PC Jeweller launches initial public offer: Five facts

Delhi-based PC Jeweller launched its Initial Public Offer (IPO) for subscription on Monday. The face value of shares is Rs. 10 and they are available in the price band of Rs. 125-135 per share. Subscribers will have to invest in lot sizes of 90 shares. The IPO closes on December 12.

The public offer comprises over 4.51 crore equity shares translating into 25.2 per cent of the post-issue paid-up equity share capital of the company. The company is offering a discount of Rs 5 to retail individuals. The company will be able to raise Rs 564 crore at the lower end of the price band and Rs 609 crore at the upper end. The company will have a market cap of Rs 2,400 crore at the upper end of the price band.

PC Jeweller competes with Tara Jewels, Gitanjali Gems and Titan Industries -- all of which are already listed on the stock exchanges.

1) Profile: PC Jeweller is one of the leading jewellery companies in India in the organized jewellery retail sector. It manufactures retails and exports jewellery. As of September 30, 2012, PCJ had 30 showrooms under the “PC Jeweller” brand located across 23 cities in north and central India.

2) Financials: PC Jeweller reported a profit after tax of Rs 231 crore on an income of Rs 3,042 crore in FY12.  For the first half of fiscal 2012-13, it reported a net profit of Rs 142 crore on an income of Rs 1,856 crore. The company had a net debt of Rs 577 crore at the end of March 2012 and Rs 377 crore at the end of September 2012.

3) Issue objectives: PC Jeweller intends to open an additional 20 showrooms by fiscal 2014, all of which are proposed to be financed through the net proceeds.

4) Grading: CARE and Crisil IPO grading: 3/5 indicating average fundamentals.

"Strong brand recall, successful branch expansion (from one to 30 showrooms in the past seven years) and stellar increase in gold prices have added shine to PCJ’s top line, which has grown at a three-year CAGR of 69 per cent," CRISIL said.

"The grading is constrained by the working capital-intensive nature of operations, regional concentration of revenue and competition from the players in the organized and the unorganized sector,” ratings agency CARE said in its note.

5) Peer comparison: PC Jeweller is available at 10.5-times price earnings (trailing March 31, 2012) against the recently listed Tara Jewels (7.6-times) and more established players like Titan Industries (38.3-times) and Gitanjali Gems (7.3-times). It’s earnings per share at Rs 12.89 is relatively lower as compared to Tara Jewels (Rs 29.97) and Gitanjali Gems (Rs 55.40).

What analysts say:

Ashok Kumar, MD, Lotus Knowlwealth

PC Jeweller is priced similarly to some other players in the segment. I don't see anything exceptional about the branding of PC Jeweller that should lead it to command a significant premium in the markets. It is a kind of stock that a flipper can play on because of the TBZ (Tribhovandas Bhimji Zaveri) euphoria in the market but a long term or serious investor can give this issue a miss. It does not have the same scale or branding that TBZ enjoys.

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