- November 24, 2022
- Posted by: Santosh Singh
- Category: IPO
Manoj Vaibhav Gems ‘N’ Jewellers Limited has filed Draft Red Herring Prospectus with market regulator SEBI on 7th Sep, 2022.
The IPO consists of Fresh Issue worth up to Rs. 210 crore and Offer for Sale (OFS) of 43,00,000 equity shares.
Business Model of Company
Vaibhav Jewellers is a leading regional jewellery brand in South India led by a first generation woman entrepreneur Mrs. Bharata Mallika Ratna Kumari Grandhi along with her daughter Grandhi Sai Keerthana. The Company is a hyperlocal jewellery retail chain with presence in the micro markets of Andhra Pradesh & Telangana with 13 showrooms (inclusive of two franchisee showrooms) across 8 towns and 2 cities. The Company has a market share of ~5% of the overall Andhra Pradesh and Telangana jewellery market and ~14% of the organized market in these two states in FY2021, as per the Technopak Report.
The Company was established by founder, Late Mr. Manoj Kumar Grandhi, with a vision to introduce organized jewellery retail play in the markets. The Company started its jewellery business as a proprietorship concern in the year 1994 from the first retail showroom in Visakhapatnam. In 2007 the Company launched V Square, the flagship showroom, which is one of the largest in Visakhapatnam with 29,946 sq.ft jewellery retail space and is one of India’s largest ISO certified jewellery showroom. The Company is expanding its presence in Andhra Pradesh and Telangana simultaneously, to capture demand and meet the taste of the population of both the states.
The Indian Jewellery Market is expected to reach a value of USD 92 Bn by FY 2025, growing at a CAGR of 15% over the next 3 years on account of the growing economy and rising disposable income, increasing consumer demand for gold, growth in gold prices and rising demand for other categories like diamonds, other precious stones and costume jewellery. In FY 2021, the total market size of Andhra Pradesh and Telangana was USD 2.0 Bn and USD 1.7 Bn respectively.
Who is the Management of the Company?
As on the date of this Draft Red Herring Prospectus, the following is the management of the company:
(i) Bharata Ratna Kumari Grandhi is a Promoter, Chairperson and Managing Director of the Company. She has 22 years of experience in the jewellery industry, having been associated with the Company since 2001. She completed her Higher Secondary School in the year 1987. Her knowledge of the jewellery industry has contributed to the growth of the Company. Currently, she looks after the overall operations and gives strategic directions furthering the growth of the Company. She is also involved in strengthening the sales, implementing the marketing strategy and involved in the business development of the Company.
(ii) Grandhi Sai Keerthana is a Whole-time Director and CFO of the Company. She is a qualified Chartered Accountant from the Institute of Chartered Accountants of India(ICAI) and is also a member of ICAI. She holds a Degree of Bachelor of Commerce from Andhra University. She has been involved in the areas of marketing, operations and product development of the Company. Currently, she is involved in managing the finances of the Company. On October 18, 2021, she was awarded Power of Young-Jeweller Think Tank by Informa Markets and Hyderabad Jewellery, Pearl and Gem Fair in association with HJMA & Art of Jewellery as Knowledge partner at HICC, Novotel, Hyderabad.
Why is the company raising funds via IPO?
The Promoter Selling Shareholder will be entitled to the respective portion of the proceeds of the Offer for Sale after deducting its portion of the Offer related expenses and relevant taxes thereon. The Company will not receive any proceeds from the Offer for Sale and the proceeds received from the Offer for Sale will not form part of the Net Proceeds.
The Net Proceeds from the Fresh Issue are proposed to be utilized towards the following objects:
- To Finance Establishment of proposed 8 new showrooms.
- Capital expenditure cost for the proposed eight new showrooms
- Inventory cost for the proposed eight new showrooms
- General corporate purposes.
In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges, including among other things, enhancement of Company’s brand name and creation of a public market for the Equity Shares in India.
Is there any OFS in the IPO?
The IPO of Manoj Vaibhav Gems ‘N’ Jewellers Limited consists of Fresh Issue worth up to Rs. 210 crore and Offer for Sale (OFS) of 43,00,000 equity shares. As part of OFS, the Promoter Bharata Ratna Kumari Grandhi will sell her stake of up to 43,00,000 equity shares.
Financials of the company?
