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• Kenrik Industries is coming out with an initial public offering (IPO) of 34,98,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 25 per equity share.
• The issue will open on April 29, 2025 and will close on May 6, 2025.
• The shares will be listed on SME Platform of BSE.
• The share is priced 2.50 times higher to its face value of Rs 10. 
• Book running lead manager to the issue is Turnaround Corporate Advisors.
• Compliance Officer for the issue is Zalakben Chintan Gajjar.

Profile of the company

Kenrik Industries has commenced its business in manufacturing, wholesaling and supplying of plain and studded gold Jewellery and Ornaments. The company is mainly focused on traditional Indian jewellery. Its products include handmade gold jewellery studded with precious and semi-precious stones such as diamond, ruby, cubic zirconia etc. Its product portfolio includes rings, earrings, armlet, pendants, nose rings, bracelets, chains, necklaces, bangles, watches, luxury items and other wedding jewellery. Its products cater to the customers across high-end, mid-market and value market segments. The jewelleries are made as per the specific requirements by the customer and the same are manufactured on job work basis at its manufacturing unit situated in Ahmedabad, Gujarat.

Although the company has several regular suppliers with whom it frequently sources its raw material from, the company does not have any fixed supplier contracts. The primary reason for not having any long term supply contracts is the volatility in pricing of the raw material which makes it impossible to have any long term arrangement. The raw material it requires is essentially gold which is a very standardised product and is widely available from a number of suppliers. Availability of raw materials is generally not a big issue in the business. The company maintains full flexibility in sourcing, ensuring that the company can take advantage of competitive pricing and better-quality materials from various suppliers in the market.

The company operates its business in a region that is well known for its dynamic bullion and jewellery market, where numerous buyers and sellers interact, providing the company with ample opportunities to connect with a diverse range of suppliers. This enables it to pivot quickly and choose from a broad range of vendors depending on current market conditions. 

Proceed is being used for:

• Meeting working capital requirements
• General corporate purposes

Industry Overview

India’s gold and diamond trade contributed 7% to India’s Gross Domestic Product (GDP). The gems and jewellery sector has employs 5 million. 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 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.

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. 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

Wide range of products: The company offers a wide range of products, including traditional and contemporary jewellery designs, precious and semi-precious stones, and customized pieces, catering to a diverse customer base. Its catalogue reflects the diversity of its customer base, offering an array of products that span from classic to avant-garde. It provides a spectrum of jewellery pieces that incorporate a variety of gemstones, metals, and design philosophies. Its collection includes bespoke pieces tailored to individual preferences, as well as ready-to-wear items that cater to more immediate tastes. This extensive range ensures that it has something to offer for every occasion, taste, and budget.

Competitive pricing: Despite its high standards of quality, it maintains competitive pricing. Its efficient manufacturing processes and strategic sourcing of materials allow it to minimize costs without compromising on craftsmanship. It leverages economies of scale and continuous process improvements to offer its customers the best value for their investment. This pricing strategy enables it to attract a broad customer base and maintain a strong market position.

Strong distribution network: The company has a well-established distribution network that enables it to reach customers across the country and beyond, ensuring timely delivery and customer satisfaction. Its logistics infrastructure ensures that its products are delivered promptly and securely to retailers and customers alike. It has partnerships with trusted carriers and a presence in key markets that enable it to navigate complex distribution channels. Its robust supply chain management guarantees that it can meet delivery commitments consistently, enhancing customer satisfaction and loyalty.

Risks and concerns

Geographical constrain: Over the three fiscal years from 2021-22 to 2023-24, Gujarat has consistently dominated in terms of the amount and percentage of the total. In 2021-22, revenue in the state of Gujarat accounted for an amount of Rs 2322.30 lakh, representing 71.26% of the total revenue from operations. This increased significantly to Rs 4980.74 lakh (96%) in 2022-23, Rs 6934.85 lakh (97%) in 2023-24 and Rs 4218.40 lakh (100%) as on October 31, 2024. The company’s business is highly vulnerable to regional conditions and economic downturns in the region. Any unforeseen events or circumstances that negatively affect these areas could materially adversely affect its sales and profitability. These factors include, among other things, changes in demographics, population and income levels. 

High inventory costs: Due to the nature of its business, the company maintains a substantial inventory. As of October 31, 2024, the company held inventory valued at Rs 1374.43 lakh. Inventory represented 86.02%, 68.04%, 64.17%, and 56.05% of its total assets for the seven months period ended October 31, 2024 and for the fiscal years ending March 31, 2024, 2023, and 2022, respectively. If any portion of this inventory remains unsold due to factors such as shifts in trends or consumer preferences, it could lead to an accumulation of stock. This increase in inventory could negatively affect its business, cash flow, financial condition, and operational results. Overstocking can also elevate its capital requirements and increase its financing costs, including loans and associated interest. Conversely, understocking can hinder its ability to meet customer demand and impair its operating performance.

Income and sales are subject to seasonal fluctuations: The company’s sales have historically exhibited certain seasonal fluctuations, reflecting higher sales volumes and profit margins during festival periods and other occasions such as Akshaya Tritiya, Navratri, Gurupushyamrut and Dhanteras and wedding season. Apart from higher sales seen during festival season, it also promotes sales on new year to increase its sales. While it stocks certain inventory to account for this seasonality, its fixed costs such as lease rentals, employee salaries, store operating costs and logistics- expenses, which form a significant portion of its operating costs, are relatively constant throughout the year. Consequently, lower than expected sales during certain quarters of the fiscal year or more pronounced seasonal variations in sales in the future could have a disproportionate impact on its operating results for the fiscal year or could strain its resources and significantly impair its cash flows.

Outlook

Kenrik Industries is engaged in the design and distribution of traditional Indian jewellery. The company’s product range features handmade gold jewellery studded with precious and semi-precious stones, including diamonds, rubies, and cubic zirconia. It currently operates under a Business-to-Business (B2B) model, catering to customers across high-end, mid-market, and value market segments. The company places strong emphasis on quality control, inventory management, and business development, ensuring all jewellery is certified by BIS Hallmark. On the concern side, majorly the company’s business is in Gujarat any adverse development affecting such a region may have an adverse effect on its business, prospects, 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 an IPO of 34,98,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 25 per equity share to mobilize Rs 8.75 crore. On performance front, the total income for the financial year ended March 31, 2024, increased significantly by Rs 1,890.14 lakh, from Rs 5,204.14 lakh in the financial year ended March 31, 2023, to Rs 7,094.28 lakhs. This growth is primarily driven by revenue from operations. The combined impact of the above factors led to a substantial growth in profit after tax, surging by Rs 58.63 lakh, from Rs. 47.44 lakh in the financial year ended March 31, 2023, to Rs 106.07 lakh in the financial year ended March 31, 2024. This reflects robust financial performance for the company during this period.

The company would prioritize innovation in its product design and manufacturing processes. This could involve investing in research and development, hiring experienced designers, and creating a culture of creativity and experimentation within the organization. Its strategy involves a multi-faceted approach. Moreover, the company will expand its customer base by targeting new markets and demographics. This could involve developing customized products for specific segments, such as corporate clients or wedding planners, or exploring international markets. Further, it is exploring opportunities in international markets by participating in global trade shows, establishing partnerships with overseas distributors, and launching multilingual marketing campaigns to cater to a global audience.