(i) Sky Gold Limited, is engaged in the business of designing, manufacturing, and marketing of Gold jewelleries since its incorporation. The Company mainly deal in 22 Karat gold jewellery, offering a wide variety of designs to suit the preferences of the end customer. They have the ability to create localised product design mixes to suit various regional tastes. The Company caters to our customers’ unique preferences, through our understanding of the local and regional market. They provide an extensive range of designs and also use studded American diamonds and / or colored stones in many of our jewelry products.
(ii) They cater to a large number of wholesalers, showrooms and retailers who buy their products in bulk quantities. Due to our diversity of clients and the varied regions each of the clients caters to, They have developed an ability to design their jewellery products as per latest trends, fashion and demographic preference of the end customers. The Company offer a wide range of products from gold jewellery for special occasions such as weddings and festivals to daily wear jewellery for all ages, genders and across various price points. They cater to a variety of customers across mid-market and value market segments and our products are designed by our in-house team of creative designers and also certain freelance designers, allowing us to manage a large and diverse portfolio of designs. Their product range includes necklaces, rings, pendants, bracelets, earrings and bangles and customized jewellery based on customer demand. Besides, various clients in Mumbai and nearby areas, They also cater to various jewellery brands. They have adopted the latest technology in our manufacturing facility which reduces their turnover time from order receipt to delivery to just 72 hours.
Objective of SKY Gold Limited IPO are:
(a) Repayment of Loans
(b) Funding Working Capital Requirement
(c) Funding expenditure for General Corporate Purposes
Promoters of SKY Gold Limited IPO Company are:
1. Mr. Mangesh Chauhan
2. Mr. Mahendra Chauhan
3. Mr. Darshan Chauhan
Financials of SKY Gold Limited IPO:
Particulars
For the year/period ended (in Rs Lacs)
31-Mar-2018
31-Mar-17
31-Mar-16
31-Mar-15
31-Mar-14
Total Assets
6,624.20
3,696.17
3,486.30
2,915.56
2,648.57
Total Revenue
54,889.53
16,441.05
18,331.31
12,777.45
9,624.74
Profit After Tax
262.04
93.93
94.03
83.24
63.59
Recommendation on SKY Gold Limited IPO:
Review and Recommendation of SKY Gold Limited IPO from IZ team is: 2/10[The business does not have any moat as there are thousands of such jewelry companies and shops in India. The SME is asking a P/E of 36 when mainline company Renaissance Jewellery is available at P/E of 8.82.]
Management Clarification regarding the rise in 3.35X Revenue in FY18 as compared to last year.
” In fiscal 2018, the revenue from operations increased by 233.84%, from ₹ 164 Cr in fiscal 2017 to ₹ 548 Cr in fiscal 2018. The increase in the year 2018 was due to increase in sale of products and an increase in income from labour charges. The company has aggressively marketed our products by participating in exhibitions and the efforts of our promoters, which has helped our Company to grow our revenue manifold”
Observation: The company has done aggressively marketing and participated in exhibitions in FY18 i.e just before the IPO but has never done in the last 5 years which is quite hard to digest.
Conclusion- The D/E will reduce considerably after the IPO. However, anything above 1 is still uncomfortable. The Mainline Peer Renaissance Jewellery Ltd is having D/E of just 0.41.
EPS Story Before the issue( based on FY18 Fin)
(i) PAT= 262 Lakhs
(ii) Outstanding Shares= 39.557 Lakhs
(iii) EPS= 6.62
(iv) P/E= 27.19
EPS Story After the issue( based on FY18 Fin)
(i) PAT= 262 Lakhs
(ii) Outstanding Shares= 53.7194 Lakhs
(iii) EPS= 4.87
(iv) P/E= 36.96
Conclusion- The Issue is priced very aggressively for the business which does not have any moat. One of the peer shown is Renaissance Jewellery Ltd., a mainline company is trading at P/E of 8.82 and this SME asking P/E of 36 that too on exceptional 3x rise in revenue which has never happened in last 5 years but somehow happened before the IPO.
Avoid this company.
Peer Comparison
a) Renaissance Jewellery Ltd
(i) EBITDA Margins= 5.56%
(ii) PAT Margins= 3.43%
(iii) ROE= 11.29%
(iv) P/E = 8.82
b) Sungold
(i) EBITDA Margins= 1.4%
(ii) PAT Margins= 0.04%
(iii) ROE= 6%
(iv) P/E = 36
Conclusion: The good mainline company is available at better return ratios and cheap valuations. So there is no harm in skipping this SME.
Management Clarification regarding the rise in 3.35X Revenue in FY18 as compared to last year.
” In fiscal 2018, the revenue from operations increased by 233.84%, from ₹ 164 Cr in fiscal 2017 to ₹ 548 Cr in fiscal 2018. The increase in the year 2018 was due to increase in sale of products and an increase in income from labour charges. The company has aggressively marketed our products by participating in exhibitions and the efforts of our promoters, which has helped our Company to grow our revenue manifold”
Observation: The company has done aggressively marketing and participated in exhibitions in FY18 i.e just before the IPO but has never done in the last 5 years which is quite hard to digest.
Debt Story Before the issue based on FY18
(i) Long-term debt= NIL
(ii) Short-term debt = ~51 Cr
(iii) Equity= ~13 Cr
(iv) D/E= 3.92
Debt Story Before the issue based on FY18
(i) Long-term debt= NIL
(ii) Short-term debt = ~51 Cr
(iii) Equity= ~38.56 Cr
(iv) D/E= 1.322
Conclusion- The D/E will reduce considerably after the IPO. However, anything above 1 is still uncomfortable. The Mainline Peer Renaissance Jewellery Ltd is having D/E of just 0.41.
EPS Story Before the issue( based on FY18 Fin)
(i) PAT= 262 Lakhs
(ii) Outstanding Shares= 39.557 Lakhs
(iii) EPS= 6.62
(iv) P/E= 27.19
EPS Story After the issue( based on FY18 Fin)
(i) PAT= 262 Lakhs
(ii) Outstanding Shares= 53.7194 Lakhs
(iii) EPS= 4.87
(iv) P/E= 36.96
Conclusion- The Issue is priced very aggressively for the business which does not have any moat. One of the peer shown is Renaissance Jewellery Ltd., a mainline company is trading at P/E of 8.82 and this SME asking P/E of 36 that too on exceptional 3x rise in revenue which has never happened in last 5 years but somehow happened before the IPO.
The Business of the company.
(i) Sky Gold Limited, is engaged in the business of designing, manufacturing, and marketing of Gold
jewelry since its incorporation.
(ii) The Company’s manufacturing facility is located in Mulund, Maharashtra. The sales offices are located in Mumbai, Kerala, and Telangana.