Retaggio Ind. BSE SME IPO review (Avoid)

•    The company is engaged in the manufacturing of all kind of gold and diamond/precious stone jewelleries.
•    It posted boosted financial performance for FY23 and FY25.
•    Based on its annualized FY25 earnings, the issue is aggressively priced.
•    The company is operating in a highly competitive and fragmented segment.
•    There is no harm in skipping this pricey and “High Risk/Low Return” bet.

ABOUT COMPANY:
Retaggio Industries Ltd. (RIL) a Jewellery manufacturing company with a strong presence and experience in catering to B2B segment of the industry. It specializes in the production and sale of a wide range of jewellery products, including gold jewellery, diamond jewellery, precious stones, and other fancy jewellery and bullion in the form of coins and bars. Jewellery manufacturing is the process of designing and creating jewellery, including rings, bangles, necklaces, bracelets, earrings, and other types of decorative pieces. 

The company specializes in crafting heritage and high-end jewellery pieces, emphasizing craftsmanship and unique designs. Jewellery manufacturing is a skilled trade that requires experience, attention to detail, and creativity. Mass-produced jewellery is often made using automated processes, while custom-made jewellery is crafted by hand and may take longer to produce. The quality of the final product is largely dependent on the skills of the manufacturer, and it is passionate about crafting beautiful, high-quality jewellery that tells a unique story. 

Right from the initial design phase to the final product, every step of the manufacturing process is carefully planned and executed to create pieces that are both stunning and durable. It also has display centre at registered office. As of March 03, 2025, it had 15 employees on its payroll

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 6198000 equity shares of Rs. 10 each at a fixed price of Rs. 25 per share to mobilize Rs. 15.50 cr. The issue opens for subscription on March 27, 2025, and will close on April 01, 2025. The minimum number of shares to be applied is for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 39.82% of the post-IPO paid-up capital of the company. The company is spending Rs. 2.10 cr. for this IPO process and from the net, the company will utilize Rs. 1.90 cr. for repayment/prepayment of certain debt facilities, and Rs. 11.50 cr. for working capital. 

The IPO is solely lead managed by Gretex Corporate Services Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Gretex Share Broking Ltd., is the Market Maker for the company. The issue is underwritten 50% each by Gretex Corporate Services Ltd., and Gretex Share Broking Ltd.

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 40 per share in November 2022 and December 2022. It has also issued bonus shares in the ratio of 2 for 1 January 2023 2023. The average cost of acquisition of shares by the promoters is Rs. 3.33, Rs. 12.97, and Rs. 13.33 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 9.37 cr. will stand enhanced to Rs. 15.57 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 38.92 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit/ -(loss) of Rs. NIL cr. / Rs. – (0.01) cr. (FY22), Rs. 23.07 cr. / Rs. 3.09 cr. (FY23), Rs. 23.28 cr. / Rs. 3.34 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 0.81 cr. on a total revenue of Rs. 9.03 cr. 

For the last three fiscals, the company has reported an average EPS of Rs. 4.26 and an average RoNW of 13.29%. The issue is priced at a P/BV of 1.21 based on its NAV of Rs. 20.70 as of September 30, 2024, and at a P/BV of 1.19 based on its post-IPO NAV of Rs. 21.06 per share.

If we attribute FY25 annualized earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 24.04. Based on FY24 earnings, the P/E stands at 11.63. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of NA% (FY22), 13.40% (FY23), 14.35%, (FY24), 8.99% (H1-FY25), and RoCE margins of – (14.68) %, 15.84%, 17.04%, 5.01% for the referred periods, respectively. 

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. 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 Eighty Jewellers, and Khazanchi Jewellers, as its listed peers. They are trading at a P/E of 13.8 and 51.7 (as of March 25, 2025). However, they are not truly comparable on an apple-to-apple basis. Peers compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 26th mandate from Gretex Corporate in the last three fiscals.  From the last 11 listings, 2 opened at discount and the rest opened with a premium ranging from 17.36% to 187.36% on the listing date.