Thangamayil Jewellery Limited IPO Message Board (Page 9)

JKG you are right on valuation, but as it is smallcap and present in only 2 state make it risky IPO, More market shink every day, today asia is huge minus but our market close. so we have to think twice before applying this small cap IPO. if i have limited money then i will definately go with NTPC FPO other then all this ,as in bad market condition NTPC will give chance for getting out where other not.

On pure valuation basis this issue looks good since post issue EPS (for FY 11) would be Rs. 11.62 (i.e. 17.61*9052/13719 app.) and for this EPS PE would be 6.45 times and compare to its peers it looks cheep, if any differ opinion please let me inform..

Hi 1 lot atlast subscribe karo kyun k kab kis IPO mein gain mile nahi baol sakte happy holiday

Thangamayil Jewellery — IPO: Avoid
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Limited geographical reach, reliance on a brand that is yet to be established, focus on gold jewellery and slim margins are the key risks.
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Bhavana Acharya

Investors can refrain from subscribing to the initial public offer of Thangamayil Jewellery (TJL), a retail jewellery chain in Tamil Nadu, as the risks appear to outweigh the potential rewards. In the price band of Rs 70-75, the valuations are at about 6.3 times the estimated FY-10 per share earnings on a post-issue equity.

Though valuations are reasonable and at a discount to the closest comparable Gitanjali Gems, the business carries a number of challenges and is not a preferred exposure for investors.

Limited geographical reach, reliance on a brand that is yet to be established, focus on gold jewellery which is susceptible to price volatility and slim margins open to cost-pressures are the key risks.

Proceeds utilisation

TJL has a chain of four outlets in as many cities in Tamil Nadu. A well- established player in the Madurai jewellery market, TJL penetrated the Karaikudi, Rajapalayam and Ramanathapuram markets in 2008-09. Despite the store additions, the company's overall sales have only gone up 10 per cent to Rs 246.8 crore in FY-09.

Proceeds of the issue will part-finance additions of a store each in seven new cities during 2010-11, with a total investment of Rs 22 crore (including equipment).

For two of these cities, store locations are temporary, shifting to new premises when they come up, requiring higher capex. Location is yet to be decided in the third city. Though it may help topline, scaling up may not contribute significantly to profits in FY-11.

Regional markets no doubt hold substantial purchasing power and may be good for wedding jewellery with national players unlikely to step in.

Still, given that such markets are likely to have established local players, it may take time for a new entrant to make a mark. TJL is well-recognised in Madurai alone; investments in brand-building in new regions may be high in the initial period.

TJL is also susceptible to competition from established regional brands, should they choose to make an entry.

The gold jewellery business inherently has low margins, subject to high working-capital requirements and price volatility. Working capital — purchase of raw material (gold, silver and diamond) — will also be partly funded from this issue.

The company's inventory turnover, though, has dropped from 6.3 times sales in FY-08 to 3.8 times in FY-09, further to 2.7 times in the first half of FY-10, lower than most industry peers.

Margin pressure

Sales and net profits registered a 71 per cent and 72 per cent three-year CAGR. Gross margins were at 5 per cent for FY-09 with net margins down to 3 per cent, though these figures are on a par with industry peers. Sales for the first half of FY-10 stood at Rs 209 crore, while net profits were at Rs 7.9 crore, leading to an improvement in gross and net margins rising to 6 per cent and 4 per cent respectively.

This was, however, due to fall in selling expenditure, now set to rise as TJL begins the brand-building exercise. With a larger store network, hike in depreciation is also likely. TJL's practice of trading some of its gold inventory could expose the company to losses on the price front, when there is little cushion to handle price risks.

About 15 per cent of sales come from recycled jewellery on which margins are typically lower by about 2 percentage points. Any increase in this segment could pressure margins.

A degree of risk stems from TJL's dependence on gold jewellery at a time when diamond-studded jewellery is starting to eat into the market for pure gold jewellery. Gold accounted for 97 per cent of TJL's sales in FY-09 (99 per cent in FY-08) with barely 2 per cent contributed by silver and negligible contributions by diamond.

COMPARE JUBILENT FOOD AND THANGAMAYIL JEWELLERY,

JUBILENT TURN OVER IS - 280 CRORE PROFIT - 6.74 CRORE
THANGAMAYIL JEWELLERY - 246 CRORE PROFIT - 7.49 CRORE

GOLD RATE IS 2001 - Rs.400 2002 - Rs.550, 2003 - Rs.675, 2004- Rs.750, 2005-Rs825, 2009 - Rs.1500, 2010 - Rs.1730.

THIS COMPANY HOLD 100 KILO GOLD STOCK 2003 THE RATE IS 675 PER GRAM

BUT NOW THEY HAVE GOLD 500 K.G IN 5 BRANCHES. SO THEY HAVE GOOD FUNDAMENTAL. AND STOCK PRICE WILL GO Rs.150 IN 6 TO 8 MONTH. AND THEY ARE ACHIEVED PROFIT IN 6 MONTH Rs.7.8 CRORE. NEXT THE GOLD RATE WILL GO TO Rs.2000 IN END OF 2010.

Q: What about your cash flows? The company has experienced negative cash flows from operations and financing activities. Negative cash flows in future could affect the results of operations. Why have the cash flows been negative and would that change anytime soon?

A: We are having a very good cash flow but we want to open our showrooms in Tuticorin, Dindigul, Theni, Nagercoil, Tirunelveli, Kovilpatti, etc. and that is why we want an IPO.

Q: Your prospectus says that in March 31 2009 you have a negative cash flow of Rs 16 crore. March 2008 a negative cash flow of Rs 6.8 crore and March 2007, negative cash flow of Rs 3.46 crore. I do understand you want to do this for expanding but why are the cash flows negative is it that you are buying at a more expensive price, why is the jeweler having negative cash flows? You also have some civil cases pending how serious are they?