As per the financial statement of the Company, in FY22, the Company reported an increase of Rs. 18% to Rs. 1697 crore as against Rs. 1443 crore in the previous financial year ended March 31, 2021. In FY22, the total expenses of the Company have also increased 17% to Rs. 1639 crore as against Rs.1404 crore in the previous financial year ended March 31, 2021. The Profit Before Tax of the Company reported a massive growth of 115% to Rs. 58 crore as against Rs. 27 crore in the previous financial year ended March 31, 2021. In FY22, the net profit of the Company has also increased 115% to Rs. 43 crore as against Rs. 20 crore in the previous financial year ended March 31, 2021.
In FY22, the total assets of the Company increased 12% to Rs. 899 crore as against Rs. 803 crore in the previous financial year ended March 31, 2021. For the same period, the total equity and liabilities of the Company increased 12% to Rs. 899 crore as against Rs. 803 crore in the previous financial year ended March 31, 2021.
In FY22, the net cash generated from operating activities of the Company was Rs. 8 crore as against Rs. 11 crore cash used in the previous financial year ended March 31, 2021. The net cash generated from investing activities of the Company was Rs. 1 crore as against Rs. 10 crore in the previous financial year ended March 31, 2021. The net cash used in financial activities of the Company was Rs. 25 crore as against Rs. 4 crore cash generated in the previous financial year ended March 31, 2021. The cash and cash equivalents at the end of the year of the Company was Rs. 6 crore as against Rs. 21 crore in the previous financial year ended March 31, 2021.
Risk in The IPO
Company May not Maintain and Develop Brands
The strength of the brands is crucial to the growth and success and the Company may not succeed in continuing to maintain and develop its brands. The Company’s brand “Vaibhav Jewellers” along with sub-brand “Visesha” particularly are very important for business of the Company. The business and results of operations are influenced by the strength and popularity of the brands, including the level of consumer recognition and perception of the brands in the mind of varied customers. Failure to manage promotional and allied activities to differentiate and further strengthen the brands could adversely affect the value and perception of the brands and the ability to maintain existing customers and attract new customers, and, as a result, the Company may face a material adverse effect on business, results of operations and financial condition.
The Unavailability of High Cost of Quality Gold Bullion, Silver and Diamonds
Timely procurement of materials such as gold bullion, silver, diamonds and other precious and semi-precious stones, as well as the quality and the price at which they are procured, play an important role in the successful operation of business. Gold used in the operations of the Company is primarily sourced from nominated banks and bullion dealers. The business of the Company is affected by the availability, cost and quality of raw materials. The non-availability or high cost of quality gold bullion, silver, diamonds and other precious and semi-precious stones may have an adverse effect on the business, results of operations and financial condition of the Company.
Covid-19 and Such Events
The spread of COVID-19 in a majority of countries across the world, including India affected business and their operations badly. The COVID-19 pandemic has had, and may continue to have, significant repercussions across local, national and global economies and financial markets. Due to which government mandated lockdown in India, the Company had to temporarily close all of its showrooms and the offices. Due to which the operations and revenues of the Company had an impact during the lockdown.
Income and Sales are Subject to Seasonal Fluctuations
The income and sales of the Company are subject to seasonal fluctuations and lower income in a peak season may have a disproportionate effect on the results of operations and may have a negative impact on the business. The sales have historically exhibited certain seasonal fluctuations, reflecting higher sales volumes and profit margins during festival periods and other specific occasions such as Akshay Trithiya, Dussehra, Dhanteras, Diwali and Christmas. Any slowdown in demand for the jewellery during peak seasons or failure by the Company to accurately anticipate and prepare for such seasonal fluctuations could have a material adverse effect on the business, financial condition and results of operations of the Company.
Company is Subject to Government Regulations and Legislations
The Company requires to maintain various licenses and permits for the business. The business of the Company is subject to applicable government regulations and legislations and requires certain statutory and regulatory approvals, licenses, registrations and permissions for operating the business. These permits, licenses and approvals may also be tied to numerous conditions and terms, obtaining some of which may be time consuming and may incur high cost. The Company cannot assure that it will be able to continuously meet such conditions or be able to prove compliance with such conditions to statutory authorities, which may lead to cancellation, revocation or suspension of relevant permits, licenses, registrations and approvals and the business of the Company may have a material adverse effect on the business, financial condition and results of operations of the Company.