IPO Date:<\/strong> 10th to 12th September, 2024
Total Issue Size: <\/strong>~2.29 Cr shares
Fresh Issue: <\/strong>~ Rs. 850 Crores\u00a0
Offer for Sale:<\/strong> ~ Rs. 250 Crores\u00a0
Price Band:<\/strong> Rs. 456 \u2013 Rs. 480 per share
IPO Issue Size: <\/strong>~ Rs. 1100 Crores\u00a0
Lot Size: <\/strong>31 shares and multiples thereof
Purpose of Issue: <\/strong>Offer for Sale by Promoter & Fresh Issue<\/p>\n
About P N Gadgil Jewellers Ltd Company<\/h2>\n
P N Gadgil Jewellers<\/a> is a prominent Indian jewellery brand with a rich legacy that dates back to 1832. Headquartered in Pune, Maharashtra, the company and its brands are known for the production of jewellery distinctive to the Maharashtra region. It is the second largest jewellery store operator in Maharashtra, after Tanishq (owned by Titan), and has a total of 39 stores across 21 cities in Maharashtra and Goa and one store in the U.S. with an aggregate retail area of approximately 108,282 sq. ft. Overall, 28 stores are company owned and 11 stores are franchisee owned, on a franchisee owned and company operated (\u201cFOCO\u201d) model. The company has eight sub-brands which cater to gold jewellery collections for different occasions, two sub-brands which cater to the diamond jewellery collections and two sub-brands which cater to platinum jewellery collections. These include, \u2018Saptam\u2019, \u2018Swarajya\u2019, \u2018Rings of Love\u2019, \u2018The Golden Katha of Craftmanship\u2019, \u2018Flip\u2019, \u2018Litestyle\u2019, \u2018Eiina\u2019, \u2018PNG Solitaire\u2019, \u2018Pratha\u2019, \u2018Evergreen love\u2019, \u2018Men of Platinum\u2019, and \u2018Yoddha\u2019. The company is promoted by Saurabh Vidyadhar Gadgil, a sixth-generation entrepreneur with over 25 years of experience in the jewellery manufacturing industry in India.<\/p>\n Source: DRHP<\/p>\n In FY24, the company earned a revenue of Rs. 6,109 crores, with 92.2% of the revenue attributable to gold products and roughly 3.5% each to silver and diamond products. Additionally, 92.55% of the yearly revenue is generated by company-owned and operated stores while accounting for 72% of the store count.<\/p>\n Source: DRHP<\/p>\n India is the second largest market in the world for jewellery after China. The size of the Indian jewellery retail sector was $70 billion in FY23, and is expected to grow by 16% annually to $145 billion by FY28. Currently, only 37% of the sector is organised, encompassing both national and regional players, while the remainder is dominated by the unorganised segment comprising over 500,000 local goldsmiths and jewellers. Over 95% of gold demand in India is fulfilled through imports, primarily from Switzerland, UAE, and South Africa. Consequently, international gold price fluctuations directly translate into domestic price movements as prices are set internationally by the London Bullion Market Association and denominated in USD. The price of gold is therefore additionally impacted by fluctuations in the price of INR with respect to USD.<\/p>\n The share of the organised sector is gradually increasing due to the higher financial strength and brand recognition of organised players, as well as government support through regulations.<\/p>\n Source: DRHP<\/p>\n The government has imposed a maximum cash transaction limit of Rs. 2 lakhs for gold purchases without KYC details, preventing money laundering through unorganised players. Furthermore, the government has made 6-digit hallmarking with Hallmark Unique Identification Number (HUID) mandatory for selling or buying gold since 1st April 2023, which has dramatically reduced the incidences of under-caratage and led a shift towards organised players as a large number of unorganised players remain unable to comply with these norms while remaining profitable.<\/p>\n Organised players are able to hedge against fluctuations in gold price through gold on lease facilities, where working capital loans are provided in the form of physical gold for typically 180 days with a lease interest rate between 3% and 8%. This financing method replaces the need for direct gold purchases without credit facilities, which remains a common practice in the unorganised market. Such players may make inventory gains whenever the price of gold increased between purchase and sale, but can also suffer heavy losses when the price of gold corrects, especially when the fall in price is sharp.<\/p>\n The jewellery market in India can be segmented regionally, as different regions have cultural differences in design and usage of jewellery, the former impacting branding and the latter impact volume of sales. Maharashtra is the third largest market in India with a market size of $8.1 billion in FY23, only smaller than Kerala ($14.4 billion) and West Bengal ($8.8 billion). There are significant barriers to entry for brands trying to create a pan-Indian identity due to cultural differences in style. The size of the market is impacted by population size, state GDP per Capita and traditional usage. Maharashtra ranks strongly along all these metrics, making it a large addressable market.<\/p>\n The jewellery retail business is cyclical and dependent on events such as marriages, festivals and harvests, which are not spread evenly across the calendar year. While Tier 2 and Tier 3 cities are impacted by harvests and crop yields more than metros and Tier 1, the impact of marriages and festivals is common across all demographics.