PNGS Gargi Fashion Jewellery coming with an IPO to raise Rs 7.80 crore

PNGS Gargi Fashion Jewellery

• PNGS Gargi Fashion Jewellery is coming out with an initial public offering (IPO) of 26,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 30 per equity share.
  
• The issue will open on December 8, 2022 and will close on December 13, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 3.00 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Shreni Shares.
  
• Compliance Officer for the issue is Bhargavi Pratish Aphale.
  

Profile of the company

The company is engaged in the retail business of costume and fashion jewellery under the brand name ‘Gargi by P. N. Gadgil & Sons’ launched in 2021 under the artificial jewellery segment. It deals in 92.5% certified sterling silver jewellery and brass jewellery, idols and other silverware and related gift items. It offers a wide range of products from artificial jewellery segment for special occasions such as weddings and festivals to daily-wear jewellery for all ages, genders and across various price points.

The company offers a wide range of products from costume and fashion jewellery segment for special occasions such as weddings and festivals to daily-wear jewellery for all ages, genders and across various price points. Its product line includes earrings, necklaces, pendants, chains, finger rings, bracelets, anklets, nose pins, mangal sutra, pendant set, bangles in brass or silver for females of age groups as well as male accessories such as rings, cufflinks, button set, that cater to its customers taste, preference, choice and the ever-changing trends in the chain and jewellery designs. Its portfolio offers its customers a wide variety of traditional, Indo-western, & modern design and jewellery.

The company primarily sources finished jewellery from third party manufacturing vendors located across India. This includes all types of jewellery primarily made of silver and brass. Additionally, to cater to the increasing demand in the market, it also outsources the work of making costume jewellery to various artisans with whom it has developed strong relationships. It offers a large variety of costume jewellery, which are designed and manufactured by its in-house designers in close collaboration along with skilled local craftsman located across the country. To ensure optimum prices and mitigate the risk of suppliers' concentration, it procures its products from various suppliers across the country. This procurement process enables it to offer a wide range of products. These products are mainly marketed using both online as well as offline marketing tools. The company operates through shop in shop model and it has entered into an agreement with P.N. Gadgil & Sons and P. N. Gadgil Art & Culture Foundation to have point of sales (POS) counters at its existing 30 showrooms across the states of Maharashtra, Gujarat and Karnataka.

Proceed is being used for:

• Funding working capital requirements.
  
• 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 gems and jewellery sector are 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 the gems and jewellery sector as a focus area for export promotion. India’s gems and jewellery export sector-which is one of the largest in the world-contributed 27% to the global jewellery consumption in 2019. The market size of the global gems and jewellery sector is likely to expand to $ 103.06 billion between 2019 and 2023. India’s gems and jewellery exports are expected to reach $ 100 billion by 2025. Globally, India was the top exporter of diamonds with a share of 20.6% in 2020. 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. From April-July 2022, India's gems and jewellery exports were at $ 13.36 billion, a 5.63% rise compared to the same period the previous year. In FY22, cut and polished diamonds accounted for the highest share of exports (62.42%), followed by gold jewellery (23.57%) and silver jewellery (6.95%). In April 2022, India’s overall gems and jewellery exports was at $ 3.23 billion.

In July 2022, India imported gems & jewellery worth $ 3.12 billion. According to the Gem and Jewellery Export Promotion Council, gold bar imports stood at $ 1,372 million and Gold jewellery stood at $ 166.75 million between April-October 2021. India’s gold demand stood at 797.30 tonnes in 2021 and is expected to be in a range of 800-850 tonnes by 2022. Growth in exports is mainly due to revived import demand in the export market of the US and fulfilment of orders received by numerous Indian exhibitors during the Virtual Buyer-Seller Meets (VBSMs) conducted by GJEPC. In the fourth quarter of 2021, demand for gold rose by 93% over the same period a year ago to 265 tonnes. The second quarter of 2021 has been better for businesses as establishments were better prepared for lockdowns compared with 2020. Total jewellery demand in terms of volume increased by 25% YoY to 55 tonnes in the second quarter of 2021. Revised SEZ act is also expected to boost exports of gems and jewellery. 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. The Government has made hallmarking mandatory for gold jewellery and artefacts and a period of one year is provided for its implementation.

Pros and strengths

Extensive product list: The company has an extensive product list which includes earrings, necklaces, pendants, chains, finger rings, bracelets, anklets, nose pins, mangal sutra, pendant set, bangles in brass or silver for females of age groups as well as male accessories such as rings, cufflinks, button set, that cater to its customers taste, preference, choice and the ever-changing trends in the chain and jewellery designs. The company’s portfolio offers its customers a wide variety of traditional, Indo-western, & modern design and jewellery for special occasions such as weddings and festivals to daily-wear for all ages, genders and across various price points. Its product profile includes traditional, contemporary and combination designs across jewellery lines, usages and price points. In addition to manufacturing its jewellery in-house, its access to a wide range of manufacturers who are smaller, localized jewellery manufacturers from various parts of India, allows it to offer a diverse product range. The company actively engages with such manufacturers to ensure that the products are as per its specifications and suggested designs.

