Koura Fine Diamond Jewelry
- Koura Fine Diamond Jewelry is coming out with an initial public offering (IPO) of 10,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 55 per equity share.
- The issue will open for subscription on March 06, 2024 and will close on March 11, 2024.
- The shares will be listed on BSE SME Platform.
- The share is priced at 5.50 times higher to its face value of Rs 10.
- Book running lead manager to the issue is GYR Capital Advisors.
- Compliance Officer for the issue is Asha Rameshwarlal Jain.
Profile of the company
Koura Fine Diamond Jewelry is engaged into the wholesale business of gold and diamonds jewelleries. Its Promoter has a history spanning over two decades in the Indian Jewellery Industry. The company sells wide range of jewellery products, including gold jewellery and diamond jewellery. Its business model is B2B. It deals in two types of jewellery; one is in 22 Karat Gold jewellery and another one is in 18 Karat Diamond jewellery. It is a well-known and trusted jewellery wholesaler.
Since the system of hallmarking is legally introduced, the company deals only in jewellery certified by Hallmark; for gold jewellery it gets it certified from the Bureau of Indian Standards (BIS) and 91.6% certifications for 22 Karat and International Gemmological Institute, India, and (BIS) 75% certifications for 18 Karat diamond jewellery. Further, in 2018 the company ventured into 750 certified and BIS-hallmarked diamond jewellery. It offers a diverse range of jewellery products and is dedicated to designing, manufacturing, and selling high-quality jewellery that includes necklaces, chains, rings and earrings.
It sources finished jewellery from third-party artisans located across India. Additionally, it also supplies raw material i.e. gold bullion / bars to artisans for making of its jewellery on a job-work basis in Ahmedabad, Mumbai, Rajkot, and Surat. Its constant endeavour is to maintain the highest standard and quality of its gold, diamonds used in its jewel pieces.
Proceed is being used for:
- Funding the working capital requirements of the company.
- General corporate purposes.
Industry overview
The gems and jewelry industry of India contributes 7% to India's Gross Domestic Product (GDP). The industry employs more than 5 million of the skilled and semi-skilled workforce in the country. The sector contributes about 10-12% of India's total merchandise exports, accounting for the third largest commodity share. During 2021-22, the gems and jewelry exports played an instrumental role in growing India's overall exports to $419 billion with a growth of 44% from 2020-21. and 34% from 2019-20. The Government of India, along with all the stakeholders of the gems and jewelry sector, is well committed to aggressively promoting exports, identifying challenges and addressing them with necessary interventions, assisting exporters, especially SME units, and exploring new markets while consolidating. existing ones. With strong growth prospects, the government of India has also declared the gems & jewelry sector as a focus area for export promotion.
The Indian gems and jewelry market consists of gold, silver, and diamond jewelry, along with other precious gems and pearls. India is the world’s second-largest consumer of gold, with 70% of the consumption being in the form of gold jewelry. Further, the Indian jewelry market can be divided into the categories of fine jewelry and costume jewelry, with 95% of the market comprising fine jewelry. The Indian jewelry retail sector is estimated to be worth $57 billion in FY22 and it is projected to grow to $91 billion by FY25. The organised retail share is 40%, consisting of national and regional players, while the rest is dominated by the unorganized segment, comprising 500,000+ local goldsmiths and jewellers. During the COVID-19 pandemic, the organized sector exhibited greater resiliency than the unorganized sector and recovered much quicker driven by both supply-side and demand-side factors. While India is traditionally a gold jewelry market, with a share of 85%, the jewelry retail market is witnessing growing participation in studded jewelry. The prominence of gold jewelry is primarily due to cultural and religious factors, along with the high degree of trust and reliability of gold. However, in certain regions, studded jewelry has a wider range of acceptance.
More than 50% of gold jewelry demand originates from the rural and semi-urban markets. Given rural India’s higher cultural association with gold, Government intervention in reviving the rural economy through investments in infrastructure, agriculture, and higher spending on livelihoods, will noticeably benefit jewelry demand. However, the share of organized retail in rural jewelry retail is low due to the high cost of retailing. Meanwhile, the online jewelry retail market was estimated to be worth $1.4 billion in FY 2020, with a 2% penetration rate. In line with growth in online retailing, the online penetration of jewelry retail is expected to increase over time and reach a 7% penetration rate and $6 billion in value, by FY 2025. Given the high growth rate of online retailing, leading players have started to invest in digital marketing and online sales. This growth is driven primarily by the affordable range of low-carat gold and studded jewelry categories catering to urban markets. As per estimates, by 2025 all fine jewelry will be digitally influenced.
