After stellar debut on the bourses following its public offer in January last year, C Mahendra Exports lost ground in the later part of the year. Export of polished diamonds is the primary business of the company, though it also manufactures diamond jewellery and has a small retail presence in domestic markets.

Prior to the issue, debt-equity was high at 2.4 times. It also had working capital cycles longer than most peers. The company then modified its issue objects, diverting money meant for setting up processing and manufacturing units, besides stepping up retail reach and brand building, towards working capital.

A part of the issue will still go towards investment in its jewellery subsidiary and increasing retail presence. However, high diamond and gold prices and high inflation have put many a consumer off. Competition in this space is also rampant and C Mahendra does not have as strong a national brand as other peers. With the global turmoil, export markets too lost sheen.

Auditors had qualified the methods for inventory valuation and foreign exchange losses. Net profits for the past three quarters have been flat or declining on a sequential basis. Steadily rising rough diamond prices and interest costs weighed on profitability. Net profit margins for the company have hovered between 0.4 and two per cent over the past three quarters, against the 3-4 per cent averaged by peers.

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