IPO Note : P N Gadgil Jewellers Limited by Nirmal Bang Ltd
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BACKGROUND
P N Gadgil Jewellers Ltd offers an extensive range of precious metal and jewellery products, including gold, silver, platinum, and diamond jewellery under its brand name “PNG.” The company provides a diverse array of designs and price ranges to cater to various customer preferences. As of July 31, the company operates 39 stores, with 38 stores across 18 cities in Maharashtra and Goa, and one store in the United States, encompassing a total retail space of ~1,08,282 square feet.
Details of the Issue:
* Total issue of ~Rs. 1,100 Cr (at upper price band) consists of fresh issue worth Rs. 850 Cr and offer for sale worth Rs.250 Cr
* Funds worth Rs. 392.6 cr to be utilized towards setting-up of 12 New Stores in Maharashtra, India
* Repayment of loan amounting to Rs. 300 cr
Investment Rationale:
* Successful in developing brand recall combining Tradition with Modern Craftsmanship
* Focus on enhancing accessibility and market share
* Strong business model with healthy financials
Valuation and Recommendation:-
P N Gadgil Jewellers Ltd has been a prominent player in organized jewellery market in Maharashtra, India. It has a second largest position in the state in terms of stores with efficient operations. It has delivered strong performance in FY24 at store level metrics such as Revenue per store, revenue per sq ft, EBITDA per store and PAT per store. On working capital front, the company has been able to manage its inventory days well historically, that has resulted in improved cash conversion cycle from 80 days in FY22 to 51 days in FY24 (well below average of industry peers: 134 days). In FY24, P N Gadgil’s operating margin stood at 4.5% which are lowest in the industry. The company is strategically aiming to boost its profitability by focusing on leveraging economies of scale to reduce costs and enhancing its revenue share of studded jewellery sales. Overall marketing expenses are also to be maintained in the range of 0.6-0.7% of revenue. Despite lower margins, the company has been able to generate strong return ratios, such as ROE of 28.9% and ROCE of 25.7% in FY24 supported by efficient operations which are best in the industry. The issue is valued at P/E of 42.2x to FY24 EPS which is available at discount when compared with industry average of 70x. Thus, we recommend SUBSCRIBE to the issue.
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SEBI Registration number is INH000001766
