Motisons Jewellers coming with IPO to raise upto Rs 151.09 crore

Motisons Jewellers 

• Motisons Jewellers is coming out with a 100% book building; initial public offering (IPO) of 2,74,71,000 shares of Rs 10 each in a price band Rs 52-55 per equity share.
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
• The issue will open for subscription on December 18, 2023 and will close on December 20, 2023.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 10 and is priced 5.20 times of its face value on the lower side and 5.50 times on the higher side. 
• Book running lead manager to the issue is Holani Consultants.
• Compliance Officer for the issue is Naresh Kumar Sharma.

Profile of the company

The company is a Jewellery retail player with a history of more than 2 decades in the jewellery industry having experienced entrepreneurs as its Promoters with more than 20 years of experience. Its jewellery business includes the sale of jewellery made of gold, diamond, kundan and sale of other jewellery products that include pearl, silver, platinum, precious, semi-precious stones and other metals. The company’s other offerings include gold and silver coins, utensils and other artifacts. It commenced its business through a partnership firm ‘Motisons Jewellers' in 1997 which was subsequently converted into public limited company in 2011 and currently has presence across multiple prominent locations in Jaipur, Rajasthan.

The company primarily source finished jewellery from third party suppliers located across India. This includes all types of jewellery made of gold, diamond and other precious and semi-precious stones. Additionally, to cater to the increasing demand in the market, it also engages artisans on job work basis and has its own manufacturing facilities located in Jaipur, Rajasthan for diamond and gem stone studded jewellery. It outsources the work of making ornaments to various artisans with whom it has developed relationships. It offers a large variety of handcrafted 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 raw materials from various suppliers across the country. This procurement process enables it to offer a wide range of products.

The company’s product profile includes traditional, contemporary and combination designs across jewellery lines, for special occasions such as weddings and festivals to daily wear jewellery for all ages, genders and across various price points. Its offerings include gold jewellery, diamond jewellery and other silverware from handmade Indian ethnic to the cutting-edge styles of the urban world. Its gold, diamond and other jewellery inventory in each showroom reflects 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 of its products are its key strengths. It has a dedicated design team, focused on developing new products and designs that meet customers’ requirements. In addition, its access to a range of contract manufacturers that are generally smaller, localized jewellery manufacturers from various parts of India allows it to offer a diverse product range. It also customizes jewellery for individual needs.

Proceed is being used for:

• Repayment of existing borrowings availed by the company from scheduled commercial banks.
• Funding the working capital requirements of the company.
• General corporate purposes.

Industry Overview

The gems and jewellery industry in India is deeply rooted in its rich heritage and culture. From auspicious symbols to elaborate pieces worn during celebrations, Indian jewellery embodies a cultural legacy that resonates with buyers who seek not just adornments but also stories and traditions. In contemporary times, the Indian gems and jewellery sector continues to shine brightly on the global stage. It plays a pivotal role in the country's economic landscape, contributing a remarkable 7% to India's GDP. With over 5 million skilled and semi-skilled workers, this sector contributes approximately 10-12% of India's total merchandise exports, establishing itself as the third-largest commodity share in the country. Notably, in FY 2023, the domestic gems and jewellery market was valued at approximately Rs 4,700 billion, and gold jewellery was the leading segment. Despite such advances, the gems and jewellery manufacturing industry remain fragmented, primarily controlled by small and medium-sized enterprises. According to the World Gold Council, around 15-20% of units operate as organized, large-scale facilities, comprising of automated machinery, skilled artisans, and quality control processes to mass-produce jewellery items. These facilities marked a notable increase from less than 10% about five years ago. Particularly, the emergence of chain stores over the last 10-15 years, at the expense of independent retailers, has been a noteworthy development. This trend continues, with a consistent increase in market share, reaching 35% by 2021, up 5% since 2016. 

