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Veerkrupa Jewellers

• Veerkrupa Jewellers is coming out with an initial public offering (IPO) of 30,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 27 per equity share.

• The issue will open on June 29, 2022 and will close on July 05, 2022.

• The shares will be listed on SME Platform of BSE.

• The share is priced 2.70 times higher to its face value of Rs 10.

• Book running lead manager to the issue is First Overseas Capital.

• Compliance Officer for the issue is Ankit Purushottam Sanchiher.

Profile of the company

The company commenced its operations by setting up a showroom in Naroda, Ahmedabad and over the years it had opened its 2nd show room in Narol, Ahmedabad. Its Showrooms with an area of 1050 square feet offer luxurious experience and customer services. Its collection of jewellery in both the showrooms reflects regional customer preferences and designs. Its wide range of jewellery designs, across various price points caters to customers across all market segments. The company’s jewellery business includes the sale of jewellery made of gold, silver, studded and other jewellery products that include diamond, platinum and other precious and semi-precious stones. Its product profile includes designer, traditional, modern and combined designs of jewellery at best prices. The variety of jewellery offered enhances its efficiency and enables it to attract and retain the ever growing customer base and relationship. Its aim and focus on design and innovation, its ability to recognize consumer preferences and market trends, the intricacy of its designs and the quality of its products are its key strengths.

The company essentially sell wide range of products for different occasions including special occasions, such as weddings and party-wear, jewellery for personal milestones, festival jewellery, daily-wear jewellery, kid’s jewellery and men’s jewellery. Each collection serves customers with different needs and preferences for different designs at various and best price range. Its jewellery is made of gold, silver, studded and other jewellery products that include diamond, platinum and other precious and semi-precious stones. Its product profile includes designer, traditional, modern and combined designs of jewellery such as earrings, chains, bracelets, gold/silver bars, Bands, Mandalsutra, Pendant sets and chains, Anklets, Waist Belts and necklaces. Besides this, it also sells Hand tools, pooja items, decorative items in silver. Its wide range of product offerings caters to diverse customer segments, from the high-end to mid-market and value market segments. It sale its jewellery from its showrooms located in Naroda and Narol. The gold, silver, diamond and other jewellery inventory in the showrooms reflect regional customer preferences and designs. Some of its highest selling products are rings, earrings, chains, mangalsutra, bracelate.

Proceed is being used for:

• Meeting the working capital requirements.

• General corporate expenses.

Industry overview

India’s gems and jewellery export sector—which is one of the largest in the world—contributed around 27% to the global jewellery consumption in 2019. Market size of the global gems and jewellery sector is likely to expand to $ 103.06 billion between 2019 and 2023. India’s gems and jewellery exports are expected to reach $ 100 billion by 2025. Globally, India was the top exporter of diamonds with a share of 20.6% in 2020. India has 10 special economic zones (SEZ) for gems & jewellery. These zones have more than 500 manufacturing units, which contribute 30% to the country’s total exports. In 2019, India’s gems & jewellery export sector—which is one of the largest in the world—contributed around 27% to the global jewellery consumption. Market size of the global gems & jewellery sector is likely to expand to $ 103.06 billion between 2019 and 2023.

As per Union Budget 2021, the Gem and Jewellery Export Promotion Council has proposed a reduction in import duty on cut and polished diamonds to 2.5%, from the existing 7.5%, in order to double exports of gems & jewellery to $ 70 billion by 2025, up from $ 35 billion in 2020. According to Gem and Jewellery Export Promotion Council, between April 2020 and December 2020, gold bars accounted for 6.8% ($ 678.77 million) and gold jewellery at 1.8% ($ 181.49 million) of the total gems and jewellery imports in India. As per the World Gold Council (WGC), India’s gold demand stood at 446.4 tonnes in 2020. In India, gold demand in terms of volume increased by 37% YoY to 140 tonnes and in value terms, the demand increased by 57% YoY to Rs. 58,800 crore ($ 7.9 billion) in the first quarter of 2021. In the second quarter of 2021, gold demand in terms of volume increased by 19% YoY to 76 tonnes and in value terms, the demand increased by 23% YoY to Rs. 32,180 crore ($ 7.9 billion).

Pros and strengths

Use of the established Brand name: Over the years “Veerkrupa Jewellers” has established itself as a renowned brand in northeast of central Ahmedaba- Naroda and Narol and the adjoining areas. Its brand name “Veerkrupa Jewellers” provides it with the advantage of the customers relying on the quality of the product. Over the years, through the customer centric approach, its core focus on maintaining the customer trust and transparency, has been rewarded and contributed towards brand recognition and customer loyalty. All of its gold jewellery is hallmarked by BIS except gold jewellery weighing less than two grams which is not required to be hallmarked.

