Motisons Jewellers Limited Has Filed DRHP for an IPO with SEBI on 06.10.2022

Motisons Jewellers Limited Has Filed DRHP for an IPO with SEBI on 06.10.2022

Motisons Jewellers Limited has filed DRHP with SEBI on October 6, 2022 to launch its IPO. The IPO consists of a fresh issue of only up to 3,34,71,000 equity shares.

Business Model of Company 

The company is a jewellery retail player  with more than 20 years of experience. The jewelry business includes the sale of gold and silver coins, utensils and other artifacts, jewelry made of gold, diamonds, and kundan; and the sale of other jewelry products that include pearls, silver, platinum, and other metals. The Company was commenced through a partnership firm in 1997, which was subsequently converted into a public limited company in 2011 and currently has a presence across multiple prominent locations in Jaipur, Rajasthan. In addition to selling products at showrooms, the company also sells the products through an online platform. 

The company primarily sources finished jewelry from third party manufacturing vendors located across India. This includes all types of jewelry made of gold, diamond and other precious and semi precious stones. Additionally, to cater to the increasing demand in the market, the Company also engages artisans on a job work basis and has its own manufacturing facilities located in Jaipur, Rajasthan for diamond and gem stone studded jewelry. The company outsources the work of making ornaments to various artisans. The Company offers a large variety of handcrafted jewelry, which are designed and manufactured by its in-house designers in close collaboration along with skilled local craftsmen located across the country. 

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) Sandeep Chhabra is the Chairman and Whole Time Director of the Company. He has cleared higher secondary examination conducted by Board of Secondary Education, Rajasthan in the year 1987 in the field of Commerce. Mr. Sandeep Chhabra stepped into business and has been associated with the brand “Motisons Jewellers” since 1997. He has more than two decades of experience in the business of manufacturing and retailing of jewellery made of gold, diamond, and other precious and semi-precious stones.

(ii) Sanjay Chhabra is the Managing Director of our Company. He cleared higher secondary examination conducted by Central Board of Secondary Education in the year 1993 in the field Commerce. Vigorously seizing the right opportunity, Mr. Sanjay Chhabra associated himself with Motisons Jewellers in 1997 and thereafter  worked towards building the brand ‘Motisons’. He has an experience of more than two decades in the jewellery industry.

Why is the company raising funds via IPO?

The IPO of Motisons Jewellers Limited includes Fresh Issue only. The Company’s objective is  to utilize the fund of the Fresh Issue towards funding the following –

1. Pre-payments or scheduled repayment of a portion of the existing borrowing availed by the company.
2.  Funding the working capital requirements of the Company .

Is there any OFS in the IPO?

As per the DRHP filed with SEBI, the IPO consists of a fresh issue only. No existing shareholders are selling their stakes in the IPO, which means the  IPO of Motisons Jewelers Limited does not have any offers for sale. 

Financials of the company?

According to DRHP, in FY22, the gross revenue of the company reported an increase of 48% to Rs. 314 crore as against Rs. 213 crore in the previous financial year. The expenses of the company have also increased 47% to Rs. 294 crore as against Rs. 200 crore in the previous financial year.

The Profit Before Tax of the Company increased to Rs. 20 crore as against Rs. 13 crore in the previous financial year.

The Profit After Tax 52% to Rs. 15 crore as against Rs. 10 crore in the previous financial year.

PAT margins of the company increased to 4.69% from 4.54% in the previous financial year.  

Risk in The IPO

The Company’s Promoters 

Certain of the Promoters and members of the Promoter Group are involved in proceedings involving SEBI which could have an adverse impact on the business and reputation. On January 05, 2022, some of the Promoters, Mr. Sanjay Chhabra, Mr. Sandeep Chhabra and Mrs. Kajal Chhabra had respectively received notices from the Investigations Department of SEBI seeking relevant supporting documents pursuant to trades conducted by each of them in the scrip of a listed company, Pincon Lifestyles Limited (ListCo), such as, bank statement, proof of payment/receipt, etc. latest by January 15, 2022 and was advised to submit the consideration received by each of them from the transferees of shares of ListCo to SEBI. 

Involvement of Promoters and Directors in Legal Proceedings 

The Company, Promoters and Directors are involved in certain legal proceedings. Any adverse decision in such proceedings may render them liable to liabilities/penalties and may adversely affect the company’s business and results of operations. The Company, Promoters and Directors are currently involved in certain legal proceedings. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. Some of the Promoters, Mr. Sanjay Chhabra and Mr. Sandeep Chhabra, in the past, were involved in proceedings initiated by the investigation agency in relation to betting in the cricket matches of Indian Premier League. Though they have been duly discharged, any re-opening of matter could have an adverse impact on the business and reputation.

Unsecured Loans 

The company has availed unsecured loans from Promoters, Promoter Group, Group Companies and other companies that are recallable, at any time. The Company has availed unsecured loans from Promoters, Promoter Group, Group Companies and other companies, aggregating to Rs. 86 crore as of March 31, 2022 that are repayable on demand and which may be recalled by such lenders at any time. The Company has paid interest ranging from 9% p.a. to 12%

Regulatory Permits and Approvals

The Company is required to obtain, renew or maintain certain statutory and regulatory permits and approvals required to operate the business. Non-compliance with existing or changes to environmental, health and safety, labor laws and other applicable regulations by the company may adversely affect the business, financial condition, results of operations and cash flows. 

Inability to respond to changes

The inability to respond to changes in consumer demands and market trends in a timely manner and to maintain optimal level of inventory in our showrooms may impact our operations adversely. The success depends on the ability of the company to identify, originate and define product and market trends, as well as to anticipate, gauge and react to rapidly changing consumer demands in a timely manner. The products must also appeal to a broad range of customers whose preferences may vary significantly across regions and cannot be predicted with certainty.