India's consumption of gold jewellery stands out as a significant and distinctive trend when compared to other major regional markets. With a rich cultural heritage and longstanding traditions deeply interwoven with gold, India has consistently remained one of the world's largest consumers of gold jewellery. As a country, India ranked second in terms of worldwide consumption of gold jewellery until 2021. India's strength in this realm becomes particularly evident when we contrast it with regional markets comprised of multiple countries. Historically, Greater China, comprising of China mainland, Hong Kong and Taiwan, has taken the lead. However, in 2022, India surpassed Greater China with 600.4 tonnes of gold jewellery demand. India’s rise as the leading consumer of gold jewellery can attributed to the unparalleled cultural and religious significance of gold in India. It is deeply embedded in Indian traditions, making gold jewellery an integral part of various ceremonies and celebrations. Additionally, India's large population, particularly the sizeable middleclass segment, contributes to substantial demand. As more individuals ascend into this segment, they gain the financial capacity to invest in gold jewellery. This expanding middle class is a substantial consumer base that seeks to embrace both the cultural and financial significance of gold. Moreover, gold serves as a practical investment in a country where traditional financial instruments can be perceived as less stable. With its intrinsic value and the ability to withstand economic uncertainties, gold becomes a preferred choice for those seeking a safe haven asset.

Pros and strengths

The company has an established brand name with heritage and legacy of over two decades: The company has a proven track record of approximate 25 years. Over the years, it has grown significantly and has established its brand 'Motisons'. It offers a wide-ranging collection of antique finished, pearl, kundan and diamond jewellery. It initially started its operations as a partnership firm in 1997 in the name of 'M/s Motisons Jewellers' and was converted into public limited company in 2011. Its strength lies in the wide variety of designs offered by jewellery designers wherein it develop its own creations and specialty designs according to the latest tastes and preferences of customers. To take its legacy forward, it will continue to innovate and strive for new benchmarks in quality, creativity and design. It hallmarks all its gold products to ensure quality and purity of products, which is in line with the quality and purity metrics as prescribed by BIS. It has also installed checks to provide assurance to customers for the hallmarked gold jewellery sold by it at all its showrooms and follow stringent and transparent purity checks to ensure quality of its jewellery before being sold to its customer.

Strategic location of showrooms: Jaipur, Rajasthan has been well-known for manufacturing of traditional jewellery. To leverage this opportunity and tap the growing historical jewellery retail market, the company has rapidly expanded its retail network of strategically located stores in recent years across the city, which help it to achieve logistical convenience in inventory management. It has 4 retail showrooms in Jaipur, Rajasthan located in prime shopping region of Johari bazaar(hub of jewellery market of Jaipur, Rajasthan), Tonk road (busiest and most prime location in Jaipur, Rajasthan) and Vaishali Nagar. (one of the densely populated area of Jaipur, Rajasthan connecting Delhi Bypass road and Ajmer Road). Furthermore, its manufacturing facilities are located at Sitapura Industrial area and Bapu Nagar, Jaipur, Rajasthan. 

Diversified product portfolio: The company’s product portfolio comprises over 3,00,000+ jewellery designs, including a wide range of gold, diamond and other jewellery products across different price points. 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 amongst its key strengths. It has a wide range and variety of products and have been able to demonstrate its ability to recognize trends in the jewellery industry in order to cater to its customers. Further, it has products across various price points to cater to a variety of customers across high-end market, mid-market and value market segments, which are designed by a team of creative designers allowing it to manage a diverse portfolio of designs. It also customizes jewellery for individual needs. Its products cater to different occasions including special occasions, such as weddings and partywear, jewellery for personal milestones, fashion jewellery, festival jewellery, daily-wear jewellery, kid’s jewellery and men’s jewellery. It caters to customers across age groups, at various price points, which ensure that it is able to serve its customers across the entire lifecycle of their jewellery requirements. 

Highly experienced and accomplished senior management team: The company’s business is consumer-centric. Its promoters, Mr. Sandeep Chhabra and Mr. Sanjay Chhabra have been associated with the jewellery industry for more than two decades and continues to provide strategic insights and overall direction to its business based on his long experience of understanding customer preferences and demands in the industry in which it operate. It has leveraged on its promoter’s industry experience and reputation to create a brand in the jewellery sector in India, with a wide customer base. It is further supported by an experienced board of directors with diversified expertise which actively contributes to and participates in its strategy. Its senior management team is responsible for the overall strategic planning and business development of the company and has helped it in the expansion of its showroom network and developing and managing its online channel.

