RBZ Jewellers IPO review (Apply)

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Review By Dilip Davda on December 16, 2023

•    RBZ is a gold jewellery manufacturer and marketing its products on Pan-India basis. 
•    It has posted steady growth in its top and bottom lines for the reported periods. 
•    Based on FY24 annualized earnings, the issue is reasonably priced. 
•    Investors may park funds for the medium to long term rewards. 

ABOUT COMPANY:
RBZ Jewellers Ltd. (RBZ) is one of the leading organized manufacturers of gold jewellery in India, specializing in Antique Bridal Gold Jewellery and distribute to reputable nation-wide retailers and significant regional players in India (Source: Care Edge Report). It holds approximately 1% of total organized wholesale gold jewellery market in India. It has a history of more than fifteen (15) years in the jewellery industry. The company designs and manufactures a wide range of Antique Bridal Gold Jewellery which consists of jadau, Meena and Kundan work and sell it on a wholesale and retail basis. 

RBZ also process and supply Antique Bridal Gold Jewellery on job work basis to national retailers. Its customer base in wholesale business includes reputed national, regional and local family jewellers spread across 20 States and 72 cities within India (Source: Care Edge Report). The Company also operates its retail showroom under the brand name "Harit Zaveri" and is an established player in Ahmedabad. (Source: Care Edge Report). It offers jewellery for bridal, occasional and daily wear at various price range in retail showroom. The company also exports jewellery to Middle East region. 

It carries out manufacturing operations from a well-equipped and modern facility situated at Ahmedabad, Gujarat having advanced technologies in casting, laser and 3-D printing. Its retail showroom is situated in the prominent area of Ahmedabad, Gujarat. 

It has a well-equipped and modern gold jewellery manufacturing facility situated at Sarkhej Gandhinagar Highway, Ahmedabad, Gujarat having capability to design as well as manufacture gold jewellery under one roof. The manufacturing facility has an area admeasuring 23,966 sq. ft. and is owned by it. Its retail showroom spread over 11,667 sq. ft. is situated in Satellite area, Ahmedabad, Gujarat in the vicinity where other large retailers have their presence. The company owns an area admeasuring 10,417 sq. ft. of showroom space and area admeasuring 1,250 sq. ft. is occupied on lease basis. As on the date of filing this offer document it had 189 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route IPO of 10000000 equity shares of Rs. 10 each to mobilize Rs. 100 cr. It has announced a price band of Rs. 95 - Rs. 100 per share. The issue opens for subscription on December 19, 2023, and will close on December 21, 2023. The minimum application to be made is for 150 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, the company will utilize Rs. 80.75 cr. for working capital and the rest for general corporate purposes. 

The company has allocated not more than 35% for QIBs, not less than 30% for HNIs and not less than 35% for Retail investors.

The sole Book Running Lead Manager (BRLM) to this issue is Arihant Capital Markets Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 20 - Rs. 44 between April 2010 and September 2016. It has also issued bonus shares in the ratio of 26 for 4 in March 2023. The average cost of acquisition of shares by the promoters is Rs. 0.82 and Rs. 1.35 per share. 

Post-IPO, RBZ's current paid-up equity capital of Rs. 30.00 cr. will stand enhanced to Rs. 40.00 cr. Based on the upper cap of the price band of the IPO the company is looking for a market cap of Rs. 400 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company had posted a total income/net profit of Rs. 107.71 cr. / Rs. 9.75 cr. (FY21), Rs. 252.53 cr. / Rs. 14.41 cr. (FY22), and Rs. 289.63 cr. / Rs. 22.33 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 12.09 cr. on a total income of Rs. 125.52 cr. The company has reported steady growth in its top and bottom lines for the reported periods. 

For the last three fiscals, the company has reported an average EPS of Rs. 5.84 and an average RoNW of 21.86%. The issue is priced at a P/BV of 2.87 based on its NAV of Rs. 34.86 as of September 30, 2023, and at a P/BV of 1.96 based on its post-IPO NAV of Rs. 51.14 per share (at the upper cap). 

If we attribute annualized FY24 earnings to post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 16.53. Thus the issue is reasonably priced. 

For the reported periods, the company has reported PAT margins of 9.11% (FY21), 5.71% (FY22), 7.76% (FY23), 9.64% (H1-FY24), and RoCE margins of 16.82%, 19.06%, 20.08%, 10.17% respectively. 
 
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has adopted a dividend policy in June 2023, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Kalyan Jewellers, Senco Gold, Thangamayil Jewellery, D P Abhushan, Titan Co., Ashapuri Gold and Sky Gold as their listed peers. They are trading at a P/E of 68.60, 34.30, 34.96, 24.89, 93.97, 132.40, and 39.52 (as of December 15, 2023). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The BRLM associated with the issue has handled only 1 issue in the past three years and the same has not closed below the offer price on listing date. 

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