IPO NOTE : International Gemmological Institute (India) Ltd by Motilal Oswal Financial Services Ltd
Commanding Leadership in the Industry: As per Redseer report, IGI is world’s 2 nd largest independent certification and accreditation service provider for diamonds, studded jewelry and colored stones, with a global market share of 33% based on the number of certifications in CY23. It is the largest player in India, holding 50% market share as of CY23.
High growth opprtunity: The global jewellery market is expected to grow at a steady 3-6% CAGR until CY28 (source: Redseer), demand for certification is expected to increase rapidly. The shift towards organized jewellery retail channels, combined with increased awareness among consumers is boosting demand for jewellery certifications.
First mover advantage in LGD certification: IGI was the first among its peers to issue certification for laboratory-grown diamonds (LGD) in CY05 and has become the global leader in LGD certification, with 65% market share. LGD demand is expected to grow at 15% CAGR from CY23 to CY28, driven by changing consumer preferences towards more affordable, sustainable and ethical options. This is expected to drive 25% growth in LGD certification by CY28.
Strong Financials: IGI India’s revenue grew at a CAGR of 32% between CY21-23 backed by its rich brand heritage. It has consistently maintained high EBITDA /PAT margin of ~70%/50%, which post acquisition will come down but still remain healthy at 55%/37% (as of CY23). Company has strong free cashflows, sufficient to meet its working capital requirements. It has constantly delivered high ROE over the past years (77% in CY23).
ssue Size and Objects: ?42.25 bn IPO comprises of ?27.5 bn OFS, by the promoter BCP Asia II TopCo Pte (Blackstone), which will continue to hold 77% share post-IPO. Balance ?14.75bn is being raised via fresh issue, the proceeds will be used to fund the acquisition of IGI Belgium and IGI Netherlands from the Promoter.
View: With proposed acquisition of overall international business of the group, IGI shall be even better placed as a segment leader globally. It operates in a fast growing, oligopolistic market which provides huge growth potential and reduces scope for new competition. At the upper price band of ?417, IGI is valued at 41.5x CY24E P/E (on an annualized and diluted basis), which looks attractive, given it is one of a kind IPO (with no listed peers). IGI holds a stellar financial track record with 38% P
