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PC Jewellers' offer reasonably priced

Source : BUSINESS_STANDARD
Last Updated: Fri, Dec 07, 2012 13:11 hrs

pCompared to the public issues of Tribhovandas Bhimji Zaveri TBZ and Tara Jewels PC Jeweller&rsquos initial public offering IPO is priced lower at a PE of 97-105 times FY12 earnings considering post-issue capital But that is for a reasonppThough the promoters have more than two decades of experience in the jewellery business the company is relatively new compared to its nearest competitors particularly TBZ in the jewellery retailing business Second its operations are concentrated in the northern region with Delhi NCR forming 57 per cent of domestic revenue in the first half of FY13 On the flip side it has reported strong growth in the past coupled with healthy margins Growth rates should remain healthy and geographical concentration risk will ease thanks to expansion In this backdrop investors can subscribe to the offerppThe company is engaged in manufacture retail and export of jewellery with five manufacturing facilities spread over 83000 sq ft Exports on a wholesale basis to international distributors formed 33 per cent of revenues in the year&rsquos first half but its share is expected to go down with a focus on domestic businessbr  table cellpadding2 width250 tbody tr styleheight 15pt height20 td styleheight 15pt width290 bgcoloreeeeda colspan3 height20strongfont faceTahoma size3GOOD SHOWfontstrongtd tr tr styleheight 15pt height20 td styleheight 15pt width120 bgcolor929373 height20font faceTahoma colorffffff size2strongIn Rs crorestrongfonttd td classxl63 alignright width75 bgcolor929373font faceTahoma colorffffff size2strongFY12strongfonttd td classxl63 alignright width79 bgcolor929373font faceTahoma colorffffff size2strongH1&rsquo FY13strongfonttd tr tr styleheight 15pt height20 td styleheight 15pt width120 bgcoloreeeeda height20font faceTahoma size2Salesfonttd td classxl63 alignright width75 bgcoloreeeedafont faceTahoma size2304200fonttd td classxl63 alignright width79 bgcoloreeeedafont faceTahoma size2185570fonttd tr tr styleheight 15pt height20 td styleheight 15pt width120 bgcoloreeeeda height20font faceTahoma size2 changefonttd td alignright width75 bgcoloreeeedafont faceTahoma size2539fonttd td alignright width79 bgcoloreeeedafont faceTahoma size2NAspan stylemso-spacerun yes spanfonttd tr tr styleheight 15pt height20 td styleheight 15pt width120 bgcoloreeeeda height20font faceTahoma size2Operating profitfonttd td alignright width75 bgcoloreeeedafont faceTahoma size23316fonttd td alignright width79 bgcoloreeeedafont faceTahoma size22337fonttd tr tr styleheight 15pt height20 td styleheight 15pt width120 bgcoloreeeeda height20font faceTahoma size2 changefonttd td alignright width75 bgcoloreeeedafont faceTahoma size2662fonttd td alignright width79 bgcoloreeeedafont faceTahoma size2NAspan stylemso-spacerun yes spanfonttd tr tr styleheight 15pt height20 td styleheight 15pt width120 bgcoloreeeeda height20font faceTahoma size2Net profitspan stylemso-spacerun yes spanfonttd td alignright width75 bgcoloreeeedafont faceTahoma size2230fonttd td alignright width79 bgcoloreeeedafont faceTahoma size2142fonttd tr tr styleheight 15pt height20 td styleheight 15pt width120 bgcoloreeeeda height20font faceTahoma size2 changefonttd td alignright width75 bgcoloreeeedafont faceTahoma size2557fonttd td alignright width79 bgcoloreeeedafont faceTahoma size2NAfonttd tr tr styleheight 15pt height20 td styleheight 15pt width290 bgcoloreeeeda colspan3font faceTahoma size1 y-o-y                                              Source DRHPfonttd tr tbodytable table cellpadding2 width250 tbody tr styleheight 15pt height20 td styleheight 15pt width240 bgcoloreeeeda colspan3 height20font faceTahoma size3strongPCJ GROWING FASTERstrongfonttd tr tr styleheight 15pt height20 td styleheight 15pt width101 bgcolor929373 height20font faceTahoma colorffffff size2strongIn Rs crorestrongfonttd td classxl65 alignright width66 bgcolor929373font faceTahoma colorffffff size2strongPCJstrongfonttd td classxl65 alignright width57 bgcolor929373font faceTahoma colorffffff size2strongTBZstrongfonttd tr tr styleheight 15pt height20 td styleheight 15pt width101 bgcoloreeeeda height20font faceTahoma size2Revenue CAGRfonttd td classxl65 alignright width66 bgcoloreeeedafont faceTahoma size2700fonttd td classxl65 alignright width57 bgcoloreeeedafont faceTahoma size2275fonttd tr tr styleheight 15pt height20 td styleheight 15pt width240 bgcoloreeeeda colspan3 height20font faceTahoma size2strongOPM strongfonttd tr tr styleheight 15pt height20 td styleheight 15pt width101 bgcoloreeeeda height20font faceTahoma size2FY10fonttd td classxl65 alignright width66 bgcoloreeeedafont faceTahoma size2100fonttd td classxl65 alignright width57 bgcoloreeeedafont faceTahoma size253fonttd