Risks and concerns

Heavily dependent on third parties for supplying products: The company does not have specific written agreements with such suppliers of finished goods and raw materials and job-workers and accordingly, they are not contractually bound to deal with it exclusively, and it may face the risk of its competitors offering better terms, which may cause them to prefer its competitors over it. Any unscheduled, unplanned or prolonged disruption of operations at its suppliers’ and jobworkers’ manufacturing facilities, including on account of power failure, fire, mechanical failure of equipment, performance below expected levels of output or efficiency, obsolescence of equipment or manufacturing processes, non-availability of adequate labour or disagreements with workforce, lock-outs, earthquakes and other natural disasters, industrial accidents, any significant social, political or economic disturbances or infectious disease outbreaks, could affect its vendors’ ability to meet its requirements, and could consequently affect its operations.

Under-utilization of manufacturing capacity: The company's manufacturing facilities are not entirely utilised by its company since (a) it purchases jewellery from independent third parties and (b) it has numerous job-work agreements with independent contractors to make jewellery. During the period ended on June 30, 2023 and Fiscal Year ending on 31 March 2023,2022 and 2021, the majority of the company’s revenue from trading sales, which constitute to about 99.84%, 95.50%, 96.98% and 96.52% of total revenue whereas the manufacturing sales just contributes less than 4.50% of total revenue. This indicates that it is highly dependent on trading sales and under performance of its manufacturing units in the future will increase its dependency on the performance of its trading business and any irregularity in the trading business might have a huge impact on the financial performance of the company and can also hamper its growth. There is no guarantee that the company will use its manufacturing units capabilities to their fullest extent. If in the future the company does not fully or effectively utilise the production units capacity, this could have a negative impact on its costs, profitability, and ability to absorb fixed costs, which would then have a negative impact on its company's financial position.

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 substantial working capital for expansion of its business. Most of this working capital is provided by bank loans. Such financing could cause its debt-to-equity ratio to increase which in turns affect its ability to borrow funds at competitive rates which will make its offerings expensive in comparison to its peers. its inability to obtain and/or maintain sufficient cash flow, credit facilities and other sources of funding, in a timely manner, or at all, to meet its working capital requirements or to pay its debts, could adversely affect its financial condition and results of operations.

High inventory costs: Due to the nature of the company’s business, it always keeps a significant amount of inventory of its items in its showrooms. If any portion of the inventory kept by the company is not sold due to a variety of factors, such as a shift in trends, an outdated design, or a shift in consumer preference, that inventory would be stoked by the company. This could result in an increase in inventory, which could have a materially negative impact on its business, cash flows, financial condition, and operational results. Additionally, if it overstocks goods for any reason, its capital requirements will rise and it will have to pay more for financing, including but not limited to loans taken out by the company and interest on that financing. Its capacity to satisfy customer demand and operating performance might suffer if it understock inventories.

Outlook

Motisons Jewellers, established in October 1997, sells gold, diamond and kundan jewellery as well as other jewellery products. The company sells pearls, silver, platinum and other metals. The company offers a wide range of products including traditional, modern and combination designs in various jewellery lines. These products are suitable for special occasions such as weddings and celebrations as well as for everyday use, for all ages and genders and in different price ranges. The company offers a wide range of jewellery products with over 300,000 designs in gold, diamonds and other materials at different price points. The company’s flagship store, Motisons Tower, is located in Jaipur, Rajasthan, and offers silver, gold and diamond jewellery across three floors. The latest branch, which opened in 2021, is located in the affluent Vaishali Nagar neighbourhood in the southwestern part of Jaipur, Rajasthan. On the concern side, the markets in which the company operate are competitive. Its competitors include both organised pan India Jewellers as well as unorganized local players in the various markets in which it operates. Besides, the company’s business is highly vulnerable to regional conditions and economic downturns in the region. Any unforeseen events or circumstances that negatively affect these areas could materially adversely affect its sales and profitability.  

The issue has been offered in a price band of Rs 52- 55 per equity share. The aggregate size of the offer is around Rs 142.84 crore to Rs 151.09 crore based on lower and upper price band respectively. On performance front, the company’s total revenue has increased by 16.64% to Rs 36,680.63 lakh for financial year 2022-23 from Rs 31,447.13 lakh for financial year 2021-22. The company’s profit for FY 2022-23 increased to Rs 2,219.58 lakh from Rs 1,474.72 lakh for FY 2021-22. Meanwhile, the company intends to leverage the scalability of its operations and expertise in developing the branded jewellery market in India to grow its network in existing and newer geographies. To maintain its operational efficiency, it intends to continue to develop its existing branded jewellery lines and introduce additional designs and seasonal product offerings to cater to its customers, and develop its diamond jewellery markets through expansion of its retail operations.