Tara Jewels Limited IPO Review (Apply)

During the calendar year 2012 so far we have seen a spat of SME IPOs that were in command with regular IPOs remaining in fray for want of improvement in the secondary market. In the mean time while RINL dared to announced the IPO opening, but deferring it on the last moment on difference of opinion on pricing of the IPO between Govt of India and the BRLMs.

The latest week that just gone by was a week of festival with an important event for stock market as Muhurat Trade, that witnessed negative trends and putting investors in the fray to be on the fence once again. Amidst such scenario, we have a surprised announcement for an IPO from Tara Jewels Ltd. that is coming out with a maiden offer to garner Rs. 180 crore from the market. Details of the issue are as under:

Tara Jewels Ltd (TJL) is in the business of the jewellery manufacturing business for over 10 years. Today it has operations span across the globe in the retail jewellery segment. The company has four manufacturing facilities, one of which is in China. TJL is one of the largest studded jewellery exporters from India since 2006. Tara Jewels growth and continuing market dominance can be attributed to our hall of designs with over 46,465 designs that caters to a diverse audience across five continents and over 20 countries. Our range includes fashion, bridal and handmade bespoke jewellery. Today, Tara Jewels plays a significant role in jewellery exports from India to global markets and caters to retailers across the USA, UK, Europe, Australia, China, South Africa, UAE and Canada. The company is now looking at direct distribution in the growing economies i.e. India and China. The group has shifted its focus from a Commodity Selling Approach to a Branded Marketing Approach. By 31st December, 2012, TJL that currently has 30 stores mulls opening of 20 more by March 2013 to take a tally to 50 stores in India.

To part finance its retail outlet opening plans and to repay debt in part, the company is offering 7977778 equity share of Rs. 10 each with a price band of Rs. 225-230 to mobilize Rs. 179.50 crore. This issue included offer for sale from existing stakeholders to the tune of Rs. 70 crore and the balance by way of fresh issue of equity shares. Issue opens for subscription on 21.11.12 and will close on 23.11.12. Minimum application is to be made for 50 shares and in multiples thereof thereafter. CARE has assigned IPO Grade 3 to this offer indicating at 'average fundamentals of the company'. While issue is lead managed by Enam Securities Pvt Ltd and ICICI Securities Ltd., Link Intime is the registrar to the issue. Its current equity capital of Rs. 19.80 crore consists of two bonus issues in the ratio of 1 for 2 in the year 2006 and 2012. 

On the performance front, the company has (on consolidated basis) posted an average EPS of Rs. 24.80 for last three fiscals and has NAV of Rs. 157.65 as on 31.5.12. This translates the offer price at a P/E of around 9 (against industry average of 17 plus) and at around 1.5 P/BV.