Subscribe to Senco Gold: Geojit

Geojit IPO report on Senco Gold

Senco Gold Ltd. (SGL) is a renowned jewellery retailer with a strong presence in Eastern India. Currently, the company boasts an extensive retail network consisting of 136 showrooms (75 company-owned & 61 franchised), with store networks in 13 States/UTs across 96 cities. Around 63% of SGL’s showrooms are located in West Bengal. Specialising in the sale of gold and diamonds, SGL also offers an extensive selection of jewellery crafted from silver, platinum, precious and semi-precious stones, and various other metals. The domestic gems and jewellery market was roughly ~Rs.4,700bn in FY23, with gold jewellery dominating the overall market with a 66% share. The organised players continued to grow faster than the industry at a 20% CAGR between FY17 and FY23, compared to 14% for the industry (Source: CRISIL Report). The company has leveraged the expertise and backing of two notable investment entities. SAIF Partners India IV Ltd., which has been a shareholder since 2014, and Oman India Joint Investment Fund II, which has invested in 2022. In FY23, 22 and 21, the Eastern and North-Eastern regions of India accounted for 64%, 63%, and 62% of the company showrooms, respectively. Between FY21 and FY23, SGL opened 28 own and 19 franchisee showrooms. It typically forays into large or new cities by way of company-operated showrooms and then leverages its ‘franchise’ model to further penetrate the smaller tier-II and tier-III locations.

Valuation and Outlook

At the upper price band of Rs.317, SGL is available at a P/E of 15.5x (FY23), lower than industry peers' valuations. Improving economic growth, rising urbanisation, increasing disposable income levels, and mandatory hallmarking are positive for the organized players. A strong brand name and a legacy of over five decades, strong company-operated showrooms, and an established asset-light ‘franchise’ model are expected to benefit SGL. Therefore, we assign a "Subscribe" rating for the issue on a medium- to long-term basis.

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