shares. So, only the rest will be available for expansion plans. Q: What are you planning to do with funds of  Rs 150 crore?
A: We are intending to deploy it for the addition of 20 retail stores within the country to the 30 stores in operations. The funds will also be used to repay a small portion of the debt. Q: By how much will the repayment of debt improve PAT and operating margins? What is the contribution of your manufacturing facility in China to overall sales?
A: Our manufacturing facility and flagship operation is actually located in SEEPZ, Mumbai. We also have a manufacturing facility in China that caters to predominately coloured stone-produced jewellery that we produce for our international customers.
The repayment of debt will definitely improve our PAT margins. Our initiatives in changing the product mix and our increased forays into the domestic retail business ensure that our PAT margins will substantially change. Q: Listed jewellery companies like Titan have reported an increased demand for diamond jewellery. Are you also witnessing any such trend? Is additional diamond jewellery sales helping margins?
A: Fortunately, we do not have legacy of selling plain gold jewellery. Yes, we sell more diamond-studded than plain gold jewellery. We have definitely noticed an increase in the number of customers walking in looking for diamonds. Q: Can you explain your involvement in litigation to the extent of Rs 30 crore?
A: I an unable to explain the details of the litigation. Most of the litigation is concerned with normal tax-related issues and each one of them is being addressed. I am confident that the litigation is not at a level that an investor needs to be worried about. Q: You have mentioned in your risk factors that your top 10 customers for fiscal 2012 account for about 70 percent of total revenue from export operations. How much do exports contribute and where are your overseas clients situated?
A: Exports contribute to about 80 percent of our turnover. Our clients are top retailers in the United States, the UK, South Africa, Australia and all of Europe. So our clientele is very select and we have built our relationships with them over time.
Apart from selling jewellery, we also offer a lot of other associated services like branding, co-branding, market research, trend analysis, designs, design analysis, in-store props and training. Q: How much do these services contribute? What is the composition and revenue contribution of the mix of jewellery sales and services?
A: We offer the services as part of a sale and do not charge for services separately.