Khazanchi Jewellers
- Khazanchi Jewellers is coming out with an initial public offering (IPO) of 69,10,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 140 per equity share.
- The issue will open for subscription on July 24, 2023 and will close on July 28, 2023.
- The shares will be listed on SME Platform of BSE.
- The share is priced 14 times higher to its face value of Rs 10.
- Book running lead manager to the issue is Mark Corporate Advisors.
- Compliance Officer for the issue is Sakshi Jain.
Profile of the company
The company is a prominent player in the Indian jewellery industry, with a strong presence in both wholesale and retail sectors. It specializes in the production and sale of a wide range of jewellery products, including gold jewellery, diamond jewellery, precious stones, and other fancy jewellery and bullion in the form of coins and bars. Its jewellery business has a rich history spanning over three decades in the Indian jewellery industry. Its promoters are experienced entrepreneurs with over 25 years of expertise in the field. It offers a diverse range of jewellery products and is dedicated to designing, manufacturing, and selling high-quality jewellery that includes necklaces, chains, rings, earrings, bangles, bracelets, pendants, nose pins, mangalsutras, and kadas. Its focus is on creating exquisite wedding jewellery and other pieces suitable for festive occasions.
The company holds a BIS Hallmark Certificate, a qualified jeweller to carry out transactions on the IIBX (India International Bullion Exchange IFSC) platform for the purpose of import of gold and it holds a Import Export Certificate. It strives to deliver excellence, consistently. Its constant endeavour is to maintain the highest standard and quality of its gold, diamonds and precious stones used in its jewel pieces. It is offering an experience that takes into consideration its customer's unique needs and preferences. The company is promoted by Tarachand Mehta, Goutham, Fancy Devi, Tarachand Mehta and Sons and Goutham HUF who have a combined experience of more than 4 decades in the jewellery industry. Each of its promoter directors are involved in the critical aspects of its business, including expansion, finance, sales and marketing.
Proceed is being used for:
- Financing the establishment of the new showroom at Chennai, Tamil Nadu.
- Augmenting the working capital requirements of the existing operations.
- General corporate purposes.
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 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 the 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 the Government of India. The Indian Government also signed a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE) in March 2022, this will allow the Indian Gems and Jewellery industry to further boost exports. CEPA will provide the industry duty-free access to the UAE market. India’s Gems Jewellery Export Promotion Council (GJEPC) aims to triple its exports to the UAE post the CEPA.
India’s gems and jewellery market size was at $ 78.50 billion in FY21. 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. India’s gems and jewellery exports reached $ 39.14 billion in 2021-22, a 54.13% rise from the previous year. In October 2022, India’s gems and jewellery exports was at $ 1.48 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 the coming years, growth in the gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1–2% of the fine jewellery segment by 2021–22. Also, the relaxation of restrictions on gold import is likely to provide a fillip to the industry.
Pros and strengths
Wide product range: The company’s wide range of product offerings caters to diverse customer segments, from the value market to high-end customized jewellery. Its product profile includes traditional, contemporary and combination designs across jewellery lines, and price points. The gold, and other jewellery inventory in its showroom reflects the customer preferences and designs. Its focus on design and innovation, its ability to recognize consumer preferences and market trends, the intricacy of its designs and the quality and finish of its products are its key strengths. In addition, its access to a wide range of independent manufacturers from various parts of India allows it to offer a diverse product range. Its products are suitable for daily wear, party wear and festive wear.
Quality assurance: The company strives to maintain the quality of its products, follow strict procedures to ensure control quality, timely delivery and competitive prices have ensured that it is a trusted jewellery brand and is coveted by its customers. It offers regular designs and guarantee its esteemed customers for the time bound delivery of the products. The company sells only hallmarked jewellery. This assurance on quality and purity along with transparent and customer friendly policies have enabled it to become an established and trusted brand.
Cordial relationship with customers: The company maintains cordial relationship with its customers and Institutional Clients by strategically aligning its offerings with their requirements. Its track record of delivery of quality products and established technical expertise has helped in strengthening relationships with its customers and gaining increased business from them.
