IPO Analysis

Date Heading Details
30-Sep-2019   11:44 Hrs IST Sona Hi Sona Jewellers (Gujarat) coming with an IPO to raise up to Rs 4.50 crore <p align="justify"><strong>Sona Hi Sona Jewellers (Gujarat)</strong></p><ul><li><div align="justify">Sona Hi Sona Jewellers (Gujarat) is coming out with an initial public offering (IPO) of 45,00,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 10 per equity share.<br></div></li><li><div align="justify">The issue will open on September 30, 2019 and will close on October 04, 2019.<br></div></li><li><div align="justify">The shares will be listed on NSE SME platform.<br></div></li><li><div align="justify">The face value of the share is Rs 10 and is priced par.<br></div></li><li><div align="justify">Book running lead manager to the issue is Fedex Securities.<br></div></li><li><div align="justify">Compliance Officer for the issue is Falak Parikh.<br></div></li></ul><p align="justify"><strong>Profile of the company</strong><br></p><p align="justify">Sona Hi Sona Jewellers (Gujarat) was originally incorporated as 'Sona Hi Sona Jewellers (Gujarat) Private Limited' as a private limited company under the provisions of Companies Act, 1956 vide Certificate of Incorporation dated February 09, 2010 issued by the Registrar of Companies, Gujarat, Dadra and Nagar Havelli. Subsequently, the Company was converted into a public limited Company pursuant to a special resolution passed by shareholders at the Extra ordinary General Meeting held on July 08, 2017 and consequently the name of the Company was changed to 'Sona Hi Sona Jewellers (Gujarat) Limited' and a fresh certificate of Incorporation was issued by the Registrar of Companies, Ahmedabad dated July 19, 2017.</p><p align="justify">The company is into trading business of jewellery and ornaments. The company operates from Millenium Plaza, Vastrapur, Ahmedabad, which is a well-known market for Jewellery and bullion. It has three brands, namely, Freya, Jinash and Sona Hi Sona. The company operates primarily in Freya and Jinash brand name. Under the Freya brand, the company deals in antique Jewellery and ornaments. Jinash brand of the company is known for American Diamond (AD) Jewellery. The company designs the jewellery and get the job-work finished either in-house or from outside (3rd party). The product catalogue of the company includes Gold Jewellery studded with or without stones. It also includes variety in Gold Jewellery to match regional tastes. The company also offers customization options to design Jewellery as per customer needs. Besides, the in-house brand Jewellery, Sona Hi Sona is also engaged in the wholesale trading business of other branded Jewellery.<br></p><p align="justify"><strong>Proceed is being used for:</strong><br></p><ul><li><div align="justify">Meeting incremental working capital requirements.<br></div></li><li><div align="justify">Meeting General corporate purposes.<br></div></li></ul><p align="justify"><strong>Industry overview:</strong><br></p><p align="justify">India's gems and jewelry sector is one of the largest in the world contributing 29% to the global jewelry consumption. The Gems and Jewelry sector plays a significant role in the Indian economy, contributing around 7% of the country's GDP and 15% to India's total merchandise exports. It also employs over 4.64 million workers. One of the fastest growing sectors, it is extremely export oriented and labour intensive. Based on its potential for growth and value addition, the Government of India has declared the Gems and Jewelry sector as a focus area for export promotion. The Government has recently undertaken various measures to promote investments and to upgrade technology and skills to promote ‘Brand India' in the international market. India is deemed to be the hub of the global jewelry market because of its low costs and availability of high-skilled labour. India is the world's largest cutting and polishing Centre for diamonds, with the cutting and polishing industry being well supported by government policies. Moreover, India exports 75 per cent of the world's polished diamonds, as per statistics from the Gems and Jewelry Export promotion Council (GJEPC).