Review By Dilip Davda on May 5, 2018
U H Zaveri Ltd. (UHZ) has been incorporated as a gems & jewellery company. Its business operations are divided into two divisions i.e. into wholesale and retail of jewellery and into trading of jewellery. UHZ mainly sells gold jewellery and marginal percentage of revenue is earned through silver jewellery and other kind of jewellery and utensils. It does not manufacture but outsourced. However, the jewellery sold by it is either designed in house or through 3-D jewellery designer or by third party designers or purchase ready to sell jewellery directly from manufacturers. It’s registered office address and showroom address is the same, i.e., in Nikol Road, Ahmedabad and does not have any other outlet in India or abroad. It sells unique collection of contemporary, antique, kundan, polka and temple jewellery. Its products have presence across different price points and cater to customers across high-end, mid-market and value market segments.
To part finance its working capital and general corpus fund needs, UHZ is coming out with a maiden IPO of 2220000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilize Rs. 7.99 cr. Issue opens for subscription on 08.05.18 and will close on 14.05.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by First Overseas Capital Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 36.30% of the post issue paid up capital of the company. Having raised initial equity at par, it raised further equity at a price of Rs. 760 per share and then issued bonus in the ratio of 50 for 1 in February 2018. Average cost of acquisition of shares by the promoters is Rs. 0.20 and Rs. 14.06 per share. Post issue, its current paid up equity capital of Rs. 3.90 cr. will stand enhanced to Rs. 6.12 cr.
The company was incorporated on 28th August 2017 and hence has just about five month’s track record. For the period ended on 31.01.18 it has earned net profit of Rs. 0.75 crore on a turnover of Rs. 13.89 crore. As per offer documents it has posted an EPS of Rs. 1.92 (Not annualized n undiluted) and RoNW of 12.87% (for the five months period ended 31.01.18). If we annualize latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 20 plus against industry average of around 35. Issue is priced at a P/BV of 2.42 on the basis of its NAV of Rs. 14.90 as on 31.01.18 and at a P/BV of 1.60 on the basis of post issue NAV. As per offer documents it is showing Goldiam Intl, Renaissance Jewellery and Uday Jewellery as its listed peers that are trading at a P/E of around 10, 9 and 35 (as on 04.05.18). Current weak sentiment for jewellery segment is raising concern.
On merchant banker’s front, this is 17th mandate from its stable in last four fiscals. Out of last 10 listings, 7 issues opened at discount to offer price, 3 with a premium ranging from 1 to 10% on the day of listing. Thus it has poor track record.
Company has just five months working. Issue pricing appears aggressive. Merchant banker has poor track records. Considering current status of sentiment for jewellery segment, there is no harm in giving this issue a miss.
Review By Dilip Davda on May 5, 2018
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of U.H.Zaveri Ltd. offers an early investment opportunity in U.H.Zaveri Ltd.. A stock market investor can buy U.H.Zaveri IPO shares by applying in IPO before U.H.Zaveri Ltd. shares get listed at the stock exchanges. An investor could invest in U.H.Zaveri IPO for short term listing gain or a long term.
Read the U.H.Zaveri IPO recommendations by the leading analyst and leading stock brokers.
U.H.Zaveri IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the U.H.Zaveri IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is U.H.Zaveri IPO?"
Our recommendation for U.H.Zaveri IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the U.H.Zaveri IPO.
The U.H.Zaveri IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit U.H.Zaveri IPO allotment status to check.
