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Industry : Diamond & Gold Jewellery

P N Gadgil Jewellers Limited View all IPOs

Price Band

Rs 456 – Rs 480

P N Gadgil Jewellers Limited is going public with a fresh issue and an offer for sale. The issue opens on 10th September 2024.

MOJO CALL

Why

MOJO CALL

Avoid

Neutral

Strong brand recall in Maharashtra

The company has a significant presence in Maharashtra with the brand “P N Gadgil” having a significant recall in the state. The company has created several sub-brands to cater the whole range of jewellery including gold, diamond, silver and platinum serving clients across multiple price points. The company has formulated several loyalty plans to benefit regular customers such as locking today’s price to buy jewellery in the future.

Best financials among organized players

The company reported a return on equity (ROE) of 28.88% for FY2024, an increase from 25.09% in FY2023 and 22.48% in FY2022. This indicates that the company achieved significantly higher returns on its investments. Additionally, it maintained an inventory turnover of 63 days, which is more efficient compared to Kalyan Jewellers (191 days), Senco Gold (201 days), and Thangamayil Jewellers (128 days).

Geographical concentration

The company generates a substantial portion of its revenue (88%) from Maharashtra, with Pune alone contributing 64.6% in FY2024, up from 56.8% in FY2022. This heavy reliance on a single city could expose the company to potential revenue risks if competitive pressures in the region intensify.

Valuations

Based on the FY2024 financials, the company aims for a P/E ratio of 42.2x and a market cap-to-sales ratio of 1.06x. Compared to the listed peers, the company is asking for the lowest valuation. Given the strong recall of the brand, improving productivity metrics and possessing the best return on equity, we believe the company might receive a rerating going ahead. We, therefore, recommend subscribing to the issue.

Issue Details

Issue Opens	10th September 2024
Issue Closes	12th September 2024
Price Band	Rs 456 – Rs 480
Issue size (Upper Band)	Rs. 1100 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 6514 Cr
Sales- March 2024 (Rs./Crs)	6110.95 Cr
Net Profit - March 2024 (Rs./Crs)	154.34 Cr
Industry	Diamond & Gold Jewellery
Promoters	SAURABH VIDYADHAR GADGIL, RADHIKA SAURABH GADGIL AND SVG BUSINESS TRUST
Lead Manager	Motilal Oswal Investment Advisors, Nuvama Wealth and BOB Capital Markets.

Objective of the Issue

Details

Objectives of the Issue Offer for sale – Rs 250 cr & Fresh Issue – Rs 850 cr

The Objectives of the Offer are to:
1. Funding expenditure towards setting up of 12 New Stores in Maharashtra – Rs 392.57 crore
2. Repayment or pre-payment, in full or part, of certain borrowings availed by the company – Rs 300 crore
3. General corporate purposes – Rs 157.53 crore

List of Shareholders Selling Their Stake

Name	Type	Value of Shares (in Rs)	% of OFS
SVG Busines Trust	Promoter	250,00,00,000	100%

Business Operations

About Company

P N Gadgil Jewellers is the second largest (in terms of stores) organized jewellery player in Maharasthra (which accounted for 15% of the overall retail spend on jewellery in FY2024). The company boasted highest revenue per square feet in FY2024 among the key organized jewellery players in India.

The company operates under the brand “PNG”, which derives its legacy the “P N Gadgil” brand, which has a heritage dating back to 1832. The company offers a wide range of jewellery ranging including gold, silver, platinum and diamond jewellery.

As of 31st July 2024, the company operated 39 stores out of which 38 stores are operated in 21 cities of Maharashtra and Goa and one store in the US.

The company operates these stores through the Franchise owned and Company operated (FOCO) model, which enables the company to expand faster and yet have control over the quality of products and provide their customers with consistent experience across all the stores.

Segment Revenue Breakup

Revenue Breakdown by Segment:
Channel Mix	FY2024	FY2023	FY2022
Online Marketplaces	2%	~0%	~0%
Physical Stores	98%	100%	100%

Financials

Financial Overview

The company’s revenue grew by 139% between FY2022 and FY2024 and stood at Rs 6110.95 crore for FY2024.

In FY2024, the company’s Return on Net Worth stood at 28.88%, an improvement compared to 25.09% and 22.48% in FY2023 and FY2022, respectively.

For FY2024, the operating margins for the company improved to 4.54%, from 3.87% recorded in FY2023. Consequently, profit margins for FY2024 also improved to 2.53%, from 2.08% recorded in FY2023.

The company has managed well to reduce its working capital days from 80 days in FY2022 to 51 days in FY2024.

The company has been able to generate positive cash flow from operations for the last three years. The company reported a CFO of Rs 6.32 crore in FY2024.

As of 30th June 2024, the company had a debt of Rs 455.2 crore (including lease liabilities).

Financial Performance (Rs/crore)

Rs./Crs	FY 24	FY 23	FY 22
Revenue	6110.95	4507.52	2555.63
Net Profit	154.34	93.70	69.52