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Kabra Jewels

• Kabra Jewels is coming out with an initial public offering (IPO) of 31,25,000 equity shares in a price band Rs 121-128 per equity share.
• The issue will open on January 15, 2025 and will close on January 17, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 12.10 times of its face value on the lower side and 12.80 times on the higher side.
• Book running lead manager to the issue is Marwadi Chandarana Intermediaries Brokers.
• Compliance Officer for the issue is Hiral Ishan Dave.

Profile of the company

Kabra Jewels operates in the retail jewellery sector, offering a diverse range of gold, diamond, and silver ornaments and its other offerings include gold and silver coins, utensils and other artifacts. The company, guided by its promoters and their team, understands customer preferences and creates designs to meet their needs. Its primary expertise is in designing and it markets its exclusive creations under the brand name “KK Jewels”. It has a diverse product portfolio which includes rings, earrings, pendants, bracelets, chains, necklaces, bangles and other wedding jewellery through which it caters a large number of customers. 

Presently, the company has 6 showrooms under the brand KK Jewels Bridal, KK Jewels Diamond, KK Jewels Silver, KK Jewels Gold, KK Jewels - Atarashi and KK Jewels - Silver Studio, 3 offices and 1 exhibition centre located in the city of Ahmedabad. All of these showrooms are operated and managed by it, and has been taken on rental basis. The gold, diamond and other jewellery inventory in each showroom match customer preferences and designs. Its main strengths are its focus on design and innovation, its understanding of consumer preferences and market trends, the detail in its designs, and the quality of its products.

The company sells its diamond and gold jewellery in the brand name of “KK Jewels” and sells loose solitaire in the brand name of “Only Solitaires”. It designs, get it manufactured and sell a wide range of gold, studded and other jewellery products across various price points ranging from jewellery for special occasions, such as weddings, which is its highest-selling product category, to daily-wear jewellery. It engages local artisans to manufacture jewellery (based on its specifications and designs). It works with local artisans to make jewellery based on its designs that match local tastes in the markets it serves. This helps it to create a product mix and store experience in each showroom.

Proceed is being used for:

• Repayment of certain borrowings availed by the company, in part or full
• Meeting working capital requirements
• General corporate purpose

Industry Overview

The Indian gems and jewellery market consist of gold, silver, and diamond jewellery, along with other precious gems and pearls. India is the world’s second-largest consumer of gold, with 70% of the consumption being in the form of gold jewellery. Further, the Indian jewellery market can be divided into the categories of fine jewellery and costume jewellery, with 95% of the market comprising fine jewellery. 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 the fulfilment of orders received by numerous Indian exhibitors during the Virtual Buyer-Seller Meets (VBSMs) conducted by GJEPC. India’s total gems and jewellery exports reached $37.73 billion in 2022-23. From April-January 2024, India's gems and jewellery exports were at $26.35 billion, a 16.03% decline compared to the previous year's period.

The gems and jewellery industry of India contributes 7% to India’s Gross Domestic Product (GDP). The industry employs more than five million skilled and semi-skilled workforces in the country. The sector contributes about 15.71% of India’s total merchandise exports, accounting for the third largest commodity share. During 2023-24 (until February 2024), the gems and jewellery exports to reach $29.61 billion with a decline in growth of 15.31% from 2022-23. India majorly exports cut and polished diamonds, lab-grown synthetic diamonds, coloured gemstones, synthetic stone, plain and studded gold jewellery, silver and platinum jewellery, imitation jewellery and articles of gold, silver and others. Western Region is a key exporting hub for the gems and jewellery industry contributing almost 74.66% of the total exports in 2022-23. Surat, a city of Gujarat state in the western region of India has more than 450 organised jewellery manufacturers, importers, and exporters, making it the jewellery manufacturing hub of the world.

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 organized 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. The improvement in availability along with the reintroduction of low-cost gold metal loans and likely stabilisation of gold prices at lower levels is also expected to drive volume growth for jewellers over the short to medium term. India has 450 organised jewellery manufacturers, importers & exporters and is the hub for jewellery manufacturing. These players have benefited greatly due to the increasing liberal policies by the government. The demand for jewellery is expected to be significantly supported by the recent positive developments in the industry. India’s gems and jewellery industry is expected to reach $100 billion by 2027.

Pros and strengths

Established brand: The company has proven a track record of a decade. Over the years, it has grown significantly and have establish its brand “KK Jewels” in the jewellery market in Ahmedabad. This brand name has helped the company to earn trust and goodwill of its customers. The company’s well established and recognizable brand and the reputation built by it has and will enable it to increase its customers in the future. The company’s strength lies in its own creations and specialty designs according to the latest tastes and preferences of customers.

