- Bid/Issue opens on : February 16, 2006
- Bid/Issue closes on : February 21, 2006
- Issue Price : Rs.170-195 per equity shares of Rs. 10 each
- Minimum application : 35 equity shares and in multiples of 35 equity shares thereafter.
- Maximum Retail Bid Amount :Rs. 100,000.
- Authorised share capital: 70,000,000 Equity Shares of Rs. 10 each
- Issued capital before the issue: 41,998,495 Equity Shares of Rs. 10 each
- Issued capital after the issue: 58,998,495 Equity shares of Rs. 10 each
- Promoters, promoters group and PAC share pre-issue: 95.24%
- Promoters, promoters group and PAC share pre-issue: 67.80%
Gitanjali Gems Ltd. (GGL) is one of the largest integrated manufacturers and retailers of diamonds and jewellery in India. It sources rough diamonds from various primary or secondary sources then engages in the cutting, polishing and retailing of diamond and other jewellery both in India and abroad. Gitanjali Gems has got two-diamond manufacturing facilities located at Borivali in Mumbai and at the SEZ in Surat. It has also got a 100% export oriented unit in SEEPZ Mumbai, which produces gold and platinum studded jewellery.
There are two jewellery-manufacturing facilities at MIDC, Mumbai, which produce branded jewellery for the retail operations in India. The company exports to all the major international markets and has a workforce of over 2300 employees. Some of the better-known brands under which the company sells its jewellery are Nakshatra, Asmi, Gilli and D’Damas.
Objectives of the issue
The Company plans to utilize a majority of the proceeds of the issue towards capitalization of subsidiaries, joint ventures and associate companies. The company plans to scale up its retail operations by setting up additional retail outlets. It also plans to set up additional diamond and jewellery manufacturing facilities in Hyderabad and Mumbai. The company has high working capital requirements because of its line of business and some proceeds from the issue will go towards working capital requirements.
Points to consider
- Industry growing at a robust Pace
- Branded jewellery in India and GGL
- Distribution network and retail outlets
- Concerns
Two of the significant brands under which the company sells its products under, Nakshatra and Asmi, are not owned by the company. This could have a significant bearing on the company being able to acquire new customers, as people recognize the brand more than the company which manufactures the product. Going forward, this could impact earnings if the license from DTC, which owns these brands is withdrawn. On the financial side, the company has not provided for contingent liabilities to the tune of 49.18 crores, which could be a negative if it materializes. - Financials
Gitanjali Gems Ltd has recorded a net income of 1153.13 crores in the six months ended September 30th 2005. The revenue and profit figures are not comparable with previous years and quarters figures because the company has undergone a complex restructuring program, amalgamating 5 of its group companies into itself. Net profit for 6 months ended September 30th 2005, was 24.47 crores. The margins in this business are low irrespective of the players. - Valuations
The issue is being offered in a price band of Rs. 170 to Rs. 195. The stock is valued at 20.27x H1FY06 annualized earnings of Rs. 8.39 at the lower price band and 23.25x H1FYO6 annualized earnings at the upper band on a post dilution basis. This is a one off play in the market as far as branded jewellery business is concerned. We expect the margins to improve as the company shifts more towards selling branded jewellery. The company has strengths in branding and a good distribution network. Investors can subscribe to the issue for short term listing gains as well as long term investment purpose.
(For Risk factors and other details please refer Red Herring Prospectus)
Source: ICICI Direct
