Current upswing in gold prices and a buoyant stock market make it a good short term bet.
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SENCO GOLD OFFER AT A GLANCE |
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| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | Rs 270 Cr (85,17,350 equity shares) |
| Offer for Sale | Rs 135 Cr (42,58,675 equity shares) |
| Face Value | Rs 10 |
| Price Band | Rs 301 – 317 |
| Mkt/Bid Lot | 47 Nos. |
| Implied M-Cap | Rs 2,461Cr |
| Implied Eq-Cap | Rs 77.66 Cr |
| Implied Free Float | 31.52% |
| Lead Manager | IIFL Securities, Ambit and SBI Capital |
| Registrar | KFin Technologies |
| Listing At | BSE, NSE |
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INDICATIVE ISSUE SCHEDULE |
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| Opening :04-Jul-2023 | Closing :06-Jul-2023 |
| Allotment :11-Jul-2023 | Refunding :12-Jul-2023 |
| Demat Credit :13-Jul-2023 | Trading :14-Jul-2023 |
The Offer
The Kolkata-registered Senco Gold Ltd (SGL) is coming out with its maiden public issue valued Rs 405 Cr (127.76 lakh equity shares at the cap price). The IPO consists of a fresh issue of Rs 270 Cr (about 85.17 lakh shares) by the company and an offer for sale of Rs 135 Cr (about 42.58 lakh shares) by the investor-shareholder (SAIF Partners India IV). The offer is being made through the book-building route with a price band of Rs 301-317 for Rs 10 paid-up share.
Applicants should bid for a minimum lot of 47 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on Friday, July 14, 2023. IIFL Securities, Ambit and SBI Capital Markets are acting as managers to the offer while KFin Technologies will play the role of registrar. The bidding opens on Tuesday, July 04 and closes on Thursday, July 06, 2023.
Of the net proceeds of the fresh issue, Rs 196 Cr is proposed to be utilized for funding working capital requirements. The balance amount is earmarked for general corporate purposes.
Lineage
SGL was originally incorporated in August 1994 by (Late) Sankar Sen and his spouse Ranjana Sen. After the demise of Sankar Sen his son Suvankar Sen and his family Trusts namely Jai Hanuman Shri Siddhivinayak Trust and Om Gaan Ganpataye Bajrangbali Trust are presented as the promoters of SGL.
The company is said to be a pan-India jewellery retail player with a history of more than five decades and have a fourth generation entrepreneur in the jewellery industry as its promoter. SGL is claimed to be the largest organized jewellery retail player in the eastern region of India based on number of stores. Among eastern India based jewellery retailers, SGL reportedly has the widest geographical footprint in non-eastern states. The company primarily sells gold and diamond jewellery. It also sells jewellery made of silver, platinum and precious and semi-precious stones and other metals. The company’s products are sold under the Senco Gold & Diamonds trade name, through multiple channels, including showrooms and online platforms.
In 2014 SGL received private equity investment from SAIF Partners India IV Ltd. In 2022 it received private equity investment from OIJIF II. This year, the company has reportedly received the “Qualified Jeweller” status from IIBX to directly import gold and has incorporated Senco Global Jewellery Trading L.L.C as its subsidiary in Dubai.
As on March 31, 2023, SGL had 136 showrooms with a total area of about 409,882 sq. ft., in 96 cities and towns over 13 states across India. Some of its Franchisee Showrooms are located in areas other than metros and tier-I, providing us greater reach in tier-II locations.
Key Management
Ranjana Sen (64), mother of promoter Suvankar Sen, is the Chairperson and Whole Time Director. She has been associated with the company since the incorporation and has an experience of over 29 years in the jewellery industry.
Promoter, Suvankar Sen (39) is designated as Managing Director and Chief Executive Officer of the company. He has been with the SGL since 2005 and has over 17 years of experience in the jewellery industry.
Promoter’s spouse Joita Sen (38) is another Whole Time Director. She has been associated with the company since 2009 and has over 10 years of experience in the designing and marketing. Vivek Kumar Mathur (60) is a Non-Executive Director nominated to the Board by SAIF Partners India IV Ltd.
Stakeholders
Currently, the promoter group holds 76.92% of the equity of Rs 69 Cr. Investor-selling shareholder, SAIF Partners India IV, is holding 19.23% at an average cost of Rs 60.17, the balance 3.86% is held by employees and others. Post-IPO, of the enlarged equity of Rs 77 Cr, the promoters would hold 68.48% and SAIF Partners India IV will have 11.64% at a cost of negative Rs 60.85! Of the post-issue promoters’ holding 20% is locked-in for a period of eighteen months and the balance 48.48% is locked for six months.
Business Track
SGL offers gold & diamond jewellery, jewellery made of silver, platinum and precious and semi-precious stones and other metals. It also retails costume jewellery, gold and silver coins and utensils made of silver. With a catalogue offering more than 120,000 designs for gold jewellery and more than 69,000 designs for diamond jewellery, the company offers variety of designs of handcrafted jewellery, most of which are designed and manufactured in-house by the company designers in close collaboration with skilled local craftsmen.
Machine made light weight jewellery in gold and diamonds are also manufactured at their manufacturing facility in Gems and Jewellery Park, Ankurhati in Howrah, based on designs prepared by the in-house designers and also sourced from third partner manufacturing vendors.
In Fiscal 2023, 89.69%of its revenue was from the sale of gold jewellery, 6.77% was from diamond and precious/semi-precious stone jewellery and 3.36% came from the sale of other jewellery.
