Manoj Vaibhav Gems 'N' Jewellers IPO - Investment Rationale, Financials, Strengths, Risks: Anand Rathi

Anand Rathi's IPO Report

Manoj Vaibhav Gems 'N' Jewellers Ltd. launched its initial public offering today and the offer will be closed on September 26. The price band for the Rs 270.20 crore IPO has been fixed at Rs 204-215 Apiece. The minimum order quantity is 69 shares.

The fresh issue will be worth a total of Rs 210 crore, while the offer for sale will be worth Rs 60.20 crore.

Objects of the Issue

Fresh issue: Rs 2,100 million

• Capital expenditure cost for proposed eight new showrooms.

• Inventory cost for the proposed eight new showrooms.

About the company

Vaibhav Jewellers are a leading regional jewelry brand in South India led by a first-generation woman entrepreneur Mrs. Bharata Mallika Ratna Kumari Grandhi along with her daughter Grandhi Sai Keerthana.

They are a hyperlocal jewelry retail chain with presence in the micro markets of Andhra Pradesh and Telangana with 13 showrooms (inclusive of two franchisee showrooms) across eight towns and two cities.

They have a market share of ~4% of the overall Andhra Pradesh and Telangana jewelry market and ~10% of the organised market in these two states in FY2023.

Strategies

• Expand in the untapped sections of the micro markets of Andhra Pradesh and Telangana and develop those markets for organised jewellery sales.

• Focus on further strengthening rural focus and improving sales from existing showrooms.

• Deepen customer relationships by enhanced focus on go-to-market strategy to strengthen customer engagement.

• Focus on augmenting brand strength.

Key Risk:

• If they are unable to effectively manage or expand the retail network and operations or pursue their growth strategy, new showrooms may not achieve their expected levels of profitability which may adversely affect the business prospects.

• The non-availability or high cost of quality gold bullion, silver, diamonds, and other precious and semi-precious stones may have an adverse effect on their business, results of operations and financial condition.

• The company may be unable to expand their product offerings in a diversified manner and distribution channels as per the market requirement and the same may have an adverse effect on their business, results of operations and financial condition.

• The company has significant working capital requirements and may require additional capital and financing in the future. Their ability to access capital at attractive costs also depends on their credit ratings. The operations could be curtailed if they are unable to obtain required additional capital and financing when needed.

• Their Promoters have provided personal guarantees to secure certain of the loan facilities, which if revoked or invoked may require alternative guarantees, repayment of amounts due or termination of the facilities.

• The company, promoters and directors are involved in certain legal proceedings and potential litigation, and they have not made any provision in their financial statements for such liabilities. Any adverse decision in such proceedings may render them liable to liabilities/penalties and may adversely affect their business and results of operations.

• The strength of their brands is crucial to the growth and success, and they may not succeed in continuing to maintain and develop the brands.

• Their Promoter and certain of the Directors may have an interest in entities which are engaged in lines of business like that of the company. Any conflict of interest which may occur between the business and the activities undertaken by such entities could adversely affect theeir business and prospects.

Valuation

The company is a key leading home-grown regional brand built on hyperlocal retail strategy.

At the upper price band company is valuing at price/earning of 11.74 times FY23 earnings with a market cap of Rs 10,502 million post issue of equity shares and return on net worth of 20.78%.

We believe that issue is fairly priced and recommend 'Subscribe – Long Term' rating to the IPO.

Click on the attachment to read the full IPO report:

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