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Shoora Designs

• Shoora Designs is coming out with an initial public offering (IPO) of 4,24,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 48 per equity share.
• The issue will open for subscription on August 17, 2023 and will close on August 21, 2023.
• The shares will be listed on BSE SME.
• The share is priced 4.80 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Swaraj Shares and Securities.
• Compliance Officer for the issue is Priti Mohata. 

Profile of the company

The company was incorporated in the year 2021 and was engaged in the business of ‘Textiles & Apparel’ Industry and ‘Apparel & Accessories’. However, thereafter in the following year, the object of the company was amended to manufacturing and trading of diamonds and jewelleries. Since, the year of 2022, the company is engaged in the business of procuring rough diamonds through suppliers, internally planning and mapping rough diamonds, and is out souring the process of cleaving, laser cutting and polishing from local job-workers in the domestic market of Surat and is selling of the said polished cut-diamonds to the wholesalers or retailers with business concentration pre-dominantly in Surat, Gujarat and the newly-explored market of Mumbai, Maharashtra.

A substantial majority of its cut and polished diamonds are sold to diamond wholesalers and the jewellery manufacturers in the domestic market of Surat and Mumbai. The revenue from sale of the diamonds is generated through offline market and through its online platform accessible. The online market facilitates and provides the customers with an option to browse variety of diamonds through its catalogue. This catalogue also provides the customers with the price data for each of the products, which thus enables the targeted investor to make a well-informed decisions.  

Proceed is being used for: 

• Working capital requirements
• General corporate purposes

Industry overview

As of February 2021, India’s gold and diamond trade contributed around 7.5% to India’s Gross Domestic Product (GDP) and 14% to India’s total merchandise exports. The gems and jewellery sector is likely to employ around 8.23 million persons by 2022, from around 5 million in 2020. Based on its potential for growth and value addition, the Government declared the gems and jewellery sector as a focus area for export promotion. The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote ‘Brand India’ in the international market. The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the Reserve Bank or the Government of India.

India’s gems and jewellery market size was at $78.50 billion in FY21. Growth in exports is mainly due to revived import demand in the export market of the US and fulfilment of orders received by numerous Indian exhibitors during the Virtual Buyer-Seller Meets (VBSMs) conducted by GJEPC.  

In the coming years, growth in the gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1-2% of the fine jewellery segment by 2021-22. Also, the relaxation of restrictions on gold import is likely to provide a fillip to the industry.

Pros and strengths

Existing distribution and sales networks: India is the largest hub for diamond processing in the world and Surat is the one of the key places of its Diamond industry. Therefore, most of the rough stones polished in Surat. Further majority of active Diamond and Jewellery exporters are based in Mumbai and Surat, which provides a very good platform for trading business. It is established player in domestic market of Gujarat and it is looking forward for expansion of its geographical reach.

Optimum Polishing: The Company is in providing polished products to its customers. The defective pieces found is returned to the customers. This ensures that no defective diamond reaches the customer and ensures reduce rejection. This helps it to create goodwill from its customers.

Repetitive customers: It offers polished diamonds to its customers. It has established relationships with customers and suppliers. The trust and goodwill earned by it over the years, has helped the company in retaining its key customers who assist it in building its client portfolio.  

Risks and concerns

Highly competitive: The markets in which it operates are highly competitive. Its competitors include both organized as well as unorganized local players in the various markets in which it operates. Some of its competitors have achieved significant recognition for their brand names due to their presence over the years. Industry consolidation, either by virtue of mergers and acquisitions or by a shift in market power among competitors, may accentuate these trends or give its competitors an upper hand. In addition, some of its competitors in smaller local markets have advantages of having strong reputations and established trust with customers due to various factors and presence over the years, which could be difficult for it to challenge or replicate in a sustained manner in the future.

Working capital: The business is working capital intensive and requires significant portion of working capital and major portion of which is utilized towards trade receivables and trade payables. Further, the company intends to continue growing by reaching out to newer clients/ customers and also increasing the sales in the existing customers base. Its growing scale and expansion may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of fund, in a timely manner, or at all, to meet the requirement of working capital or pay out of debts, could adversely affect its financial condition and result of its operations.  

Depend on third party job workers: It mainly depends on third party job workers for carrying out various stages of its operations, namely being, cleaving, laser cutting, and polishing of rough diamonds. It does not have specific written agreements with such job workers and accordingly, they are not contractually bound to deal with it exclusively, and it may face the risk of its competitors offering better terms, which may cause them to prefer its competitors over it.  

Outlook

Incorporated in 2021, the company is engaged in the business of procuring rough diamonds through suppliers, internally planning and mapping rough diamonds and is out souring the process of cleaving, laser cutting and polishing from local job-workers in the domestic market of Surat and is selling of the said polished cut-diamonds to the wholesalers or retailers with business concentration pre-dominantly in Surat, Gujarat and Mumbai, Maharashtra. On the concern side, the markets in which it operates are highly competitive. Its competitors include both organized as well as unorganized local players in the various markets in which it operates.

The company is coming out with an IPO of 4,24,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 48 per equity share to mobilize Rs 2.03 crore. On performance front, the company’s total revenue has increased by 1195.43% from Rs 1625.78 thousand in the fiscal year ended on March 31, 2022 to Rs 21,060.82 thousand for the year fiscal period ended on March 31, 2023. Net Profit has increased from profit of Rs 391.39 thousand in the fiscal year ended March 31, 2022 to profit of Rs 1,145.63 thousand for period ended March 31, 2023. Going forward, it plans to establish its presence in the other areas. Its emphasis is on expanding the scale of its operations as well as growing its geographical presence, which it will provide more opportunities to grow it business and revenues.