</p><p align="justify">India's Gems and Jewelry sector has been contributing in a big way to the country's foreign exchange earnings (FEEs). The Government of India has viewed the sector as a thrust area for export promotion. The Indian government presently allows 100% Foreign Direct Investment (FDI) in the sector through the automatic route. India is the largest consumer of gold in the world. Rising middle class population and increasing income levels are the key drivers for the demand of gold and other jewelry in India. As of January 2018, the Reserve Bank of India (RBI) has increased the scope of the gold-monetization scheme by allowing charitable institutions and government entities to deposit gold, which is expected to boost deposits over the coming months. The Bureau of Indian Standards (BIS) has revised the standard on gold hallmarking in India from January 2018, to include a BIS mark, purity in carat and fitness as well as the unit's identification and the jeweler's identification mark on gold jewelry. The move is aimed at ensuring a quality check on gold jewelry.<br></p><p align="justify"></p><p align="justify"><strong>Pros and strengths</strong><br></p><p align="justify"><strong>Wide Experience to meet the customer's requirements:</strong>&nbsp; The wide experience of the promoters of the company in Gold industry helps it to carter with the exact requirement of the customers, which in turn helps to design the products accordingly. Its wide range of product offerings caters to diverse customer segments, from the value market to high-end customized Jewelry. Its product profile includes branded and combination designs across Jewelry lines, usages and price points.</p><p align="justify"><strong>Regular updates of new designs:</strong> Marketing personnel regularly participate in exhibitions and trade fairs where they come across various new designs. These designs are forwarded to its in-house designers who improve upon it according to latest trends and requirements. Its in-house designers and the freelance designers also come up with their own designs and ideas which are showcased to its regular customers. The customers in the jewelry world are discerning, knowledgeable and demanding. The company brings innovative ideas and designs to its customers on a regular basis. The Company intends to continue to add new designs to its jewelry portfolio by regularly participating in exhibitions and trade fairs.</p><p align="justify"><strong>Wide Range of Jewelry:</strong> The Company has three brands (i) Sona Hi Sona (ii) Freya and (iii) Jinansh of which it mainly operate through its two known brands; Freya and Jinansh. Under Brand Freya, the company deal in antique Jewellery and ornaments and under Brand Jinansh, it deal with American Diamond (AD) Jewelry, therein. It also deal in Gold Jewellery with or without studded precious and semi-precious stones as well as in Real Diamond and Silver Jewellery and Ornaments.<br></p><p align="justify"><strong>Risks and concerns</strong></p><p align="justify"><strong>Capital Intensive:</strong> Its business is working capital intensive and the growth of business depends upon the Inventory maintained by the company. Significant portion of funds of the company is utilized in Inventory. company intends to continue growing by expanding its operation and geographical reach. All these factors require huge inventory and maintain of the inventory in very effective manner. Its inability to maintain sufficient cash flow and credit facility in timely manner could adversely affect its operation and profitability of the company.</p><p align="justify"><strong>Dependent on few clients:</strong> Its top ten customers contribute approximately 93.92% and 99.14% of its revenues for the period ended March 31, 2019 and March 31, 2018. Any decline in its quality standards, growing competition and any change in the demand for its services by these customers may adversely affect its ability to retain them.</p><p align="justify"><strong>Highly competitive:</strong> India jewelry industry is highly divided between organized sector and unorganized sector. If the company fails to create a position or its existing position deteriorates, the operating results or financial condition will get adversely affected. Aggressive discounting and marketing by competitors may also adversely impact its performance for a temporary period. It may in future experience increase competition from existing or new wholesale traders of jewelry industry. Due to increase in competition, it may temporarily experience downward pressure on prices, lower demand for its products, reduced margins and a loss of market share, all of which would have an adverse impact on business and results of operations.