IPO Analysis: Motisons Jewellers Limited

IPO Rating: Apply for the long-term

About the Issue 

Motisons Jewellers Limited stands as a prominent leader in the retail jewellery sector, specialising in the artistry of crafting jewellery from gold, diamonds, Kundan, and an array of other materials. It is gearing up to launch its Initial Public Offering (IPO) for equity shares, each having a face value of Rs 10. The IPO price range is set between Rs 52 and Rs 55 per equity share, resulting in a total issue size of Rs 151.09 crore at the upper price band. 

The IPO is scheduled to commence on December 18, 2023, and will conclude on December 20, 2023. The market lot size for the IPO is 250 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 14 lots, equivalent to 3,500 shares or a total investment of Rs 1,92,500 assuming the upper price band. 

Objects of the Issue 

Considering that the offer is exclusively a fresh issue, it is crucial to emphasize that the company will directly profit from the offer proceeds. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes: 

1. Repayment of existing borrowings availed by the company from scheduled commercial banks 
2. Funding the working capital requirements of the company  
3. General corporate purposes 

Promoter holding 

Sandeep Chhabra, Sanjay Chhabra, Namita Chhabra, Kajal Chhabra, Moti Lal Sandeep Chhabra HUF, Sandeep Chhabra HUF, Sanjay Chhabra HUF, Motisons Global Private Ltd and Motisons Entertainment (India) Private Ltd are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 91.54 per cent in the company.  

Company profile 

Motisons Jewellers Limited is a leading player in the retail jewellery sector, boasting a legacy spanning over 25 years in the industry. The company specializes in retailing jewellery crafted from gold, diamonds, kundan, and a variety of other materials. Additionally, they offer a diverse range of jewellery products, such as pearl, silver, and platinum, as well as precious and semi-precious stones. The company's product line extends to include gold and silver coins, utensils, and various other artefacts. 

In 1997, the company initiated its jewellery business with a single showroom in Jaipur, Rajasthan. Since its inception, it has significantly broadened its showroom network and product portfolio. Presently, the company manages four showrooms bearing the ‘Motisons’ brand, strategically positioned across various areas within the city of Jaipur, Rajasthan. 

The company predominantly sources finished jewellery from third-party suppliers situated throughout India. In response to the growing market demand, the company also collaborates with skilled artisans on a job-work basis and maintains its own manufacturing facilities situated in Jaipur, Rajasthan, specifically for crafting diamond and gemstone-studded jewellery. The production of ornaments is outsourced to various artisans with whom the company has cultivated strong relationships. 

Financials  

The company has demonstrated consistent growth in both revenue and net profit. In FY23, there was a notable growth of 16 per cent in revenue and an impressive 47 per cent surge in net profit compared to FY22. This momentum carried into Q1FY24, with the company achieving a revenue of Rs 86 crore and a net profit of Rs 5.4 crore. The performance was bolstered by significant demand during the wedding season, contributing to the company's continued strong performance. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 17 per cent and 30 per cent, respectively, for the fiscal year 2023, underscoring its robust performance. 

Valuation and outlook 

The issue is priced with a P/BV ratio of 2.50 times, calculated using its Net Asset Value (NAV) of Rs 21.98 as of June 30, 2023. At the upper price cap, it is priced at a P/BV ratio of 1.68, considering its post-IPO NAV of Rs 32.66 per share. 

When we calculate the PE ratio for the company by considering the FY23 earnings relative to the post-IPO fully diluted paid-up equity capital, the resulting PE ratio stands at 16. As per its official documents, the company has referenced several listed peers, including Goldiam International Ltd, Thangamayil Jewellery Ltd, D.P. Abhushan Ltd and Renaissance Global Ltd which are currently trading at PE ratios of 21, 35, 25 and 13, respectively. Considering the valuation and returns of comparable listed peers concurrently, the offering seems to be priced attractively.

The business boasts several strengths that contribute to its success. With a well-established brand name, the company holds a prominent position in the market. The strategic placement of its showrooms is advantageous, capitalizing on Jaipur's renowned status as a hub for traditional jewellery manufacturing. Furthermore, the company's strength lies in its extensive and diversified product portfolio, featuring over 3,00,000 jewellery designs across various categories.  

The company's operational strategy seamlessly integrates sourcing, manufacturing, and retail sales, affording it numerous competitive advantages. This approach enables the company to swiftly adapt its product range in response to evolving customer preferences. The integration also ensures just-in-time inventory availability, allowing the company to efficiently manage changes in demand and maintain a responsive and agile market presence. 

Hence, we recommend investors to subscribe to the issue with a long-term perspective.