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All that glitters is certainly gold in the present volatile market conditions, prompting jewellery retail chains to enter the capital market to expand their businesses and raise additional capital.
On January 25, two jewellery retail chains Tribhovandas Bhimji Zaveri (TBZ) and Joyalukkas filed their offer documents with Securities and Exchange Board of India.
The last one month saw three jewellery retailers filing their offer documents. C Mahendra Exports' recent IPO was subscribed 2.78 times.
For working capital
TBZ's offer document says the company plans to invest Rs 156 crore from its net IPO proceeds (total amount unspecified) to ‘meet incremental working capital requirements'; Rs 18 crore would be used for setting up nine showrooms. Each of these showrooms will have a minimum carpet area of 3,000 sq. ft.
Joyalukkas would use its IPO funds for establishing new showrooms, as well as for repayment/prepayment of loans. The Kerala-based company plans to expand its reach in the four southern States by opening 13 showrooms by September 2013. The company plans to open a showroom in Delhi by April.
While the companies are gearing up to enter the capital markets, the question is whether there is substantial appetite in the market for these companies. “Certainly, as these companies can play on their brand name,” said Mr Prakash Diwan, Head of Institutional Equity, Networth Stock Broking. “Lesser known companies have entered the capital markets and done well for themselves.”
“Also, the appetite depends on the issue size. Eventually, the retail investor wants to make good gains. These companies, with a relatively smaller issue size, will be able to garner the required response,” said Mr Vinay Agrawal, Executive Director- Equities Broking, Angel Broking.
Analysts also see the jewellery retail segment, which is relatively under-represented in the capital market, catching up and generating greater interest among investors. “With the rupee becoming weaker compared with other currencies, exports are doing well allowing these companies to make decent profits,” said Mr Diwan.
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