<br></p><p align="justify"></p><p align="justify"><strong>Outlook</strong><br></p><p align="justify">Sona Hi Sona Jewellers (Gujarat) is engaged in trading business of jewelry and ornaments. The company operates from Millenium Plaza, Vastrapur, Ahmedabad, which is a well-known market for Jewelry and bullion. It has three brands, namely, Freya, Jinash and Sona Hi Sona. The company designs the jewelry and get the job-work finished either in-house or from outside. On the concern side, the company has experienced negative cash flows in previous years / periods. Any operating losses or negative cash flow in the future could adversely affect its results of operations and financial condition.</p><p align="justify">The company is coming out with an IPO of 45,00,000 equity shares with face value of Rs 10 each is issued at par to mobilize Rs 4.50 crore. On the performance front, as per Restated Financial statements in the past 3 years, Total Revenue from operations of the company was Rs 5448.10 lakh in FY 2016-17, Rs 5903.26 lakh in FY 2017-18 and Rs 6717.98 lakh in FY 2018-19 reflecting Net Profit after tax for the above - mentioned periods as Rs 6.18 lakh, Rs 18.65 lakh and Rs 38.86 lakh respectively.</p><p align="justify">The company maintaining good strong relationship with customers is a most critical factor in jewellery business. Through regular interactions with the Customers at its Showrooms, product sales trends and market research, it is able to determine current trends in the industry, which are used by the company in the product development. It will continue to focus on timely delivery of quality products which will help in forging strong relationships with its customers and gaining increased business from them.<br></p><p align="justify">(<strong>Financials in Rs Million)</strong></p><table width="100%"><tbody><tr><th>Particulars</th><th>Mar&nbsp;2019</th><th>Mar&nbsp;2018</th><th>Mar&nbsp;2017</th></tr><tr><td>Net Sales</td><td>671.80&nbsp;</td><td>590.31&nbsp;</td><td>544.80&nbsp;</td></tr><tr><td>Total Income</td><td>671.80&nbsp;</td><td>590.33&nbsp;</td><td>544.81&nbsp;</td></tr><tr><td>PBIDT</td><td>20.99&nbsp;</td><td>15.17&nbsp;</td><td>9.73&nbsp;</td></tr><tr><td>PBT</td><td>5.30&nbsp;</td><td>3.19&nbsp;</td><td>0.93&nbsp;</td></tr><tr><td>PAT</td><td>3.89&nbsp;</td><td>1.87&nbsp;</td><td>0.62&nbsp;</td></tr><tr><td>Reserves and Surplus</td><td>24.83&nbsp;</td><td>20.94&nbsp;</td><td>38.47&nbsp;</td></tr><tr><td>Net Worth</td><td>97.68&nbsp;</td><td>93.80&nbsp;</td><td>46.46&nbsp;</td></tr><tr><td>Total Debt</td><td>123.06&nbsp;</td><td>127.82&nbsp;</td><td>75.10&nbsp;</td></tr><tr><td>ROCE</td><td>9.33&nbsp;</td><td>8.63&nbsp;</td><td>7.65&nbsp;</td></tr><tr><td>RONW</td><td>4.06&nbsp;</td><td>2.66&nbsp;</td><td>1.34&nbsp;</td></tr><tr><td>PATM(%)</td><td>0.58&nbsp;</td><td>0.32&nbsp;</td><td>0.11&nbsp;</td></tr><tr><td>CPM(%)</td><td>0.63&nbsp;</td><td>0.38&nbsp;</td><td>0.18&nbsp;</td></tr><tr><td>CEPS</td><td>0.58&nbsp;</td><td>0.31&nbsp;</td><td>1.23&nbsp;</td></tr><tr><td>Enterprise Value</td></tr></tbody></table><p align="justify"><br></p>
30-Sep-2019   10:59 Hrs IST Goblin India coming with an IPO to raise up to Rs 15.20 crore <p align="justify"><strong>Goblin India</strong> <ul><li><div align="justify">Goblin India is coming out with is coming out with a 100% book building initial public offering (IPO) of 29,24,000 equity shares of face value of Rs 10 each in a price band Rs 51-52 per equity share.</div></li><li><div align="justify">The issue will open on September 30, 2019 and will close on October 04, 2019.</div></li><li><div align="justify">The shares will be listed on SME Platform of BSE.</div></li><li><div align="justify">The face value of the share is Rs 10 and is priced 5.10 times of its face value on the lower side and 5.20 times on the higher side.&nbsp;</div></li><li><div align="justify">Book running lead manager to the issue is Fast Track Finsec.</div></li><li><div align="justify">Compliance Officer for the issue is Nikita Suyani.</div></li></ul><p align="justify"><strong>Profile of the company</strong><p align="justify">Goblin India was incorporated on April 26, 1989, as ‘Kal-Chop Export Private Limited' under the provisions of the Companies Act, 1956 with the Registrar of Companies, Gujarat bearing Registration Number 04-12165. Subsequently, the name of the Company was changed from ‘Kal-Chop Export Private Limited' to ‘Camex Auxi- Chem Private Limited' vide a fresh Certificate of Incorporation issued by Registrar of Companies, Gujarat dated December 15, 1989. The company obtained another fresh certificate of incorporation pursuant to change of name from ‘Camex Auxi-Chem Private Limited' to ‘Camex Tradelink Private Limited' dated April 18, 2002 issued by the Registrar of Companies, Gujarat and Dadra &amp; Nagar Haveli. Subsequently, the company was converted into public limited company pursuant to Shareholders Resolution passed at the Extra Ordinary General Meeting held on January 11, 2010 and the name of the company was changed to ‘Camex Tradelink Limited' vide a fresh Certificate of Incorporation dated April 8, 2010 issued by the Registrar of Companies, Gujarat and Dadra &amp; Nagar Haveli. The company obtained another fresh certificate of incorporation pursuant to change of name from ‘Camex Tradelink Limited' to ‘Goblin India Limited' dated August 24, 2015 issued by the Registrar of Companies, Ahmedabad.