Quality of its products: Given that its inventory is produced by third party vendors (Karigars) who are engaged as job-workers, the company has implemented stringent two-stage quality control procedures to ensure standardized quality and purity of the products it sells. Jewellery produced is checked for physical defects, such as structural issues and inconsistencies in polishing and finishing, and is checked for purity with a gold testing machine and hallmarked from third party agencies.

Design and Innovation in its product range: The company has an extensive range of jewellery products in gold, diamond and platinum studded with precious and semiprecious stones such as rings, earrings, pendants, nose rings, bracelets, chains, necklaces, bangles and also make customized jewellery for weddings. The company is dealing in gold jewellery consisting of normal & antique gold jewellery, gold jadtar jewellery, gold polki jewellery, gold kundan meena jewellery, real diamond jewellery, loose diamonds, solitaires and solitaire jewellery, silver jewellery, silver and allied metal utensils and silver articles. Its wide range of product offerings caters to diverse customer segments, from the high-end to midmarket and value market segments and also, cater to different occasions including special occasions, such as weddings and party-wear, jewellery for personal milestones, fashion jewellery, festival jewellery, daily-wear jewellery, kid’s jewellery and men’s jewellery.

Risks and concerns

Significant working capital requirement: The company had total sanctioned limit of Rs 3,950 lakhs towards working capital facilities. The company’s business requires substantial amount of working capital to maintain adequate inventory levels at its six showrooms. In addition to the requirement of funds, the company may need to obtain additional financing in the normal course of business from time to time as it expands its operations. It may not be successful in obtaining additional funds in a timely manner and/or on favourable terms including rate of interest, primary security cover, collateral security, terms of repayment, or at all. If it does not have access to additional capital, it may be required to delay, scale back or abandon some or all of its plans or growth strategies or reduce capital expenditures and the size of its operations may get constrained.

Business risk due to geographic concentration: A significant majority of the company’s retail stores are located in Ahmedabad at Shivranjani Cross Road and Ambali Bopal Road. This geographic concentration exposes the company to potential risks associated with the local market. Any adverse economic conditions, changes in consumer preferences, regulatory changes, infrastructure issues, or natural disasters affecting Ahmedabad could have a material negative impact on the company’s operations and financial performance. Furthermore, the company’s reliance on a single city for a substantial portion of its revenue limits its ability to mitigate risks associated with local market fluctuations and competition. If the economic conditions or consumer behaviour in Ahmedabad were to deteriorate, or if the company’s stores in this region were to face operational disruptions, the company’s results of operations, cash flows, and financial condition could be adversely affected.

High debt-to-equity ratio may limit financial flexibility: The company has maintained a high debt-to-equity ratio of 2.90, 3.22, and 2.74 for FY 2024, FY 2023, and FY 2022, respectively. A high debt-to-equity ratio indicates significant reliance on borrowed funds, which may expose the company to financial and operational risks. Increased debt levels could limit its ability to obtain additional financing on favourable terms, increase its interest payment obligations, and reduce its financial flexibility. In the event of adverse economic conditions, fluctuations in interest rates, or business downturns, its ability to service this debt could be impacted, potentially leading to liquidity challenges, default on debt obligations, or the need to refinance on unfavourable terms. These factors could adversely affect its financial condition, results of operations, and future growth prospects. 

Outlook

Kabra Jewels Limited is engaged in the retail jewelry business, offers a diverse collection of gold, diamond, and silver ornaments. The company designs, manufactures, and sells a wide range of gold, studded, and other jewelry products across various price, ranging from jewelry for special occasions, such as weddings, which is their highest-selling product category, to daily-wear jewelry. The company has well established relationship with the artisans and it also has design and innovation in the product range. On the concern side, the company requires significant amount of working capital for continued growth. Its inability to meet its working capital requirements, on commercially acceptable terms, may have an adverse impact on its business, financial condition and results of operations. Moreover, the company’s income and sales are subject to seasonal fluctuations and lower income in a peak season may have a disproportionate effect on its results of operations.

The company is coming out with a maiden IPO of 31,25,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 121-128 per equity share. The aggregate size of the offer is around Rs 37.81 crore to Rs 40.00 crore based on lower and upper price band respectively. On performance front, during the financial year 2023-24, the net revenue from operation of the company increased to Rs 16,400.17 lakh as against Rs 12,227.07 lakh in the financial year 2022-23 representing an increase of 34.13% which was due to increase in the volume of sale of products by the company. The company’s profit after tax for the year increased by Rs 113.27% to Rs 939.64 lakh in financial year 2023-24 from net profit Rs 440.58 lakh in financial year 2022-23.

The company will continue to add new design to its existing product portfolio to cater to various customer and price segments in the jewellery markets. It endeavours to maintain the quality of its products, and follow strict procedures to ensure quality control, timely delivery and competitive prices. The company intends to strengthen its product development effort by leveraging skills of its employees and focusing on changing trends in the designs of jewellery and customers demand, which will help to increase the sales of the company and retain customers.