IPO Size: Rs. 100 cr, Entirely Fresh Issue  

• To fund Rs. 81 cr working capital requirement of FY24

Price band: Rs. 95-100 per share

M cap: Rs. 400 cr, implying 25% dilution

IPO Date: Tue 19^th Dec to Thu 21^st Dec 2023, Listing Wed 27^th Dec 2023

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Ahmedabad Based Jeweller

15 year old RBZ Jewellers holds 1% market share in India’s organised wholesale gold jewellery market, serving clients like Titan, Senco Gold, Malabar, Joyalukkas etc. It also retails antique gold jewellery through ‘Harit Zaveri’ showroom in Ahmedabad.

Healthy Margins

Of Rs. 288 cr revenue in FY23, 48% came from gold jewellery wholesale, 37% for gold jewellery retailing, 5% from diamond and precious stone, 7% from bullion and balance from job work. Company clocked Rs. 40 cr EBITDA (14% EBITDA) margin and Rs. 22 cr PAT, leading to a healthy 7.8% net margin and an EPS of Rs. 7.44. H1FY24 revenue rose 6% YoY to Rs. 125 cr, with Rs. 22 cr EBITDA and Rs. 12 cr PAT. 24% RoE of FY23 was maintained in H1FY24.

The inventory turnover ratio stood at 1.9x in FY23, which is not adverse like Motisons’ 1x, and also in line with most listed peers. All of company’s Rs. 102 cr gross debt is on floating rate, which will be beneficial once interest rates begin to decline in a couple of quarters. The debt is rated Crisil BBB/Stable.  

Inexpensive Valuation

Since H2 accounts for about 60% of company’s annual revenue, FY24E EPS is seen at Rs. 8, on the expanded equity. This implies a PE multiple of 12x for current year, which is inexpensive. Gold jewellery exporter Renaissance Global, with Rs. 2,100 cr topline but 3.3% net margin, is ruling at a PE of 14x.

Company’s small size of operations may entail listing with additional surveillance mechanism (ASM) of the stock exchange, with restricted volumes. But the valuation and healthy margins are some positives.