tr tr styleheight 15pt height20 td styleheight 15pt width101 bgcoloreeeeda height20font faceTahoma size2FY11fonttd td classxl65 alignright width66 bgcoloreeeedafont faceTahoma size2100fonttd td classxl65 alignright width57 bgcoloreeeedafont faceTahoma size273fonttd tr tr styleheight 15pt height20 td styleheight 15pt width101 bgcoloreeeeda height20font faceTahoma size2FY12fonttd td classxl65 alignright width66 bgcoloreeeedafont faceTahoma size2109fonttd td classxl65 alignright width57 bgcoloreeeedafont faceTahoma size288fonttd tr tr styleheight 15pt height20 td styleheight 15pt width101 bgcoloreeeeda height20font faceTahoma size2Net profit CAGRfonttd td classxl65 alignright width66 bgcoloreeeedafont faceTahoma size21290fonttd td classxl65 alignright width57 bgcoloreeeedafont faceTahoma size2765fonttd tr tr styleheight 15pt height20 td stylemso-ignore colspan width240 bgcoloreeeeda colspan3font faceTahoma size1CAGR is for the period FY09-FY12br Source DRHP Analyst reportsfonttd tr tbodytableppBy FY14-end the company aims to have 50 owned-stores across India from 30 stores in 23 cities and eight states currently with addition of 20 stores half in the western and southern rest in north and east which is to be funded through the IPO proceeds Retail area would also jump 81 per cent from the current 164000 sq ft While the expansion should mitigate the geographical concentration risk establishing a strong brand name as in northern India in the new regions might not be easybr  table cellpadding2 width200 tbody tr styleheight 15pt height20 td styleheight 15pt width190 bgcolor929373 colspan2 height20strongfont faceTahoma colorffffff size3ISSUE DETAILSfontstrongtd tr tr styleheight 15pt height20 td styleheight 15pt width108 bgcoloreeeeda height20font faceTahoma size2Price bandspan stylemso-spacerun yes spanbr Rssharefonttd td alignright width74 bgcoloreeeedafont faceTahoma size2125 -135fonttd tr tr styleheight 15pt height20 td styleheight 15pt width108 bgcoloreeeeda height20font faceTahoma size2Size Rs crorefonttd td alignright width74 bgcoloreeeedaspan stylemso-spacerun yesfont faceTahoma size2 fontspanfont faceTahoma size2556-601span stylemso-spacerun yes spanfonttd tr tr styleheight 15pt height20 td styleheight 15pt width108 bgcoloreeeeda height20font faceTahoma size2Opens onfonttd td alignright width74 bgcoloreeeedafont faceTahoma size2Dec 10thfonttd tr tr styleheight 15pt height20 td styleheight 15pt width108 bgcoloreeeeda height20font faceTahoma size2Closes onfonttd td alignright width74 bgcoloreeeedafont faceTahoma size2Dec 12thfonttd tr tr styleheight 15pt height20 td styleheight 15pt width108 bgcoloreeeeda height20font faceTahoma size2CRISIL andspan stylemso-spacerun yes spanbr CARE Ratingfonttd td alignright width74 bgcoloreeeedafont faceTahoma size23 out of 5fonttd tr tbodytableppThe company&rsquos &lsquoJewels for Less&rsquo scheme 50000 members started just two years earlier has seen good response and its policy of &lsquofull refund&rsquo for jewellery returned within seven days of purchase are positives and should help on this frontppThe company has reported rapid and profitable growth in a short span of time which instils confidence Says CRISIL in its IPO grading note &ldquoThe pace of expansion has been faster compared to other players with addition of 25000 sq ft every year The stores have been profitable from the first year of operations&rdquoppApart from expansion sales growth CAGR of 70 per cent in FY09-12 highest among its competitors is also aided due to a focus on wedding jewellery 80 per cent domestic revenues the largest segment and relatively less affected by slowdown since it is an essential planned purchaseppThe company&rsquos strategy is to open large formats average size per store of 5500 sq ft Of the 30 stores 27 have an area of over 3000 square feet each which includes 11 showrooms of more than 5000 sq ft each four above 10000 sq ftppSays Balram Garg managing director of the company &ldquoThe large format reinforces our positioning as trusted jewellery retailer enabling us to attract a diverse customer base offers a wide range of jewellery ensures effective inventory management and provides benefits of scale&rdquoppPut together these moves along with the increasing contribution of diamond jewellery 32 per cent of revenues in the first half from 18 per cent four years ago have led to higher operating profit margin OPM than its peers And there is further scope for margin improvement Says Garg &ldquoWe are more focused on bottomline growth as it will help expand our network faster&rdquo Declining share of exports in total mix will also help Buying gold on lease basis against purchase since inception has ensured less pressure on the balance sheet All these have helped net profit grow at a faster pacep

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