Manoj Vaibhav Gems 'N' Jewellers Limited IPO is open for subscription: All you need to know
The last IPO that opens for subscription this week is Manoj Vaibhav Gems 'N' Jewellers Limited (MVGJL). We have already covered the two IPOs that opened earlier in the week: Sai Silks and Signature Global India Limited.
MVGJL IPO opens for subscription on the 22nd and closes on the 26th of September. In this article, we will look at the various aspects related to the company. It will help investors decide whether to subscribe or invest in the IPO for the long term.
Manoj Vaibhav Gems 'N' Jewellers Limited IPO: Key Details
Below are the key details related to the MVGJL IPO:
- Issue Size: Rs 270.20 crore
- Price Band: Rs 204 - Rs 215
- Issue Details: Rs 210.00 crore Fresh Issue + Rs 60.20 crore Offer For Sale (OFS)
- Market Cap: At the upper price band, Rs 1,050.22 crore
- Minimum Investment: Rs 14,835
Manoj Vaibhav Gems 'N' Jewellers Limited IPO: About the business
Vaibhav Jewellers is a leading regional jewelry brand in South India. The company is a hyperlocal jewelry retail chain with a presence in the micro markets of Andhra Pradesh & Telangana with 13 showrooms (inclusive of two franchisee showrooms) across 8 towns and 2 cities. As per Technopak Report, MVGJL has a market share of ~4% of the overall Andhra Pradesh and Telangana jewelry market and ~10% of the organized market in these two states in FY23.
The company was one of the earlier entrants in the organized jewelry retail market of Andhra Pradesh and continues to focus on regional expansion into the high-growth untapped regions within the micro-markets of Andhra Pradesh & Telangana,, creating a market for branded jewelry in the area of operations.
Vaibhav Jewellers cater to all economic segments of the micro markets through their dedicated branded showrooms and have a strong rural market focus and a dedicated urban focus. The company has positioned itself as a retailer focussed on ‘Relationships, by Design’ where they focus on offering designs, high quality, transparency, and customer service to their customers. They connect with target groups through exhibitions to understand the tastes and preferences of the customers through their “To Marketing Strategy".
The company has designed and developed a website: www.vaibhavjewellers.com, for online sales in addition to other online marketplaces. The website can be easily navigated and is user-friendly for online shopping, inquiries, and live video shopping options.
Manoj Vaibhav Gems 'N' Jewellers Limited IPO: Industry Outlook
The global jewelry market is estimated at $340.7 billion in CY22 and is a significant contributor to the world economy. It is also, for centuries, an expression of creativity, status, and exclusivity. Diamonds and gold are two precious items that contribute more than 50% of the global jewelry market. USA, China, and India are the top three markets in the global jewelry market with different pecking orders in the diamond and gold jewelry market. India in addition to being a big market also plays a significant role in the supply chain of gold and diamond jewellery market.
India was the world’s second-largest market for gold, with an average consumption of close to 700-750 tons before the COVID-19 pandemic. Gold demand came down by 35% to 446 tons in CY20, which has increased by 74% to 774 tons in CY22.
Gold consumption in India is met by imports with a domestic mining contribution of close to 1%. Recycled gold contributes close to 8% of the total supply. The contribution of recycled gold depends on the prevailing prices, with an increase in prices leading to higher availability of gold for recycling.
In FY23, the total market size of Andhra Pradesh and Telangana was $3.3 billion and $2.8 billion, respectively. While the Andhra Pradesh jewelry market is expected to grow to $6.3 billion by FY27 at a CAGR of ~18%, the Telangana market is expected to grow to $5.3 billion during the same period at a CAGR of ~18%.
Manoj Vaibhav Gems 'N' Jewellers Limited IPO: Listed Peers
The company has many listed peers in the jewelry segment. The listed peers include names like Titan Company, Thangamayil Jewellery, Kalyan Jewellers India and Tribhovandas Bhimji Zaveri. Let us look at the finals to understand how MVGJL stands in comparison with peers for FY23:
- In terms of revenue, Titan Company is the largest player followed by Kalyan Jewellers. MVGJL is the smallest player, one of the reasons being it is a regional player, unlike the leaders.
- The EBITDA margins are the highest for Titan Company. Kalyan Jewellers and Manoj Vaibhav Gems have nearly the same margins around 7.5%.
- Among all the peers, the highest debt to equity ratio is for Thangamayil Jewellery, followed by MVGJ. Both of them have to equity ratio of over 1. Titan Company has the lowest ratio.
- Return of Capital Employed is highest for Titan Company followed by MVGJL.
Manoj Vaibhav Gems 'N' Jewellers Limited IPO: Financials
Let us now look at the most crucial part that one needs to consider while evaluating a new company (and also a new company). Below are the financial numbers of MVGJL over the last three financial years:
- The company has reported a revenue of Rs 1,443.18 crore, Rs 1,697.70 crore, and Rs 2,031.30 crore for FY21, FY22, and FY23, respectively. Revenue has grown at an exceptional 18.64% CAGR in this period.
- MVGJL has reported an EBITDA of Rs 69.51 crore, Rs 104.96 crore, and Rs 143.05 crore for FY21, FY22, and FY23, respectively. In the same period, the EBITDA margins as a percent of revenue were 4.85%, 6.20%, and 7.06%, respectively.
- They have reported a net profit of Rs 20.74 crore, Rs 43.68 crore, and Rs 71.60 crore for FY21, FY22, and FY23.
- For the last three financial years, MVGJL has reported an average EPS of Rs 13.77 and an average RoNW of 17.24%.
- If we attribute annualized Q1-FY24 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 13.65.
- The Return of Capital Employed (ROCE) has increased from 10.64% in FY21 to 17.71% in FY23. ROE has also increased significantly from 9.49% in FY21 to 23.19% in FY23.
- The debt-to-equity ratio is high but has reduced in the last three financial years. For the last three financial years, the D/E ratio was 2.02, 1.75, and 1.34, respectively.
What are the competitive strengths of Manoj Vaibhav Gems Limited?
As per the company, their competitive strength is as below:
- The company is a leading home-grown regional brand built on hyperlocal retail strategy.
- They were amongst the first movers in the organized jewellery business in the state of Andhra Pradesh by starting business as a proprietorship concern in the year 1994 which has given them a first mover advantage.
- MVGJL's focus of fortifying the business is that Rural Market focus as the rural market continues to contribute 58% of the jewelry demand in India.
- Through their operating ethos of ‘Relationships, by Design’ they offer diverse product designs at varied price ranges to customers' budget brackets.
Risks associated with the Manoj Vaibhav Gems Limited
Below are the risks associated with the MVGJL Limited:
- If they are unable to effectively manage or expand their retail network and operations or pursue a growth strategy, their new showrooms may not achieve the same expected levels of profitability.
- The non-availability or high cost of quality gold bullion, silver, diamonds, and other precious and semi-precious stones may hurt their business.
- If they are unable to expand their product offerings in a diversified manner and distribution channels as per the market requirement, it will impact their business.
- The company has significant working capital requirements and may require additional capital and financing in the future.