PC
Jeweller is entering the capital market on 10th December
2012 through a fresh issue of 4.51 crore equity shares of Rs.10 each, priced in
the band of Rs. 125 to Rs. 135 per share. A discount of Rs. 5 per share will be
offered to the retail investors. Company will raise Rs. 556 crore and Rs. 601
crore, at the lower and upper end of the price band,
respectively. Representing 25.20% of the fully diluted post issue
paid-up capital of the company, the issue closes on 12th December
2012.
Objects of the Issue
1) To finance establishment of new showrooms (estimated required fund of Rs. 516.8crs)
2) General corporate purposes
Recommendation
Anand Rathi Share and Stock Brokers, one of
the leading brokerage and research house has recommended subscription to the
PCJ IPO.
The company has been
showing good traction in the performance, looking at its expansion track record
and future plans shows good potential in the company. Comparing to its peers it
looks fairly placed in terms of size, brand recognition and showroom counts. At
higher price band the stock trades at 7.8x its FY12 earnings and with good return
ratios over a period of time we feel that investors can SUBSCRIBE to the issue.
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Company
Description
It is one of the
leading jewellery companies in India and their operations include the manufacture,
retail and export of jewellery. They have a strong brand name in North and
central India. They offer wide range of products including gold and diamond
jewellery and other jewellery including silver articles with a focus on diamond
jewellery and wedding jewellery. For Sep 2012 the domestic gold jewellery,
diamond jewellery and other jewellery contributed 67.1%, 32.6% and 0.3%
respectively of the revenue from domestic sales.
As on Sep 2012 they
have 30 showrooms under the “PC jeweler” brand and located across 23 cities in
North and Central India with an aggregate area of 1,64,572 sq ft., of these
showrooms, 27 are large format (with an area of 3,000 sq ft. or more) including
11 showrooms which have an area of more than 5,000 sq ft. and of which 4 are
more
than 10,000 sq ft.
They have 2
manufacturing facilities in Selaqui, Dehradun, Uttarakhand that cater to the
sales in India, they also have 2 facilities at Noida SEZ, Uttar Pradesh that
cater to the export sales.
Business
Highlights
Further
expand the retail network
They intend to open
an additional 20 showrooms by fiscal 2014 across India including Southern
region and western parts of India. This will take the count of showrooms to 50
by FY14 if the expansions are on track.
Export comprises
of good share of revenue
For Sep 2012 end
export consists of 32.6% of the total revenue. They also export gold and
diamond jewellery on a wholesale basis to international distributors in Dubai
and Hong Kong.
Network of
strategically large format showrooms
With 30 showrooms
across 23 cities in North and Central India with an aggregate area of 1,64,572
sq ft., major showrooms are in the area of Karol Bagh and South Extension in
New Delhi and Gurgaon and Panchkula in Haryana. These are typically in the high
street areas, which give higher visibility and customer traffic.
Continue to
increase focus on diamond and the higher margin jewellery sales
They continue to
increase their focus on diamond jewellery and other precious stone jewellery,
as these typically involve higher profit margins than other types of jewellery.
Domestic diamond jewellery sales constituted of 32.6% for Sep 2012 and 21.9% of
the total revenue operations in the same period.
Strong
Financials
The financials for
the company show consistent improvement in the business with increasing
profitability levels including EBITDA and PAT margins and comfortable ROCE,
RONW, gearing and interest coverage ratios.
| Particulars (Rs. In crs) | 12-Sep | FY12 | |
| Total Income | 2064.2 | 3674.2 | |
| Total Exp | 1886.8 | 3409.2 | |
| PBT | 177.44 | 265 | |
| Current tax | 36.3 | 53.4 | |
| MAT - | -19.31 | ||
| Deferred tax | -0.3 | -0.3 | |
| PAT | 141.5 | 231.2 | |
| Equity | 133.9 | 133.9 | |
| FV | 10 | 10 | |
| EPS | 10.57 | 17.27 | |
| Ratios | FY12 | FY11 | FY10 |
| ROCE % | 43.02 | 57.75 | 40.63 |
| RONW % | 52.24 | 57.61 | 50.08 |
| Average collection period (days) | 67 | 63 | 76 |
| Average creditors (days) | 103 | 102 | 98 |
| Average Inventory (days) | 122 | 92 | 111 |
| Operating cycle (days)] | 86 | 53 | 89 |
| Source: RHP |
Concerns
- Competition from unorganized sector.
- Changes in prices of gold, diamond
and other precious metals.
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