Started in 2017, PN Gadgil & Sons Limited is Pune based one of the leading and trusted retail jewellery companies in Maharashtra. The legacy of the 'P. N. Gadgil' brand traces back over six generations to the year 1832. Prior to the incorporation of the Company in the year 2017, consequent to its conversion from the Erstwhile Partnership Firm, the current business was carried on by the Promoters in the name of such Erstwhile Partnership Firm. Company's offerings include gold jewellery, silver jewellery, idols and other silverware, diamonds and diamond jewellery and other gemstones jewellery and related gift items. Company has the ability to create localised product mixes in the stores to suit regional tastes. Company offers a wide range of products from jewellery for special occasions such as weddings and festivals to daily wear jewellery for all ages, genders and across various price points. Company has a dedicated design team, focused on developing new products and designs that meet customers' requirements. Company also customise jewellery for individual needs. Company engages artisans and contract manufacturers to manufacture the jewellery. As on March 2018, PN Gadgil is the 2nd largest in terms of the store count in Maharashtra (as per CRISIL Report). Company's stores are divided into three formats, primarily on account of the size of the store, namely 11 'large format stores' (above 3,500 sq. ft. of built up area), six 'medium-format stores' (above 2,200 sq. ft. of built area up to 3,500 sq. ft. of built up area) and eight 'small-format stores' (above 1,000 sq. ft. of built up area up to 2,200 sq.ft. of built up area). As of March 31, 2018, company has 23 stores in Maharashtra and one store in Gujarat and Karnataka each, with an aggregate built-up area of 100,213 sq. ft. For efficient management and operations, Company has divided its stores into three separate zones as per the zonal model, namely Pune-zone, Nashik-zone and Solapur-zone. The store network has increased from two stores as on April 1, 2012 to 25 stores as on March 31, 2018. Company further intends to expand the footprint by increasing the store count to 29 by end of FY19 and 40 by end of FY20. All the stores are operated and managed by them. They also sell products through online platform at www.onlinepng.com. Company exchanges gold and gold jewellery purchased from them on weight to weight and karat basis. However, in cases where gold and gold jewellery is not purchased from them, they exchange the same on net weight basis using karat meter analysis. Company also has a 100% exchange policy on the diamond jewellery including making charges. In the last few years, company has introduced a range of jewellery collections which are designed to cater to specific customer preferences such as 'Light Weight Beauty' which is their jewellery in value market segment, 'Love again and again' diamond jewellery, 'Saptapadi Bridal' jewellery and 'Lantern Collection' which is their temple jewellery collection. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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