| For women, jewellery is never enough. And the beautiful display that branded jewellery find in prominant shopping malls these days only makes it tougher for men to say no to their better half. The result: jewellers are sure to make their million. |
| Gitanjali Gems Limited, manufacturers and retailers of diamond and gold jewellery, should surely be a big beneficiary of the fast growth in the branded jewellery segment. Gitanjali owns popular jewellery brands like Nakshatra, Asmi and Gili. |
| The company is entering the market with an IPO of 1.7 crore shares of Rs 10 each by a 100 per cent Book Build Process. The price band has been fixed between Rs 170 and Rs 195 per share amounting to Rs 289 crores on the lower end and Rs 331.5 crores on the higher. |
| Gitanjali will use the proceeds for expansion of its retail operations, setting up a diamond-and-jewellery manufacturing facility at the proposed 'Gems and Jewellery Special Economic Zone' at Hyderabad, for setting up and expanding manufacturing facilities in Mumbai and for future acquisitions. |
| The company's current operations include cutting and polishing the rough diamonds for exports and manufacture and sale of diamond and other jewelery through their retail outlets. |
| As of now, it has two diamond manufacturing facilities located at Borivali in Mumbai and at the Special Economic Zone in Surat apart from a 100 per cent export oriented unit in SEEPZ Mumbai. The latter produces gold and platinum studded jewellery. |
| Besides this, it also has two jewellery-manufacturing facilities at MIDC, Andheri which produce branded jewellery for the retail operations in India. |
| The company's sales for the six month period ending on September 2005 were Rs 1153 crores, half of which came from exports. Its earnings stood at Rs 24.74 crores during the same period, resulting an annual earnings per share (EPS) of Rs 11.78 assuming its earnings would grow on the same lines for the next two quarters. |
| Post-issue, with the diluted equity, the company's EPS is likely to be Rs 8.39. Based on this, PE multiple would be in the range of 20.27-23.24. |
| The company's profits have shown a downward trend for the past three years. However, the profits have grown by 142 per cent from March 2005 to September 2005 due to inorganic growth. |
| During this perid, the company merged with itself three of its fellow group companies- Gemplus Jewellery India Limited, Prism Jewellery Private Limited and Giantti Jewels Private Limited in April 2005 for a consideration of Rs 9.98 crores. |
| The management is optimistic about the future growth mainly because of its retail operations. |
| The company sells its branded and other jewellery products in India through nationwide sales and distribution network consisting of 26 exclusive distributors, 620 outlets including outlets in host stores, 5 standalone stores and 17 stores set up through franchisee arrangements spread across 13 cities and towns. |
| Its strong marketing and distribution network also benefits from the opertaions of another group company outside India invlolved in diamond and jewellery business. |
| The company's branded jewellery lines were among the first branded jewellery products introduced in India. Its first jewellery brand, Gili was selected as 'Superbrand' in 2004 by Indian Consumer Superbrands Council established by Superbrands Pvt. Ltd, an independent arbiter in branding. |
| The branding of jewellery in India now follows the pattern of the international market where 90 per cent of jewellry is sold as a fashion accessory or as everyday wear and not as an investment. |
| Branded jewellery is therefore envisioned as a lifestyle and personality statement. There is also a shift in consumer preference due to the extensive positioning of diamond jewellery as both affordable and contemporary. |
| The company's brands and sub brands are aimed at different customer profiles, various markets and price segments and for various uses and occassions. Like, its gift range is sold through gift shops like Archies, its wedding collection is showcased at various saree showrooms, etc. |
| Gems and jewellery exports stood at Rs 70,375 crores in fiscal 2005 amounting for about 19.7 per cent of Indian exports. Exports from gems and jewellery have also recorded 18.8 per cent Compunded Annual Growth Rate(CAGR) over past five years. |
| India continues to remain a key player in the global diamond industry as a leading diamond processor in the world. The craftsmanship and low cost of indian diamond processors has given India a competitive advantage in diamond cutting and polishing. India accounts for 55 per cent of global polished diamond market in terms of value, 80 per cent in terms of caratage and 92 per cent in terms of pieces. |
| India's exports of gold jewelley were Rs1,731 crores in fiscal 2004-05. Gold exports from India have grown by CAGR of 13.4 per cent over the past five years. UAE and USA are the major export destinations and together constitute approximately 85 per cent of gold jewellery exports from India in fiscal 2005. |
| The stock with a price-earnings multiple of 20-23x may seem overvalued when compared to its nearest competitor-Rajesh Exports, which has a PE multiple of 10.45. But looking at the valuations of Titan which hosts the Tanishq brand, the stock looks reasonably priced. |
| Issue opens: February 16 Issue closes: February 21 |
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