IPO Analysis: RBZ Jewellers Ltd

IPO Rating: Apply for the long-term

About the Issue: 

The company stands out as a leading manufacturer of gold jewellery in India. It specializes in crafting antique bridal gold jewellery, featuring jadau, meena, and kundan work. 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 95 and Rs 100 per equity share, resulting in a total issue size of Rs 100 crore at the upper price band. The IPO is scheduled to commence on December 19, 2023, and will conclude on December 21, 2023. The market lot size for the IPO is 150 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 1,950 shares or a total investment of Rs 1,95,000 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. Funding working capital requirements of the company 
2. General corporate purposes 

Promoter holding 

Rajendrakumar Kantilal Zaveri and Harit Rajendrakumar Zaveri are the promoters of the company. The promoter and promoter group currently hold a pre-issue shareholding stake of 100 per cent in the company.  

Company profile 

The company stands out as a leading manufacturer of gold jewellery in India. It specializes in crafting antique bridal gold jewellery, featuring jadau, meena, and kundan work. Currently, the company commands around 1 per cent of the organized wholesale gold jewellery market in India. Regarding demand, the company distributes its products through both wholesale and retail channels. In the wholesale sector, it serves a diverse clientele, including renowned national retailers, as well as regional and local family jewellers spanning 20 states and 72 cities within India.  

The company also directly engages with end consumers in Gujarat through its retail showroom, operating under the brand 'Harit Zaveri' in Ahmedabad. The retail division offers various categories of gold, diamond, and Polki jewelry, containing various types of bangles, rings, bracelets, necklaces, and jewelry sets, catering to bridal, occasional, and daily wear. Additionally, the company processes and supplies antique bridal gold jewellery on a job work basis to national retailers.  

On the supply side, the company operates a state-of-the-art gold jewellery manufacturing facility located on the Sarkhej-Gandhinagar Highway in Ahmedabad, Gujarat. This facility is well-equipped with advanced technologies such as casting, laser, and 3-D printing. It boasts the capability to both design and manufacture gold jewellery seamlessly under one roof. 

Financials  

The company has demonstrated consistent growth in both revenue and net profit. Over the period, it successfully increased its revenue from Rs 107 crore in FY21 to Rs 288 crore in FY23. In FY23, it reported a net profit of Rs 22 crore, marking a notable 57 per cent growth compared to the previous year. The figures for H1FY24 also remained consistent, further reinforcing the overall optimistic financial performance for the year. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 27 per cent and 24 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 2.87 times, calculated using its Net Asset Value (NAV) of Rs 34.86 as of September 30, 2023. At the upper price cap, it is priced at a P/BV ratio of 1.96, considering its post-IPO NAV of Rs 51.14 per share. 

When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the post-IPO fully diluted paid-up equity capital, the resulting PE ratio stands at 12. As per its official documents, the company has referenced several listed peers, including Kalyan Jewellers Ltd, Senco Gold Ltd, Thangamayil Jewellery Ltd, D.P. Abhushan Ltd, Titan Company Ltd, Ashapuri Gold Ornament Ltd, Sky Gold Ltd. In terms of valuation and returns when compared to its listed peers, RBZ Jewellers Ltd demonstrates a significant outperformance. As a result, the offer appears to be attractively priced. Hence, we recommend investors to subscribe to the issue with a long-term perspective.