Financial Track
SGL has put up impressive performance in last couple of years. From Rs 2,660 Cr in fiscal 2021, the company’s top line has reached Rs 4,077 Cr in fiscal 2023. Net profit has leapt from Rs 61 Cr to Rs 156 Cr during the period. Post public issue the company’s equity capital would increase to Rs 77.66 Cr compared to which the company’s present bottom line is quite attractive.
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Senco Gold Financial Performance (in Cr) |
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| Year Ended |
Mar-23 |
Mar-22 | Mar-21 | Mar-20 |
Mar-19 |
| Revenue |
4077 |
3535 | 2660 | 2420 |
2484 |
| Operating Profit |
322 |
277 | 192 | 220 |
175 |
| OPM% |
7.9 |
7.8 | 7.2 | 9.1 |
7.1 |
| Other Income |
31 |
13 | 15 | 9 |
9 |
| EBIDTA |
353 |
290 | 207 | 229 |
185 |
| EBIDTA % |
8.6 |
8.2 | 7.7 | 9.4 |
7.4 |
| Interest |
86 |
71 | 67 | 56 |
45 |
| Depreciation |
46 |
42 | 40 | 37 |
28 |
| Tax |
63 |
49 | 29 | 37 |
47 |
| Net Profit |
156 |
129 | 61 | 91 |
72 |
| Equity (Implied) |
78 |
53 | 53 | 53 |
53 |
| Reserves (Implied) |
1338 |
659 | 536 | 485 |
400 |
| Borrowing |
1177 |
863 | 532 | 575 |
568 |
| Fixed Assets |
293 |
230 | 214 | 207 |
182 |
Valuation
SGL’s IPO cap price Rs 317 compares favorably with leading listed jewellery peers. SGL’s P/E multiple works out to 15.2x which is the lowest among peers. In terms of Price to Cash Earnings, Book Value, EBIDTA, Revenue and Fixed Assets too, the valuation is comparatively cheap.
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HOW SENCO GOLD COMPARES WITH LISTED PEERS |
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Financials |
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| (Amount in Cr) |
Senco |
Titan | Kalyan |
Thangamayil |
| Market Cap |
2462 |
271325 | 15142 |
2082 |
| Borrowing |
1177 |
2195 | 3509 |
548 |
| Fixed Assets |
293 |
3018 | 1857 |
122 |
| Revenue |
4077 |
40575 | 14071 |
3153 |
| Other Income |
31 |
308 | 38 |
3 |
| EBIDTA |
353 |
5187 | 1152 |
156 |
| Interest |
86 |
300 | 303 |
35 |
| Net Profit |
162 |
3270 | 465 |
80 |
| Equity Cap |
78 |
89 | 1030 |
14 |
| Reserves |
1338 |
11762 | 2605 |
375 |
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Stock Features |
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| Current Price (Rs) |
317 |
3049 | 147 |
1518 |
| Face Value (Rs) |
10 |
1 | 10 |
10 |
| Book Value |
182 |
133 | 35 |
283 |
| Promoter Stake % |
68.5 |
52.9 | 60.6 |
66.7 |
| Debt/Equity |
0.8 |
0.2 | 1.0 |
1.4 |
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Profitability |
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| OPM % |
7.9 |
12.0 | 7.9 |
4.9 |
| Net Margin % |
3.9 |
8.0 | 3.3 |
2.5 |
| Cash EPS |
26.69 |
41.44 | 6.90 |
67.87 |
| Earnings Per Share |
20.83 |
36.48 | 4.53 |
58.11 |
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Growth |
||||
| CAGR 3Yr Sales % |
19.0 |
25.0 | 14.9 |
24.5 |
| CAGR 3Yr EBIDTA % |
15.6 |
25.6 | 11.1 |
15.8 |
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Return |
||||
| RONW % |
17.4 |
27.6 | 12.8 |
20.5 |
| ROCE % |
14.6 |
33.8 | 12.7 |
15.2 |
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Discounting |
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| Price/Earnings |
15.2 |
83.6 | 32.5 |
26.1 |
| Price/Cash EPS |
11.9 |
73.6 | 21.3 |
22.4 |
| Price/Book Value |
1.7 |
22.9 | 4.2 |
5.4 |
| Price/EBIDTA |
7.0 |
52.3 | 13.1 |
13.3 |
| Price/Revenue |
0.6 |
6.7 | 1.1 |
0.7 |
| Price/Fixed Assets |
8.4 |
89.9 | 8.2 |
17.1 |
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Distribution |
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| Dividend % |
15 |
1000 | 5 |
0 |
| Yield % |
0.5 |
0.3 | 0.3 |
0 |
| Pay-out % |
5.2 |
27.2 | 11.1 |
0 |
Concern
- SGL had applied for the trademark “Senco Gold & Diamonds” and “Senco Gold & Diamonds Craftsmanship for You” which have been objected to. Further, its application for the trademark “DIGIGOLD” was rejected. If any of its unregistered trademarks are registered in favour of a third party, it may affect the business of SGL.
- The company’s revenues have been significantly dependent on sale of gold jewellery, which accounted for 90%, 92% and 92% of its total revenue from operations for Fiscals 2023, 2022 and 2021, respectively. Current upswing in gold prices gives higher valuation for the closing stock which naturally inflates the profit. Hence any downtrend in gold price would significantly deplete profits of gold jewelers.