Nanavati Ventures coming with an IPO to raise upto Rs 2.18 crore

Nanavati Ventures

• Nanavati Ventures is coming out with an initial public offering (IPO) of 436000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share.
  
• The issue will open on April 25, 2022 and will close on April 27, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 5 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is First Overseas Capital.
  
• Compliance Officer for the issue is Pankaj Valjibhai Pandav.
  

Profile of the company

The company is engaged in trading of diamonds majorly in Surat, Gujarat. Its operations include sourcing of polished and uncut diamonds from primary and secondary source suppliers in the domestic market and sale of diamond to the retail and wholesale operations in Gujarat. It primarily sell diamonds to a customer base spread across domestic markets that includes various jewellery manufacturers, large department store chains, retail stores and wholesalers. The company was engaged into the business of trading of diamonds since the day of incorporation. It procure the rough and unpolished diamonds in several sizes and shapes from the suppliers and then the processing and polishing of rough gemstone is done by skilled workers on job-work basis.

The company has independent sales and distribution networks for its products. A substantial majority of its cut and polished diamonds are sold to diamond wholesalers and the jewellery manufacturers in the domestic markets. It procures diamond from suppliers at domestic level and it has good business association with suppliers. It has a centralised procurement policy and generally purchase in large volumes in order to stock. By purchasing in large volumes, it is able to purchase inventory at lower prices than its competitors, which enables it to sell its products at competitive prices.

Proceed is being used for:

• Meeting working capital requirements.
  
• Meeting issue expenses.
  
• General corporate purpose.
  

Industry overview

As of February 2021, India’s gold and diamond trade contributed 7.5% to India’s Gross Domestic Product (GDP) and 14% to India’s total merchandise exports. The gem and jewellery sector is likely to employ 8.23 million persons by 2022, from 5 million in 2020. Based on its potential for growth and value addition, the Government declared gems and jewellery sector as a focus area for export promotion. The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote ‘Brand India’ in the international market. The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the Reserve Bank or Government of India.

In FY21, exports of gems & jewellery stood at $25.30 billion. In March 2021, exports of gems & jewellery stood at $3.42 billion. The Government of India is aiming at $70 billion in jewellery export in the next five years (until 2025), up from $35 billion in 2020. In FY21, gems & jewellery exports in India stood at $25.30 billion. In FY22 (until October), India exported gems & jewellery worth $23.65 billion compared with the $11.482 billion recorded in FY21 (until October). In October 2021, India exported gems & jewellery worth $4.17 billion compared with the $2.92 billion recorded in October 2020. In FY22 (until September), India exported gems & jewellery worth $18.98 billion compared with $8.01 billion in FY21 (until September). In September 2021, India exported gems & jewellery worth $3.16 billion compared with $2.4 billion in September 2020. In August 2021, the GJEPC announced an ambitious target of raising exports of the sector to $44 billion in FY22. 

Pros and strengths

Established brand: The company’s brand i.e. ‘Nanavati Ventures’ is a recognizable brand in its region and is differentiating factor for the Customers, which helps establish customer confidence and influences buying decisions. Its reputation as to offer the most reasonable price for diamonds. It offers its authentic product range, customer support, and business understanding grew and it is receiving good response from its customers to offer high quality within their budget. It offer end to end customer service and support. Its established brand and reputation will enable it to obtain more clientele list, pursuant to which it may build its brand.

Understand customer needs: The company carefully cover the study of each customer’s needs. It makes them aware of all available options and provide them with a competent advice enabling them to take an informed business decision. Its aim is to earn customer's trust and confidence through personal attention, passion for what it does and commitment to long-lasting relationship. It will go an extra mile to deliver customers’ a measurable business value and help them adopt and succeed in the Diamond industry.

Strong distribution and sales networks: The company is having good channel for distribution to the retailers as well as end use customers. India is the largest hub for diamond processing in the world and Surat is the heart of its thriving Diamond industry. Therefore most of the rough stones polished in Surat. Further majority of active Diamond and Jewellery exporters are based in Mumbai and Surat, which provides a very good platform for trading business. It has excellent domestic market within the state of Gujarat and company is looking forward for expansion of its geographical market as there is lots of opportunities in India in future.

Risks and concerns

Business is partly seasonal in nature: Diamond purchases are discretionary and are more often perceived to be an exercise in luxury. As a result, the company’s business is sensitive to a number of factors that influence consumer spending. The price of diamond relative to other products, everyday household as well as luxury items, influences the proportion of consumer’s money that is spent on the buying of diamond. Other factors include festive seasons, marriages season and general economic conditions, consumer confidence in future economic and political conditions, fears of economic slowdown, consumer debt, disposable consumer income. If the company unable to cope up with demand of customers and their requirement during the festive season and Marriage seasons, its profitability will be adversely affected on account of reduction of sales. Further it may not be able to recover the shortfalls of sales of such periods.

High working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.

Face competition: The diamond trading sector is highly fragmented and competitive. The company would not only compete with organized players but also a high percentage of unorganized players at local, national and international levels. Some of them may offer better quality diamonds at competitive prices and may be capable of providing more personalized services to each client due to the smaller number of orders placed with them. Further, these unorganized player offer their services at highly competitive prices having well established presence in their local markets. Aggressive discounting by competitors, including liquidating excess inventory, may also adversely impact its performance in the short term. This is particularly the case for easily comparable prices for rough and polished diamonds, for similar quality diamonds sold through wholesaler, retailers and other traders.

Outlook

Incorporated in 2010, Nanavati Ventures is a Diamond Trading company. The company sells diamonds largely to a domestic customer base that includes jewellery manufacturers, large department store chains, retail stores, and wholesalers. The company is located in Surat, Gujarat. Nanavati Ventures purchases rough and unpolished diamonds from suppliers, and then professional workers process and polish those rough gemstones for the end product. The company's products are sold and distributed through independent sales and distribution networks. The company’s management’s experience and knowledge enables it in addressing and mitigating various risks inherent in its business, including competition, reliance on independent contractors, the global economic crisis related effects and fluctuations in the prices. Its quality products have earned it a goodwill from customers, which has resulted in customer retention and order repetition also new addition to the customer base. On the concern side, the company has not taken any insurance coverage for a number of the risks associated with its business and otherwise, such as insurance cover against loss or damage by fire, explosion, burglary, theft and robbery. The company’s business and prospects could be adversely affected by changes in any of these regulations and policies, including the introduction of new laws, policies or regulations or changes in the interpretation or application of existing laws, policies and regulations.

The company is coming out with a maiden IPO of 436000 equity shares of Rs 10 each at a fixed price of Rs 50 per share to mobilize Rs 2.18 crore. On performance front, total revenue for the financial year 2019-20 stood at Rs 595.10 lakh whereas in Financial Year 2018-19 the same stood at Rs 55.43 lakh representing an increase of 973.54%. The company reported Restated profit after tax for the financial year 2019-20 of Rs. 5.39 lakh in comparison to Rs 0.03 lakh in the financial year 2018-19. The company will explore the three marketing strategies that are involved in marketing strategy, including posting and positioning and traditional marketing including advertising and the combination of all. Besides, the company envisages to provide the direct selling facility to end user customers.