AJC Jewel BSE SME IPO review (Avoid)

•    The company is primarily engaged in the business of manufacturing and designing wide range of wholesale gold jewelleries.
•    It marked growth in its top and bottom lines for the last three fiscals.
•    First nine months of FY25 indicates declining trends in its top and bottom lines.
•    Based on its recent financial data, the issue appears aggressively priced.
•    It is operating in a highly competitive and fragmented segment.
•    Post-IPO, small equity base indicates longer gestation for migration to mainboard.
•    There is no harm in skipping this pricey bet.

ABOUT COMPANY:
AJC Jewel Manufacturers Ltd. (AJML) is primarily engaged in the business of manufacturing and designing the wide range of wholesale Gold Jewelleries which includes plain gold, studded and named jewelleries available in 22karat and 18Karat. As at December 31, 2024, plain gold, studded gold and named Jewelleries contributed 33.45%, 42.12%, and 6.34%, respectively of its revenue from operations. The Company manufacturers the finished gold jewelleries from the raw gold i.e., bullions and required consumables and sell it to dealers, showrooms, corporates and small jewellery shops in the wholesale quantities.

It provides an extensive range of jewellery designs of plain gold, rose gold, the jewelleries studded with Cubic Zircon and / or coloured stones and named jewelleries customized and designed in detail, keeping in mind the customer’s unique preferences and requirements. AJML manufactures jewelleries for three categories of Individuals men, women and children.

The company caters to a large number of local dealers, showrooms and small-scale jewellery shops who buy its products in bulk quantities. It caters to a variety of customers across mid-market and value market segments and products are designed by its in-house team of designers who are CAD designers and also certain freelance designers, allowing it to manage a large and diverse portfolio of designs. Its product range includes Anklet, Bangle, Bracelet, Earrings, Necklace, Nose Pin, Pendant, Ring and customized named jewelleries (like Name Bracelet, Name Pendant, Name Ring) based on the dealer’s
orders and end customers preferences and demands. As of February 28, 2025, it had 67 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 1620000 equity shares to mobilize Rs. 15.39 cr. at the upper cap. The company has announced a price band of Rs. 90 – Rs. 95 per share of Rs. 10 each. The issue opens for subscription on June 23, 2025, and will close on June 26, 2025. The minimum number of shares to be applied is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.70% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 2.63cr. for capex on new equipments, Rs. 8.90 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes. 

The IPO is solely lead managed by Smart Horizon Capital Advisors Pvt. Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Rikhav Securities Ltd. is the market maker, and Shreni Shares Ltd. is a syndicate member.

The company has issued/converted initial equity shares at par value. The average cost of acquisition of shares by the promoters is Rs. 6.50, Rs. 7.23, and Rs. 10.29 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 4.45 cr. will stand enhanced to Rs. 6.07 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 57.65 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 127.40 cr. / Rs. 1.26 cr. (FY22), Rs. 194.25 cr. / Rs. 2.04 cr. (FY23), Rs. 246.84 cr. / Rs. 3.32 cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 1.85 cr. on a total income of Rs. 175.53 cr. It posted growth in its top and bottom lines for the last three fiscals. For 9M of FY25, its top and bottom line indicates degrowth (purely on arithmetical basis). 

For the last three fiscals, the company has reported an average EPS of Rs. 7.25 and an average RoNW of 27.47%. The issue is priced at a P/BV of 3.04 based on its NAV of Rs. 31.24 as of December 31, 2024, but its post-IPO NAV data is missing from the documents. The company is operating in a highly competitive and fragmented segment.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 23.34. Based on FY24 earnings, the P/E stands at 17.37. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 0.99% (FY22), 1.05% (FY23), 1.35%, (FY24), 1.06% (9M-FY25), and RoCE margins of 17.78%, 11.31%, 17.47%, 11.94% for the referred periods, respectively. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Sky Gold, and Patdiam Jewellery as their listed peers. They are trading at a P/E of 38.1, and 13.7 (as of June 18, 2025). However, they are not truly comparable on an apple-to-apple basis. These peers compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 8th mandate from Smart Horizon in the last two fiscals.  From the last 6 listings, 1 opened at discount, 1 at par, 1 at discount, and the rest with a premium ranging from 4.44% to 90.00% on the listing date.