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Industry : Jewellery

Senco Gold View all IPOs

Price Band

Rs. 301–Rs. 317

Senco Gold is going public with a Fresh Issue and Offer for Sale. The issue opens on 4th July 2023.

MOJO CALL

Why

Neutral

MOJO CALL

Avoid

Neutral

Low Margins and Negative Cash flows

The gold jewellery business has great potential as unorganized players will cede market share to organized players. Despite this Senco enjoys a very low margin. When compared to its listed peers, the company had the lowest CAGR growth in revenue. Furthermore, the company has experienced negative cash flows for the past two years in a row.

No Exclusivity on Brand

Senco Gold does not own the brand name, and the retired partners may use it for their own businesses. This, we believe, may not allow the company to command a higher price-to-earnings ratio than its peers.

Fair Valuation

Based on the upper price band, the company will have a market capitalization of Rs 2462 crore. For the year ended March 2023, the company reported sales of Rs 4077 crore, resulting in a market cap-to-sales ratio of 0.6x. The company reported a net profit of Rs 158 crore, resulting in a PE ratio of 16x. We believe that the company's reasonable valuation provides scope for capital appreciation. However, with the exception of Titan, none of the jewellery firms have consistently provided capital appreciation for investors. Hence, we recommend a neutral rating for the company.

Issue Details

Issue Opens	4th July 2023
Issue Closes	6th July 2023
Price Band	Rs. 301–Rs. 317
Issue size (Upper Band)	Rs. 405 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 2462 Cr
Sales- March 2023 (Rs./Crs)	4077 Cr
Net Profit - March 2023 (Rs./Crs)	158 Cr
Industry	Jewellery
Promoters	Suvankar Sen
Lead Manager	IIFL Securities

Objective of the Issue

Details

Fresh Issue – Rs. 405cr

Funding Working Capital Requirements

General Corporate Purposes

List of Shareholders Selling Their Stake

Name	Type	Number of Shares on Sale	% of Total Offerings
SAIF Partners India IV Limited	Selling Shareholder	42,58,675	100%

Business Operations

About Company

Senco Gold is in the business of selling jewellery.

The company's primary products include gold and diamond jewellery, as well as silver, platinum, precious and semi-precious stones, and other metals. The company also sells costume jewellery, gold and silver coins, and silver kitchenware.

They offer a catalogue of 120,000 gold jewellery designs and 46,000 diamond jewellery designs manufactured in-house.

Everlite, Vivaha, Aham, and Ileana are among their brands.

Revenue breakdown by Product:
Products	FY 23	FY 22	FY 21
Gold Jewellery	90%	92%	92%
Diamond and precious/semi precious stones	7%	5%	5%
Silver jewellery and articles	1%	1%	1%
Platinum jewellery	2%	2%	2%

Financials

Financial Overview

The company's sales growth over the last two years was 24%, which was lower than its peers.

Despite having achieved a positive cash flow of Rs 1800 crore in FY21, the company has struggled to maintain this performance and has since experienced a negative cash flow from operations in successive financial years.

The company’s total borrowings in FY23, which is Rs 1177 crore, has more than doubled from Rs 532 crore in FY21.

Financial Performance (Rs/crore)

Rs./Crs	FY 23	FY 22	FY 21
Sales	4077	3535	2660
Net Profit	158	129	61