Risks and concerns
Depends upon few suppliers for purchase and sale of bullion: The company has dealt with few suppliers of bullion and ornaments. For the financial year ended on March 31, 2023 and March 31, 2022, its top 5 suppliers contributed around 84.09% and 89.22% respectively of its purchase of bullion and top 5 customers of bullion contributed around 71.12% and 31.80% respectively of its sales. In the event of a delay, inadequacy or default in deliveries by any of its vendors, it may not be able to source its products on an adequate and timely basis or on commercially acceptable terms. A major disruption to the timely and adequate suppliers of products could adversely affect its business, results of operations and financial condition. Any problems faced by its suppliers which could result in delays or non-adherence to quality requirements could adversely impact its ability to meet its customers’ requirements in time and its operations would be affected to the extent it is unable to line up supplies from alternate suppliers.
Significant working capital requirements: The company’s business requires a substantial amount of working capital, primarily to finance its inventory, including the purchase of raw materials. Moreover, it may need working capital for the expansion of its business at regular intervals due to its business requirements. Its Sanctioned Working Capital limit (i.e., Cash Credit Loan) as of June 30, 2023 were Rs 3,400 lakh and the outstanding Working Capital loan as on June 30, 2023 were Rs 3,388.65 lakh. It may need to raise additional capital from time to time, depending on business requirements. Some of the factors that may require it to raise additional capital include (i) business growth; (ii) unforeseen events beyond its control; and (iii) significant depletion in its existing capital base due to unusual operating losses.
Face competition: The markets in which the company operates are highly competitive. Its competitors include both organised pan-India jewelers as well as unorganized local players in the various markets in which it operate. Some of its competitors have achieved significant recognition for their brand names due to their presence over the years. In addition, some of its competitors in smaller local markets have advantages of having strong reputations and established trust with customers due to various factors and presence over the years, which could be difficult for it to challenge or replicate in a sustained manner in the future. The company faces competition from existing jewellery retailers, both organised and unorganised, and potential entrants to the jewellery retail industry that may adversely affect its competitive position and its profitability.
Outlook
Incorporated in 1996, Khazanchi Jewellers is a prominent player in the Indian Jewellery Industry. The company has a strong presence in both the wholesale and retail sectors. The company specializes in producing and selling a wide range of jewelry products. These include gold, and diamond jewelry, precious stones, and other fancy jewellery and bullion in the form of coins and bars. It has a rich history spanning over three decades in the Indian jewelry industry. The company has one showroom located at No. 130, NSC Bose Road, Sowcarpet Chennai. The company holds a BIS Hallmark Certificate, a qualified jeweller to carry out transactions on the IIBX (India International Bullion Exchange IFSC) platform for the purpose of import of gold and it holds a Import Export Certificate. It strives to deliver excellence, consistently. Its constant endeavour is to maintain the highest standard and quality of its gold, diamonds and precious stones used in its jewel pieces. It is offering an experience that takes into consideration its customer's unique needs and preferences. On the concern side, Jewellery purchases are typically high-value, luxury purchases and depend on consumers' discretionary spending power. Various factors affect discretionary consumer spending, including economic conditions, perceptions of such conditions by consumers, economic outlook, employment, the level of consumers’ disposable income, the savings ratio, business conditions, inflation levels, interest rates, consumer debt and asset values, availability of credit and levels of taxation, among others.
The company is coming out with an IPO of 69,10,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 140 per equity share to mobilize Rs 96.74 crore. On performance front, the revenue from operations for the FY 2022-23 was Rs 48065.77 lakh as compared to Rs 25694.48 lakh during the FY 2021-22 showing an increase of 87.07% on account of increased Sales of Gold Bullion and Ornaments. Profit after Tax (PAT) stood at Rs 755.61 lakh in the FY 2022-23 as compared to Rs 326.62 lakh in FY 2021-22 showing increase of 131.34 %. Meanwhile, to cater to the growing demand from its existing customers and to meet requirements of new customers, it intends to, and is in the process of, setting up a new showroom at prime location in Chennai. The company aims to focus on deepening its penetration in its existing markets and thereby increase its domestic presence by expanding its customer network. It intends to expand its retail operations to this spacious showroom which is proposed to be spread over three floors.