Diversified product portfolio across categories and price points: The company’s products are sold under the brand name of 'Veerkrupa' and under stringent quality control processes, including various official and other tests for different jewellery. Each collection serves customers with different needs and preferences for different designs. Its products cater to different occasions including special occasions, such as weddings and party-wear, jewellery for personal milestones, festival jewellery, daily-wear jewellery, kid’s jewellery and men’s jewellery. Its products are available in multiple jewellery options, including earrings, chains, bracelets, gold/silver bars, Bands, Mandalsutra, Pendant sets and chains, Anklets, Waist Belts and necklaces. Besides this, it also sells Hand tools, pooja items, decorative items in silver. It cater to customers across age groups, at various price points which ensure that it is able to serve its customers across the entire lifecycle of their jewellery requirements.

Well established and cordial relationship with supplier: The company’s access to local jewellery job workers/ manufacturers allows it to offer quality and a diverse product range. It actively engages with such job workers/ manufacturers to ensure that the products are as per its specifications and suggested designs. This long standing relationship enables it to procure timely delivery of raw materials, quality and customized manufacturing of jewellery`s. This arrangement has been beneficial for it as it is able to successfully execute its orders on time and develop strong relationships without suppliers and customers.

Risks and concerns

The company may fail to protect its jewellery designs: The company changes its jewellery designs on a regular basis and do not register such designs under the Design Act, 2000. As such, it would be difficult for it to enforce its intellectual property rights in its designs. If its competitors replicate its product designs available on its website or designs given to third-party contractors, it could lead to a loss of revenue, which could adversely affect its results of operations and financial condition. Further, it manufacture through its network of contract manufacturers where it provide raw material and designs to such contractors. While it supervise and has limited control over the entire manufacturing process, the contract manufacturers could make the same or similar jewellery for other parties, including its competitors. If its contract manufacturers produce the same or similar jewellery for its competitors, its customers may no longer purchase its jewellery or look to its competitors for similar jewellery, which could negatively impact its results operations and financial condition.

Requires significant amount of working capital: The company’s business requires significant amount of working capital including fund requirement for payment for bulk purchases of various designed and trending jewellery and raw materials. Hence, major portion of its working capital is utilized towards debtors and inventory. The results of operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. However, if its management fails to manage its inventory or misjudges expected clients demand or shortage of materials/ products or an accumulation of excess inventory or accurately evaluate the credit worthiness of its clients, it may lead to bad debts, delays in recoveries and / or write-offs which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

Strong competition: The jewellery sector is highly fragmented and competitive. The company would not only compete with organized players but also a high percentage of unorganized entities such as individual jeweler’s, retailer stores, jewellery showrooms and galleries and small scale companies. Some of them may offer better designs and patterns to the clients and may be capable of providing more personalized services to each client due to the smaller number of orders placed with them. Further, these unorganized entities offer their services at highly competitive prices having well established presence in their local markets. Aggressive discounting by competitors, including liquidating excess inventory, may also adversely impact its performance in the short term.

Outlook

Veerkrupa Jewellers is engaged in the jewellery business including the sale of silver, gold, studded and other jewellery products. The company's jewellery is made of gold, silver, studded and other jewellery products that include diamond, platinum and other precious and semi-precious stones. It has two showrooms located at Naroda and Narol has an average size of 1050 square feet and 13 staff, the majority of them are sales personnel. Its products are available in multiple jewellery options, including earrings, chains, bracelets, gold/silver bars, Bands, Mandalsutra, Pendant sets and chains, Anklets, Waist Belts and necklaces. Besides this, it also sell Hand tools, pooja items, decorative items in silver. It caters to customers across age groups, at various price points which ensure that it is able to serve its customers across the entire lifecycle of their jewellery requirement. Its business is consumer-centric. Experience of its promoters has significantly contributed to the growth of its business operations and revenues. On the concern side, the company’s business is experience significant increase in its sales during the festive, wedding season and other significant seasons like Christmas, Diwali season, Gudi Padwa, Dhanteras etc. Any significant shortfall in sales or its inability to cope up with the growing demands during this periods during these periods, would affect its profitability and it would experience adverse effect on its results of operations. Besides, the company has not taken any insurance cover at present. Hence, it may not be able to protect ourselves from any damage or loss suffered by it.

The company is coming out with a maiden IPO of 3000000 equity shares of Rs 10 each at a fixed price of Rs 27 per share to mobilize around Rs 8.10 crore. On performance front, during the year 2020-21, the total revenue of firm has decreased to Rs 463.76 lakh as against Rs 1260.62 lakh in year 2019-20 showing a decrease of 63.21%. This is primarily due to Covid-19 impact during Fiscal 2021. Profit After Tax (PAT) for Financial Year 2020-21 has decreased to Rs 1.07 lakh from Rs 9.04 lakh in Financial Year 2019- 20, a decrease of around 88.16% over the previous year. Meanwhile, the company intends to leverage the scalability of its operations and expertise in developing the branded jewellery market in Gujarat to grow its network in existing and newer geographies within Gujarat. To maintain its operational efficiency, the company intends to continue to develop its existing branded jewellery lines and introduce additional designs and seasonal product offerings to cater to its customers, and develop its jewellery markets through expansion of its retail operations.