Tara Jewels lists at Rs 242, a 5% premium to issue price

Moneycontrol Bureau

Shares of jewellery manufacturer and retailer Tara Jewels began trading on Thursday, listing at Rs 242, a 5 percent premium to issue price of Rs 230. The company raised Rs 179.5 crore through the issue, which comprised of a fresh issue of equity shares worth Rs 109.5 crore and an offer for sale of Rs 70 crore worth of shares by Fabrikant H K Trading. It had set a price band of Rs 225-230. The fresh issue proceeds are proposed to be used to expand its retail footprint and payment of loans. Tara Jewels currently has 30 stores across India and has plans to open 20 stores across India by March-end. Apart from manufacturing and retailing jewellery under the Tara Jewels brand, it supplies studded jewellery to foreign companies like Wal-Mart and Christ Uhrean Schmuck. Exports account for around 80 percent of the company's sales. At 10:20 hrs, Tara Jewels was up 1.7 percent at Rs 233.95 on NSE. Below is the edited transcript of CMD Rajeev Sheth’s interview with CNBC-TV18. Q: You will be at liberty to talk a bit more openly about what kind of growth expectations you have. What kind of growth targets have you set for Tara going into the next year both in terms of revenues and how EBITDA would perform? A: We have been growing at a steady historic rate of about 20 percent. We intend sustaining that growth through the journey of this company. I believe that our go forward growth should maintain the historic growth that we have. Understanding the fact that now we are into retail and that is a far greater profiting sector for us. Our growth in retail will outstand our growth in the export market. Q: If there has been one area of slight concern, is that your balance sheet has been quite leveraged and interest cost are eaten away a fair amount of your profits and you have had some cash flow issues as well. Going forward, do you see margins improving now, given that you will be able to repay some debt, can you take us through how that may pan out 2013 onwards? A: The year in the industry has been rather challenging with gold prices going up as well as diamond prices shooting up. Keeping in mind that we have yet maintained a growth pattern over the years, we have had to go to the banks for more working capital. Going forward, we will see us not only us reducing our debt, but even the philosophies that we implement in terms of just-in-time material etc that our working capital needs would go down in ratio to the amount of business that we do. Therefore, that would bring a substantial saving in the area of interest cost to the company. _PAGEBREAK_ Q: Between your three verticals, what kind of growth specifically do you expect to see from exporting and retailing going into next year? A: From exports we are looking at trying to maintain a growth of 10-15 percent while in retail a growth of anything between 20 percent and 25 percent. Q: What are the comparable margins in the export market where you supply to players like Walmart, those markets are quite comparative versus retail which you are trying to get a bigger footprint in? A: The margins in the export business are roughly in the region of between 16 percent and 18 percent. In retail they are substantially more, they are far greater because they cover manufacturing profit and whatever profit the retail industry earns too. Q: By the end of next year how much would you have scaled up your retail presence because that is a reason why you have raised a large chunk of the money in the initial public offering (IPO)? A: We would have added an additional 20 stores. We already have 30 stores; our intent is to add similar format stores, taking our total upto 5. As we go forward, we want retail to become a substantial portion of our entire business. Q: Retail business is also getting quite competitive. You have got entrenched players like Tanishq and then you have a clutch of smaller players who are all trying to build a retail business. Do you have significant layouts for brand building over the next couple of years? Do you think you can carve out a significant share in this market? A: The entire market as it stands now is roughly about USD 28-29 billion. It is a substantially large market; the organized sector of this market is only at about 6 percent. I am given to understand that the figures of growth are somewhere in the region of about 20-25 percent. Besides the fact that the entire market in itself is growing quite a bit, the organized sector is also growing far more rapidly. Consumers are looking for branded players that bring brand values in terms of guarantees on the gold, certification of diamond’s ability to be able to exchange jewellery and other such factor. This is right at the beginning stage of the curve. So, I do not see there being any issue with the number of organized retailers that are coming into this market. It is a market large enough and placed for a lot more to come in.