<\/p>\n Rural households often invest their harvest proceeds in gold jewellery between September-November and January-March. Additionally, auspicious religious occasions like Diwali\/Dhanteras in October and November, and Akshaya Trithiya and Ugadi in April and May, further augment the demand for gold and silver jewellery. Sales in the third quarter and fourth quarter are typically higher than the first quarter and second quarter of the fiscal year.<\/p>\n Source: DRHP<\/p>\n Source: DRHP<\/p>\n The company will become the third largest listed jewellery company in India, despite having its presence dominated in one city- Pune, which accounts for 65% of sales. The company has the strongest operational and financial metrics compared to peers as reflected through the high ROCE, EBITDA per square feet, and Net Profit per store and low working capital days.<\/p>\n Source: DRHP<\/p>\n The Fresh Issue of Rs. 850 crores would be used to:<\/p>\n The Offer for Sale <\/strong>of Rs. 250 crores is by the promoter, SVG Trust.<\/p>\n Strong Brand: <\/strong>Since its inception in 1832, the PN Gadgil brand has a strong recollection in Pune, which is the company\u2019s main market. As the company expands its presence across Maharashtra, it is extremely likely that the company will be able to leverage its brand image given the similarities in culture in other cities.\u00a0<\/p>\n Strong Operational Metrics: <\/strong>The company has extremely high EBITDA per square feet and Profit per Store, which shows that the company is operationally efficient. Furthermore, the high ROCE aided by the low working capital days showcase the company\u2019s financial strength.<\/p>\n Lack of Competition in Maharashtra:<\/strong> The company is the second largest jeweller in Maharashtra even though its presence outside Pune is extremely limited. This suggests that most of Maharashtra remains underpenetrated and is still dominated by the unorganised market.<\/p>\n Dependence on one city: Since 65% of the company\u2019s sales come from Pune and top 3 stores contribute 25% of total revenue. Therefore, the profitability metrics may be skewed due to the high profitability of these three stores. In such a case, growth may lead to lower ROCEs and lower EBITDA per square foot.<\/p>\n Saurabh Vidyadhar Gadgil <\/strong>serves as the Managing Director of the company and has been a member of the Board since November 28, 2013. He holds a master’s degree in business administration from the Institute of Management Education in Pune, Maharashtra, and has earned a doctorate in philosophy with a focus on business administration from Ballsbridge University in London. With over 25 years of experience in the jewellery manufacturing and trading industry, he brings extensive expertise to his role.<\/p>\n Parag Yashwant Gadgil <\/strong>is an Executive Director at the company and has served on the Board since November 28, 2013. He holds a diploma in mechanical engineering from the Board of Technical Examination in Maharashtra, India. With over 36 years of experience in the jewellery manufacturing and trading industry, he brings significant expertise and knowledge to the company.<\/p>\n Kiran Prakash Firodiya<\/strong> is an Executive Director and the Chief Financial Officer of the company. He joined the Board on February 16, 2023, and has been serving as the Chief Financial Officer since June 1, 2020. He is a chartered accountant with a master’s degree in business administration from Allahabad Agricultural Institute, Uttar Pradesh, and a master’s degree in commerce from the University of Pune, Maharashtra.<\/p>\n P N Gadgil<\/a> is one of India\u2019s oldest jewellery brands and remains prominent in Maharashtra. Furthermore, the company\u2019s operations are extremely efficient, boasting strong operating and financial metrics. However, the company\u2019s skewed profitability from 3 stores in Pune and high dependence on the city are areas of concern, especially as the company begins to grow in newer geographies. With this context, the company\u2019s expected P\/E of more than 40 post listing seems to factor in all the upside.<\/p>\n Recommendation: Avoid<\/strong><\/span><\/p>\n![\"\"](\"https:\/\/www.moneyworks4me.com\/ckeditor\/userfiles\/image\/jewellery-manufacturing-industry-in-india.png\")
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<\/figure>\nIndustry Overview<\/strong><\/h2>\n
Size<\/strong><\/h3>\n
Competitive Environment\u00a0<\/strong><\/h3>\n
![\"\"](\"https:\/\/www.moneyworks4me.com\/ckeditor\/userfiles\/image\/competitive-environment.png\")
<\/figure>\nRegional<\/strong><\/h3>\n
Seasonality<\/strong><\/h3>\n
![\"\"](\"https:\/\/www.moneyworks4me.com\/ckeditor\/userfiles\/image\/seasonality.png\")
<\/figure>\nFinancial Performance<\/strong><\/h3>\n
![\"\"](\"https:\/\/www.moneyworks4me.com\/ckeditor\/userfiles\/image\/financial-performance.png\")
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<\/figure>\nUtilisation of Funds<\/strong><\/h3>\n
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Positives<\/strong><\/h3>\n
Concerns<\/strong><\/h3>\n
Management<\/strong><\/h3>\n
MoneyWorks4me Opinion<\/strong><\/span><\/h2>\n
P N Gadgil Jewellers Limited IPO Tentative Timetable:<\/span><\/span><\/h2>\n