Shanti Gold IPO review (May apply)

•    The company is engaged in gold jewellery manufacturing and supplying on B2B model.
•    It marked growth in its top and bottom lines for the reported periods.
•    The company is operating in a highly competitive and fragmented segment.
•    Based on recent financial data, the issue appears aggressively priced.
•    Only well-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
Shanti Gold International Ltd. (SGIL) is south based gold jewellery manufacturer and supplier doing business on B2B model. In South India, the tradition of investing heavily in gold jewellery, is deeply ingrained, with families often prioritizing substantial, intricate designs that reflect both wealth and cultural heritage. The emphasis on gold as an investment also drives higher expenditure in this region (Source: CARE Report).

Further, while it is planning to expand its reach, and as part of strategy, the company is planning to (a) geographically expand in North India, (b) set up a new manufacturing facility in Jaipur, and (c) expand its presence in global markets, including the USA and the UAE, any delays or challenges in expanding geographical footprint may expose it to continued dependency on Southern India. January and August month dominates monthly sale of products to the tune of around 11% and 12% in its total revenues. 

SGIL generates the highest amount of revenue in the month of August followed by the month of January since the exhibition for the India International Jewellery Show is held in the months of August and January and January also marks the beginning of the wedding season in India. As of March 31, 2025, the company holds inventory worth Rs. 148.58 cr. As of May 31, 2025, it had 222 employees on its payroll, and additional 100 contract workers.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 18096000 fresh equity shares issue worth Rs. 360.11 cr. (at the upper cap). The company has announced a price band of Rs. 189 – Rs. 199 per equity shares of Rs. 10 each. The issue opens for subscription on July 25, 2025, and will close on July 29, 2025. The minimum application to be made is for 75 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25.10% of the post-IPO paid-up equity capital. From the net proceeds of the issue, the company will utilize Rs. 46.30 cr. for capex on setting up of Jaipur facility, Rs. 200.00 cr. for working capital, Rs. 17.00 cr. for repayment/pre-payment of certain borrowings., and the rest for general corporate purposes. 

The sole Book Running Lead Manager (BRLM) to this issue is Choice Capital Advisors Pvt. Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Choice Equity Broking Pvt. Ltd. is the syndicate member.

After converting initial equity shares at par, the company issued bonus shares in the ratio of 5 for 1 in November 2024. The average cost of acquisition of shares by the promoters is Rs. 1.66 per share. 

Post-IPO, its current paid-up equity capital of Rs. 54.00 cr. will stand enhanced to Rs. 72.10 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 1434.71 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 682.28 cr. / Rs. 19.82 cr. (FY23), Rs. 715.04 cr. / Rs. 26.87 cr. (FY24), Rs. 1112.47 cr. / Rs. 55.84 cr. (FY25). Top 5 and Top 110 customers are contributing around 23% and 34+% respectively in its total revenue. The company posted growth in its top and bottom lines for the reported periods.

For the last three fiscals, the company has posted an average EPS of Rs. 3.67 and an average RoNW of 38.70%. The issue is priced at a P/BV of 7.05 based on its NAV of Rs. 28.22 as of March 31, 2025, and at a P/BV of 2.80 based on its post-IPO NAV of Rs. 71.08 per share (at the upper cap). 

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 25.68. Based on FY24 earnings, the P/E stands at 53.35. Thus, the issue is aggressively priced. 

The company has posted PAT margins of 2.92 % (FY23), 3.78% (FY24), 5.05% (FY25), its RoCE margins of 19.36%, 17.97%, 25.70% respectively for the referred periods.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has already adopted a dividend distribution policy in December 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Utssav CZ Gold, RBZ Jewellers, and Sky Gold as their listed peers. They are trading at a P/E of 21.2, 14.5, and 30.7 (as of July 23, 2025). However, they are not truly compared on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
The BRLM associated with the offer has handled 6 pubic issues in the past three fiscals, out of which no issues closed below the offer price on the listing date.