IPO NOTE : Senco Gold Ltd By Nirmal Bang Ltd
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Objects and Details of the Issue:
* Total issue of ~Rs. 405 Cr (at upper price band) consists of fresh issue worth Rs. 270 Cr and offer for sale worth Rs.135 Cr
* To utilise an estimated amount of ? 196 Cr from the net proceeds towards the funding of company’s working capital requirement
Investment Rationale:
* Leading organized jewellery player with a strong brand name
* Expansion of its presence through strong distribution channels
* Established low capex model to improve operating leverage
* Focusing on optimal product mix in order to achieve higher operating margins
* Focus on technology to enhance operational efficiency while targeting youth and upwardly mobile in India
Valuation and Recommendation:-
Senco Gold has positioned well in the eastern India and other non-eastern regions with its legacy of last five decades of journey. It has delivered 24% revenue growth over FY21-23 with margin improvement from 6.6% in FY21 to 7.8% in FY23. Although, company’s decent performance in terms of profitability amongst its peers, it has observed challenges generating positive operating cash flow during the last 2 years. Further, debt to equity ratio at 1.2x as on Mar’23 may lead to further contraction in company’s profitability. However, the IPO is issued at 15.5x PE valuation based on its FY23 EPS which is at discount relative to average PE valuation of its peers. Thus, we recommend ‘SUBSCRIBE’ to the issue for listing gains.
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SEBI Registration number is INH000001766
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