Hybrid Shopping model: With changing technology and growing demand of virtual shopping platforms, the company has adapted itself. The company has its counter space at 30 offline stores of P.N. Gadgil & Sons and P. N. Gadgil Art & Culture Foundation located on POS basis at various locations across the state of Maharashtra, Karnataka and Gujarat. Offline stores enable the customer to examine the product quality and design in reality before they purchase the product. Considering the recent evolution of online shopping, one would think that the sector has peaked. However, the newest technological advancements allow retailers to enhance customer journeys and increase customer engagement even further. The customers also have an option to purchase it online on its website www. gargi.shop where they can explore more options across variety of designs and products. Further, it also listed its silver jewellery on Amazon. Customers can interact, communicate, browse and personalise their own shopping experience, which is all supported by retail experts.

Effective internal control and processes: The company has established a set of operational and control practices to manage its business operations and to support its future growth at both the store and corporate level. Given the value and nature of its jewellery, its inventory management and internal audit procedures are critical to the success of its business. The company’s inventory procurement is centralized, which enables it to benefit from economies of scale and to maintain quality and security standards. The company tracks its inventory from the initial procurement of its products to ultimate sales in its stores. The company barcode each piece of finished goods inventory and conduct regular inventory counts at its stores. These measures are coupled with an integrated enterprise resource planning (ERP), system that allows it to monitor inventory and sales through a centralised platform. Its agreement with P.N. Gadgil & Sons and P. N. Gadgil Art & Culture Foundation also includes providing with security guards to all the stores, 24 hours a day where its POS Counters are present.

Risks and concerns

The company may fail to protect jewellery designs:  The company changes its jewellery designs on a regular basis and does not register such designs under the Design Act, 2000. As such, it would be difficult for it to enforce its intellectual property rights in its designs, and if its competitors copy its designs, in particular the designs of its products available on its website or the designs given to third-party suppliers, it could lead to a loss of revenue, which could adversely affect its results of operations and financial condition. If its suppliers produce the same or similar jewellery for its competitors, its customers may no longer purchase its jewellery or look to its competitors for similar jewellery, which could negatively impact its results operations and financial condition. Additionally, designs developed by it may inadvertently infringe on the intellectual property rights of third parties, which may expose it to legal proceedings. Thus, it is susceptible to litigation for infringement of intellectual property rights in relation to such designs. This could materially and adversely affect its reputation, results of operations and financial condition.

Face competition: The markets in which the company operates are competitive. Its competitors include both organised pan-India jewellers as well as unorganized local players. Some of its competitors have achieved significant recognition for their brand names or have considerable financial, distribution, marketing, bargaining power with suppliers and other resources. Industry consolidation, either by virtue of mergers and acquisitions or by a shift in market power among competitors, may accentuate these trends. In addition, some of its competitors in smaller local markets have advantages of having strong reputations and established trust with customers in their local markets, which could be difficult for it to challenge or replicate in a sustained manner in the future. Its principal competitive factors include brand name, product style, product range, quality, display, price transparency, store location, designs suited to local preferences, advertising and promotion. It cannot give any assurances that it will be able to compete successfully on all of these factors against existing or future competitors in the future.

Dependent on third-party transportation provider: The company’s success depends on the uninterrupted supply and transportation of its products. It has entered an agreement with P. N. Gadgil & Sons and P. N. Gadgil Art & Culture Foundation and majorly relies on the transportation facilities currently provided by them to deliver its finished products. Although it has not encountered any significant disruption to the supply and transportation restrictions, there can be no assurance that any such disruption will not occur in the future as a result of these factors and that such disruptions will not be material. Transportation strikes may have an adverse effect on supplies and deliveries. In addition, products may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of products which may also affect its business and results of operation negatively. A failure to deliver its products in an efficient and reliable manner could have a material and adverse effect on its business, financial condition and results of operations.

Outlook

PNGS Gargi Fashion Jewellery is engaged in the retail business of costume and fashion jewellery under the brand name 'Gargi by P. N. Gadgil & Sons' launched in 2021 under the artificial jewellery segment. The company deals in 92.5% certified sterling silver jewellery and brass jewellery, idols and other silverware and related gift items. It offers a wide range of products from artificial jewellery segment for special occasions such as weddings and festivals to daily-wear jewellery for all ages, genders and across various price points. The company have an extensive product list which includes earrings, necklaces, pendants, chains, finger rings, bracelets, anklets, nose pins, mangal sutra, pendant sets, bangles in brass or silver for females of age groups as well as male accessories such as rings, cufflinks, button set, that cater to its customers taste, preference, choice and the ever-changing trends in the chain and jewellery designs. On the concern side, the company requires several statutory and regulatory permits, licenses and approvals to operate its business. Many of these approvals are granted for fixed periods of time and need renewal from time to time. Non-renewal of the said permits and licenses would adversely affect the company’s operations, thereby having a material adverse effect on its business, results of operations and financial condition.

The company is coming out with an IPO of 26,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 30 per equity share to mobilize Rs 7.80 crore. On performance front, the total income from operations for the period ended on September 30, 2022 was Rs 1,189.17 lakh which is about 100% of the total revenue. Profit after tax for the period ended on September 30, 2022 amounted to Rs 213.17 lakh which is 17.93% of total revenue. Meanwhile, the company intends to continue to expand its existing range of product offerings to cater to customers across price points through creative designs and adding new collections. It plans to leverage its brand recognition and experience in the market to service the increasing demand of its products. It proposes to open new POS counters at various malls and airports across the nation over the coming years. It also intends to leverage its goodwill associated with its existing brand, to further develop its various sub-brands in target markets and product segments in India.