<p align="justify">Goblin India is engaged in the business of designing, marketing and sale of business, travel &amp; casual luggage and travel accessories. The company is also involved in other distribution and trading business of batteries &amp; torches, household items, office electronics, and other commodities to the corporate. Goblin brand is known for travelling gears and corporate gifting. It sells the products through different channels such as wholesale, retail, e-commerce, and corporate gifting. In India, it has 129 direct dealers, 4 distributors and 245 dealers. It also has a subsidiary in France with more than 250 dealers. The company has two retail outlets in Ahmedabad and one store in Paris. Goblin also sells the products through Amazon, Flipkart and other e-commerce platforms.<br><p align="justify"><strong>Proceed is being used for :</strong><ul><li><div align="justify">Setting up a plant to manufacture/ Assemble ABS Luggage Bags at Ahmedabad, Gujarat.</div></li><li><div align="justify">Funding the working capital requirement of the company.</div></li><li><div align="justify">Meeting general corporate purposes.</div></li></ul><p align="justify"><strong>Industry Overview</strong><p align="justify">The Indian luggage industry is engaged in the production of luggage bags both in hard and soft categories. In the soft category it manufactures bag packs, duffel bags, laptop bags, other business travelling bags and various travel accessories. Growing preference for short haul travel and penchant to travel hassle free is driving demand for new 79 luggage categories away from traditional heavier luggage products. Consequently, luggage manufacturers are innovating and upgrading their portfolio regularly to meet consumer expectations along with executing right marketing and branding strategies to gain market share. <br></p><p align="justify">Currently, soft luggage segment account for approximately 75% share in India's luggage industry. In 2017, the annual market size growth of the luggage and bags industry moderated marginally to about 13% due to temporary disruptive changes (both in organized and unorganized segment) following two major announcements, that is, demonetization and GST. However, favorable long term growth dynamics are in place to support healthy growth in luggage and bags sales in coming years.</p><p align="justify">Tourism is an important aspect of the Indian economy. Rising inclination towards travelling and growth in tourism is likely to boost the luggage industry. Over the years, both domestic and international air travel has shown consistent growth presenting good prospects for travel goods market in India.<br></p><p align="justify"><p align="justify"><strong>Pros and strengths</strong><p align="justify"><strong>Experienced management:</strong> The company's leadership is the result of team work allowing issues and ideas to be developed, widening its competitive advantage. It has grown steadily under the vision, leadership and guidance of its promoter. Its promoter has played a key role in developing its business and it benefits from promoter's industry expertise, vision and leadership. Its Promoter, Manoj Choukhany, has experience of more than a decade in the luggage industry. The promoter is also assisted by a team of experienced personnel. Its management team's experience and their understanding of the industry will enable the company to continue to take advantage of both current and future market opportunities.<p align="justify"><strong>Quality and Customer Service:</strong> The company is proud in setting and meeting high quality standards in its products and in its services. Its products undergo a comprehensive quality control check by its supplier and by it. Its Customer Service is dedicated to provide essential support to its customers and consumers with a goal to enhance their buying and company experience.<p align="justify"><strong>Diversified Product Portfolio:</strong> The company has diversified Licensed Products Profile. It provides large range of categories ranging from small leather goods, ladies handbags, travel gear, backpacks to other travel accessories in India.