A: We have already paid the money but we need acceptance.

Q: Have you got approvals for all the places where you are planning to open the shops? I understand that the showroom at Madurai doesn’t still have approval.

A: We only have approval from the corporation, the money is already paid

Q: I am looking at your March 31 2009 income, that was about Rs 246 crore and your expenses are about Rs 230 crore. What kind of margin are you left with in this business?

A: That is our turnover.

Crafting fine jewellery

Thangamayil Jewellery is entering the capital market on 27th January 10, with a public issue of Rs. 28.75 crores, with the price band of Rs. 70 to Rs. 75 per share.



The company is a regional player with presence in Madurai and engaged in jewellery retailing. To broad base its presence, the company is planning to open retail outlets in Tuticorin, Dindigul, Theni,Nagarcoil, Thirunelveli, Kovilpatti and Sivakasi and want to spread to the whole state, instead to a city. For this, fund requirement is estimated at Rs. 48 crores, which has been partly mobilized from pre-IPO placement of Rs. 6.25 crores, at Rs. 75 per share, while Rs. 12.84 crores is coming from internal accruals. Balance of Rs. 28.75 crores is to come via IPO. As the company has a net worth of Rs. 37 crores, as at 30-9-09, it may not be difficult to source a part fund from internal accruals. The company had a total loan of Rs. 51.25 crores as at 30-9-09, which is largely to finance the working capital requirement of the company, as it has been holding net current assets of close to Rs. 80 crores, of which, Rs. 78 crores is as inventory.



The company has also been improving on its financial performance year after year. For FY 09, the total income of the company was at Rs. 247 crores, with PAT at Rs. 7.50 crores, giving an EPS of Rs. 8.30. For 6 months ending 30-9-09, the total income improved to Rs. 209 crores, with PAT at Rs. 7.97 crores, resulting in an annualized EPS of Rs. 17.50.



The company is a tiny player and would continue to remain a small cap company, with an expected market cap of close to Rs. 100 crores. Its present paid up equity of Rs. 9.89 crores is likely to move to Rs. 13.75 crores, post IPO.



We all know that, it is the time to move to branded jewellery with quality assurance provided to the customers. Also, retail jewellery segment has better margin as compared to exports or trading in bullion and diamonds. The company is trying to expand in Tamil Nadu state with minimal capex, which will help the company to post a growth of about 40% every year, over next 3-4 years.



Expecting an EPS of Rs. 15 for FY 10 on conservative basis, share at the upper band of Rs. 75 is being issued at a PE of 5 times, which looks reasonable, while comparing with the other listed peers. Also, expected growth in the coming years can make the stock looks attractive, due to fall in its PE multiples. However, due to small cap status and being a regional player with presence in about 2 states, it may be a limiting factor for the stock.



Still, on an overall basis, stock at upper band of Rs. 75, looks reasonably priced, which is likely to give listing gain as well as gain over next 6-12 months.

I have seen the Interview on CNBC TV18 .The MD was confused & could not answer the questions yet the company is good & I will be making at least 3 applications.

Hi Imran here Friends chota IPO hai Aur itna to subscrib ho he jayega listing gain milsakta hai !!! ??? meine 2 lot k lyea applay karne wala hu Rating kitni mili hai ?????? Thoda Risk to lena he cahye

this is a useless ipo not worth 10 rs.It is correct the MD does not even know aht to speak
this stock will have no interest from f1 so all thes thangalimal and syncom healthcare should be stayed away.

only infinite computers and jubiliant foodworks will have interest from f1 and also great business model.

Please refer this link for more info about their strong base in south india and their business goals.
http://premiuminvestments.in/new-issues-analysis-ipo-/39628p102/39678.html

They have already 5 shops in Tamil Nadu and planning to expand in a rapid phase across the state. Looking at the growth they had in the last 5 years is also tremendous.

Viking Jan 21, 2010 8:09:48 AM IST Report Spam!
Watch this Video on Moneycontrol where the MD of the Company was posed 3 Questions.

http://www.moneycontrol.com/video/ipo-issues-open/thangamayil-jewellery-ipo-to-openjan-27_436881.html

He was not able to undestand any question properly.
If you waytch the video you will think 10 Times before investing




Rightly said.
He looks totally confused and out of place.
It looks as if he is looking at someone besides the camera for answers.

Hi risk issue!! Coming from a small town of South India. Price is also high and further companies like Rajesh Exports came down to 20 levels in the down market and just now only picking up. Do the Company promotors know the various aspects of Corporate Governance as they are not professionals!!

Watch this Video on Moneycontrol where the MD of the Company was posed 3 Questions.

http://www.moneycontrol.com/video/ipo-issues-open/thangamayil-jewellery-ipo-to-openjan-27_436881.html

He was not able to undestand any question properly.
If you waytch the video you will think 10 Times before investing

the company is having strong customer base. and Jewellery business is a stable one. So subscribe it in this ipo for long term gains.

U may expect 10% gains in listing.

Look at the past Performance IPO Jewellers. They are not very encouraging with most of them still quoting below IPO price.

Further with Just one Shop that to in Tire 2 City of Madurai and they came for IPO :-)

It would definately be a Underperformer

I Think gold investment to very high amount so invest this ipo equal to gold investment is correct?

Positive - 1).Issue ka main object Buy New Machinery,
2).Retail outlets and renovate the old outlet,
3).Meet the requirement of working capital.
4).Customer base is 1,00,000.

Nagative -> Only existing in perticular south segment,not whole India.

Very Small Issue Siza,28.75 Crore.too small.So we will definately see huge subscription.