Senco Gold IPO opens for subscription today: Here's what brokerages have to say

The Rs 405-crore initial public offering (IPO) of Senco Gold is set to kick off for subscription on Tuesday, July 04. The company is set to sell its shares in the range of Rs 301-317 apiece with a lot size of 47 equity shares. The issue will be closed for subscription on Thursday, July 6.

The initial stake sale of Senco Gold includes fresh equity shares amounting to Rs 270 crore and an offer for sale (OFS) of Rs 135 crore from its existing shareholders existing SAIF Partners India IV. The net proceeds from the issue shall be utilized towards funding working capital requirements of the company, and general corporate purposes.

Incorporated in 1994, Senco Gold is a pan-India jewelry retailer, which sells its products under its brand name 'Senco Gold & Diamonds' through its 136 showrooms across 96 cities and towns in 13 states throughout the country. It is the largest organized jewelry retailer in eastern India in terms of number of stores.

Senco Gold majorly sells gold and diamond jewelry along with jewelry made of silver, platinum, precious and semi-precious stones, and other metals. It also offers costume jewelry, gold, and silver coins, and utensils made of silver. The company also manufactures machine-made lightweight gold and diamonds jewelry and source jewelry from third-party vendors.

A day ahead of its IPO, Senco Gold raised Rs 121.50 crore from 21 anchor investors by allocating 38,32,807 equity shares at Rs 317 apiece to them, a BSE circular said. Anchor investors included Ashoka Whiteoak Emerging Markets Trusts, Jupiter India Fund, Sundaram Mutual Funds, Bandhan Emerging Business Fund, Templeton India, 3P India Equity Fund among others.

For the financial year ended on March 31, 2023, the company reported a net profit at Rs 158.48 crore, compared to Rs 129.10 crore in the year ended on March 31, 2022, while its total revenue stood at Rs 4,108.54 crore in FY23, which was Rs 3,547.41 crore in the previous financial year.

The company has reserved 50 per cent of the equity shares for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the allocation. Remaining 35 per cent of the equity shares will be allocated to the retail investors.

IIFL Securities, Ambit Capital and SBI Capital Markets are book-running lead managers to the issue, while Kfin Technologies has been appointed as the registrar. Shares of the company will be listed on both BSE and NSE, with July 14 as the tentative date of listing.

Select brokerage firms are positive on the issue and suggest investors to subscribe for it citing the growth potential, strong market share, sound financial performance and structural shift. However, others believe that the issue is aggressively priced, leaving limited upside potential on the table. Here's what a host of brokerage firms said about the IPO of Senco Gold:

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SMIFS Research
Rating: Subscribe for listing gains
Senco, with its strong brand name and a legacy of over five-decade , is well placed to benefit from the expected growth rate in the jewelry industry and also benefit from structural shift from un-organized to organized sector. Company has demonstrated one of the best financial performances among peers. Based on current performance, we assign 'subscribe' for listing gain, said SMIFS.

Geojit Financial Services
Rating: Subscribe
At the upper price band of Rs.317, Senco is available at a P/E of 15.5 times FY23, lower than industry peers' valuations. Improving economic growth, rising urbanisation, increasing disposable income levels, and mandatory hallmarking are positive for the organized players, said Geojit Financial Services with a 'subscribe' rating for the issue on a medium-to-long term basis.

Choice Broking
Rating: Subscribe
At higher price band, Senco is demanding a P/E multiple of 15.5 times to its FY23 earning, which is at discount to the peer average. Considering its dominant market position in eastern India, diversified product offerings and well-managed operations, we are optimistic on the company’s medium-term outlook, Choice Broking added with a 'subscribe' rating for the issue.

Canara Bank Securities
Rating: Subscribed for listing gains
Senco's past financial performance is also robust as its revenue and profit after tax have grown by 24 per cent and 61 per cent in terms of 2-year CAGR, respectively. Debt to equity of the company stands at 1.25 times for FY2023 as compared to industry average of 0.80 times, which can create pressure on the future prospect, said Canara Bank Securities with a 'subscribe for listing gains' rating.

Stoxbox
Rating: Subscribe
Senco also focuses on attaining an optimal balance between their operated showrooms and expanding their asset-light franchise model. They use a hub-and-spoke approach to enter new geographies and optimize their inventory management. We feel the issue is fairly valued, said Stoxbox and recommended a 'subscribe' rating for the issue.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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