<br><p align="justify"><p align="justify"><strong>Risks and concerns</strong><p align="justify"><strong>Dependent on corporate customers and dealers:</strong> The company's business derives a major portion of its revenue from its corporate customers and dealers. The loss of a major customer or a significant reduction and sales of, or demand for its products from its major customers, may adversely affect its business, financial condition. Further, major events affecting its customers includes dealers, such as adverse market conditions, regulatory changes, adverse cash flows, change of management, mergers and acquisitions by customers could adversely affect its business. If any of its customers includes dealers become bankrupt or insolvent, it may lose some or all of its business from that customer and its receivables from that customer may have to be written off, thus impacting its cash flows and financial condition.<p align="justify"><strong>High working capital requirements:</strong> Its business requires significant amount of working capital and major portion of its working capital is utilized towards debtors, and inventories. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.<p align="justify"><strong>Intense competition:</strong> The markets in which it sells its products are highly competitive and it faces significant competition from organized and unorganized Luggage traders and manufacturers. It may have to confront pressures in respect of pricing; product quality from the clients and such pressures may put strain on its profit margins which may consequently affect the financial position of the company. Competition emerges not only from the organized sector but also from the unorganized sector and from both small and big players. Its Competitiveness is also measured by the technology it adopts as the industry is rapidly growing in India. Its inability to compete with this intense competition; will have material adverse impact on its company's financial position.<br><p align="justify"><p align="justify"><strong>Outlook</strong><p align="justify">Goblin India is engaged in the business of designing, marketing and sale of business, travel &amp; casual luggage and travel accessories. The company is also involved in other distribution and trading business of batteries &amp; torches, household items, office electronics, and other commodities to the corporate. Goblin brand is known for travelling gears and corporate gifting. It sells the products through different channels such as wholesale, retail, e-commerce, and corporate gifting. On the concern side, the company had negative cash flows in the past and may continue to have negative cash flows in the future. Its inability to generate and sustain adequate cash flows in the future could adversely affect its results of operations and financial condition and the trading price of its Equity Shares. Such negative cash flows may lead to a net decrease in cash and cash equivalents for respective years.<p align="justify">The company is coming out with a maiden IPO of 29,24,000 equity shares of Rs 10 each via book building route with a price band of Rs 51 - Rs 52 to mobilize Rs 14.91 crore to Rs 15.20 crore (based on lower and upper price bands). On the performance front, during the financial year 2018-19, the net revenue from operation of the company increased to Rs 6827.62 lakh from Rs. 6074.05 lakh in the financial Year 2017-18 representing an increase of 12.40%. This Increase was majorly due to increase in sale of its traded goods as compared to financial Year 2017-18. During the financial year 2018-19, the other income of the company increased to Rs 21.03 lakh as against Rs 19.64 lakh in the financial Year 2017-18 representing an increase of 7.07%. Such increase was primarily due to increased commission income and other miscellaneous income. The company's Profit after tax for the financial Year 2018-19 increased to Rs 344.92 lakh as compared to Rs 309.37 lakh financial year 2017-18. The increase in profit after tax by 11.49% was majorly due to factors mentioned above.<p align="justify">The company intends to explore modern technology to access new opportunities in the market to sell its products to the ultimate customer, including direct sales to the customer through the internet. Both B2B and B2C platforms shall be considered for access over well-known aggregator portals to market and sell its products to retail customers. It shall also expand its existing distributor network in the domestic and overseas markets.</p>
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