Senco Gold IPO to open for subscription on Tuesday; should you subscribe?

The initial public offering (IPO) of Senco Gold (SGL) 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 closed for subscription on Thursday, July 6.

Senco Gold is eyeing to raise Rs 405 crore from its initial stake sale, including 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.

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 for investors.

Senco Gold, 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 unorganized to organized sector. Company has demonstrated one of the best financial performances among peers, said SMIFS Research.

"At a higher price band, Senco is commanding a P/E multiple of 13.9 times (on FY23 EPS on upper price band), which is lower than the peer average. Thus, the IPO is attractively priced. Hence, based on current performance, we assign 'subscribe for listing gain' rating to the issue," he added.

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.

On FY23 financials, the IPO is valued at 15.5 times P/E, 10.1 times EV/EBITDA and 0.8 times EV/sales, at the upper price band, which seems reasonable for the company. While the company’s financials have improved over the last 2 years, its higher concentration in the Eastern region pauses the challenge, said Reliance Securities.

"As the diamond jewelry market is relatively unorganized, expansive product offerings and the plans to venture into other regions in the country to improve its brand recall and customer base would take some more time," it added. "Market growth provides an opportunity for expansion going ahead. Current valuation leaves limited upside. We believe it is more or less fairly valued."

Senco has delivered consistent revenue growth, profitability and RoE over the last 3 years, said SBICap Securities. "The company’s topline and bottomline have grown at a 3-year CAGR of 19 per cent and 20 per cent, respectively. With its strong legacy in the jewelry business, the company is likely to grow its market position in other parts of the country," it said.

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 to the issue. Shares of the company will be listed on both BSE and NSE, with July 14 as the tentative date of listing.


(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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