Pros and strengths
Significant market opportunity: Leading B2B jewellery brand in a large market with rapidly increasing organized share, driven by strong growth tailwinds. Jewellery in India is a large and attractive market with significant tailwinds. As India is transitioning into organized retail fine jewellery, which is a huge plus-point for this industry and there is huge headroom to grow also.
Wide range of design and product: The company’s products are sold under the brand name of 'Koura”. Each collection serves customers with different needs and preferences for different designs.
Sole focus on B2B wholesale jewellery segment: The company’s sole focus on B2B jewellery wholesale segment has helped it to be a trusted supplier among its client bases which has resulted in repetitive orders and customer confidence in its products and dealings.
Risks and concerns
Limited operating history: The company was originally incorporated as a public limited Company under the Companies Act, 2013 with Registrar of Companies, Central Registration Centre through a certificate of incorporation dated March 25, 2022. After incorporation, company has taken-over the running business of proprietorship firm of its Promoter i.e., M/s Aurum Jewels which commenced it business on September 19, 2017, for the expansion of the business of its Company. It has very limited operating history as a company from which one can evaluate its business, future prospects and viability. Its future revenues and profitability are difficult to estimate and could fluctuate significantly and as a result the price of its Equity Shares may remain volatile. Further, its growth exposes it to a wide range of increased risks. It will also place significant demands on its management, financial and other resources and will require it to continuously develop and improve its operational, financial and internal controls. There can be no assurance that the company will be able to successfully pursue its growth strategies, or that pursuing these strategies will provide it the anticipated benefits.
Maximum revenue comes from few customers: The company typically has long term relationships with its customers and the success of its business is accordingly significantly dependent on it maintaining good relationships with its customers. The actual sales by the company may differ from the estimates of its management due to the absence of long-term agreements. The company garnered revenue from top 10 customers in FY23, FY22 and FY21 is 87.95%, 100.00% and 85.00%, respectively. Since it is significantly dependent on certain key customers for a significant portion of its revenue, the loss of any one of its key customers, including its top customer, for any reason, could have an adverse effect on its business, results of operations and financial condition. The loss of one or more of these significant or key customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. It cannot assure that it will be able to maintain historic levels of business and/or negotiate and execute long term contracts on terms that are commercially viable with its significant customers or that it will be able to significantly reduce customer concentration in the future.
No long-term supply agreements with its vendors/suppliers: The company’s top 5 suppliers represented 66.38% of its total purchase for financial year of 2023 and it is purchasing majority of diamonds for diamond jewelry from Surat. It does not have any long-term agreements with its vendors/suppliers and it operates on a purchase order system. In absence of any formal contract with its vendors/suppliers, it is exposed to the risks of irregular supplies or no supplies at all or delayed supplies or price variation which would materially affect its results of operations. In the event of any disruption in the raw material supply or the non-availability of raw material in the required quantity and quality from alternate source, the production schedule may be adversely affected impacting the sales and profitability of the Company.
Outlook
Koura Fine Diamond Jewelry Limited wholesales gold and diamond jewelry. The company offers 22 Karat Gold and 18 Karat Diamond jewellery. The company deals exclusively in jewelry that is certified by the Hallmark. For gold jewelry, the company obtains certification from the Bureau of Indian Standards (BIS) with 91.6% certifications for 22 Karat and from the International Gemmological Institute, India, and (BIS) with 75% certifications for 18 Karat diamond jewelry. The company has been successfully operating in Gujarat and Odisha, both in the western and eastern regions. On the concern side, the company has been recently incorporated and post incorporation has taken-over the running business of Aurum Jewels (Proprietorship firm of its Promoter) thus it has limited operating history as a Company which may make it difficult for investors to evaluate its historical performance or future prospects. Moreover, the company has historically derived, and may continue to derive, a significant portion of its income from its top 5 customers. It is dependent upon a limited number of customers, which could adversely impact its revenues and profitability.
The company is coming out with an IPO of 10,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 55 per equity share to mobilize Rs 5.50 crore. On performance front, the total income of the company for period ended March 31, 2023 was Rs 556.35 lakh. Moreover, profit after tax for period ended March 31, 2023 was at Rs 13.41 lakh. The company plans to invest in building a state-of-the-art e-commerce platform that will offer an extensive range of jewellery products to customers across India. The platform will provide customers with a seamless shopping experience, including easy navigation, multiple payment options, and fast delivery. Moreover, the company has been successfully operating in western and eastern regions, specifically in Gujarat and Odisha. It intends to leverage its substantial efforts and experience, to expand its presence across several markets and have the potential for opening a further showroom. It has started in Maharashtra, specifically Nagpur as a region with a lot of potential for growth and started the operations. These regions have a significant market for jewelery and the company aims to capitalize on the opportunities presented in these regions.
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