P N Gadgil Jewellers Company is coming up with its IPO fresh issue of Rs. 850 crores and offer for sale worth Rs. 250 crores, totalling Rs. 1,100 crores, which will open on 10^th September 2024. The issue will close on 12^th September 2024 and be listed on the exchange on 17^th September 2024. In this article, we will look at the P N Gadgil Jewellers IPO Review and analyze its strengths and weaknesses. Keep reading to learn about the company.

P N Gadgil Jewellers IPO – About the Company

The company was incorporated in 2013. PNG Jewellers is a prominent jewelry brand in Maharashtra, India. The company operates 33 retail stores across 18 cities in Maharashtra, Goa, and one in the U.S. with approx retail area of 95,885 sq. ft. PN Gadgil offers a wide range of gold, silver, platinum, and diamond jewelry under its flagship brand ‘PNG’ and various sub-brands. The company focuses on both traditional and modern designs for weddings, festivals, and daily wear.

PNG Jewellers employs a multi-channel approach, with its physical stores and an online presence through its website and mobile app. Over 75 skilled artisans carry out the manufacturing for the company. PNG maintains strict quality control measures, including BIS hallmarking for gold jewelry and certifications for diamond products. This commitment to quality has helped build customer trust and brand loyalty.

The company uses diverse marketing strategies to improve brand awareness, including location-based marketing, event-focused campaigns, and celebrity brand ambassadors. They have experienced growth in recent years, achieving the highest increase in ROE and improving revenue per store among key organized jewelry players in India between Fiscal 2021 and 2023. The company also boasts the highest revenue per square foot in the industry.

Some of their brands include Saptam, Swarajya, Rings of Love, The Golden Katha of Craftsmanship, Flip, Litestyle, Eiina, PNG Solitaire, Men of Platinum, Evergreen Love, Pratha, and Yoddha.

P N Gadgil Jewellers IPO – About the Industry

The Indian jewellery retail sector reached USD 70 billion in FY 2023, with organized retail making up 37%. The market is expected to grow to USD 145 billion by FY 2028, driven by economic expansion, rising incomes, and increased gold demand. Gold prices are influenced by both supply and demand factors, including mining trends and central bank holdings.

In FY 2023, jewellery accounted for 66% of India’s gold consumption, while bars and coins made up 34%. Jewellery is projected to grow at 17% over the next five years, reaching a 62% market share by FY 2028. Bars and coins are expected to grow faster at 21% CAGR, reaching a 38% market share.

Bangles and chains dominate Indian jewellery sales, contributing 60-70% of total sales. Necklaces account for 15-20%, popular during festivals and weddings. Rings and earrings make up the remaining 5-15%. Southern states lead in gold jewellery consumption, contributing 40% of the market, followed by western states at 25%.

P N Gadgil Jewellers IPO – Financial Highlights & Segments

P N Gadgil Jewellers reported revenue from operations of Rs. 4,507.51 crores in FY23, and Rs. 2,555.63 crores in FY22. Net Profits in FY23 stood at Rs. 93.70 crore, and Rs. 69.51 crore in FY22 respectively. The company had a jump in profits of 34.79% YoY from FY22. They recovered from a loss of around 6.71 crore in FY21.

The majority of the expenses are spent on acquiring materials which is around 91.96% compared to revenue. Other expenses form around 3.64% of the revenue. In other expenses, the major expenses were discount expenses, Advertisement expenses, and Shop Repairs and there was a write-off in doubtful advances and assets which was related to their subsidiaries ending up liquidated.

Ratio Analysis

PAT Margins in FY23 were 2.08% compared to 2.72% in FY22. In FY23, the EPS was Rs. 16.97 per share and Rs. 12.59 per share in FY23. This is an improvement from a loss of Rs. 1.22 in FY21. The increase in EPS is a result of revenue growth.

The company’s debt-to-equity ratio stood at 0.78 in FY23 compared to 1.05 in FY22. In FY22, the Company’s RoE was 28.03%, which was lower than 28.93% in FY23. The increase in RoE was due to an increase in profits greater than the rise in reserves. Even revenues increased YoY resulting in returns growth. 

The RoCE stood at 23.57% in FY23 compared to 20.83% in FY22. The improvement in revenue and profits has aided the ratio. Inventory Turnover ratio stood at 6.93 in FY23 compared to 3.81 in FY22.

Segment

P N Gadgil Jewellers recognises its revenue from operations under jewellery business. Their revenue from India accounts for around 97.38%, UAE is around 0.88% and the USA is 1.73% in FY23. As of H1FY24, the UAE business does not contribute to the revenue as they closed their store in that region.

P N Gadgil Jewellers IPO – Listed Key Players 

The listed peers of P N Gadgil Jewellers are Joyalukkas India Limited, Malabar Gold Limited, Kalyan Jewellers India Limited, Senco Gold Limited, Thangamayil Jewellery Limited, and Titan Company Limited.

Compared to its peers, The PAT margins of P N Gadgil Jewellers stood at 2.08% which is in the lower range of its peers. The peers ranging from 2.08% to 6.20%, comparably, P N Gadgil has underperformed its peers. 

The EBITDA margin is used to understand efficiency in operations. The range was around 3.87% to 10.54% and P N Gadgil was at the lower end compared to his peers. For Titan, the details are not available. However, P N Gadgil is near the lower range of its peers. 

The RoE of P N Gadgil was 25.09% which is in the higher range of its peers and RoCE followed the same trend as RoE. The RoE growth was due to higher profits and revenue which ensured better returns compared to its peers. 

Operational revenue per store for P N Gadgil is around Rs. 132.57 crore which is near to the higher range of its peers. The range is from 30 crore to 165 crore. Revenue from operation per square feet for P N Gadgil which is around Rs. 4,73,953.27/sqft is higher than its peers. 

Overall the P N Gadgil Jewellers performed par in some parameters and underperformed in some with the peers. 

Strengths of the Company

1. Brand Legacy: PNG Jewellers leverages its legacy brand dating back to 1832. The company offers a wide range of traditional and modern jewelry designs. This projects a strong heritage and customer trust and loyalty.
2. Market Position: The company holds the position of the second-largest organized jewelry retailer in Maharashtra by store count. PNG shows rapid growth, achieving high revenue per square feet growth and return on equity between 2021 and 2023 among key jewelry players in India.
3. Diverse Product Portfolio: PNG offers around 38,000 SKUs across gold, silver, platinum, and diamond jewelry. Its 12 sub-brands cater to various occasions and price points. This diverse portfolio serves customers of all income levels and age groups.
4. Quality Measures: The company maintains strict quality control measures. PNG has implemented BIS hallmarking for gold jewelry since 2007 and ensures certifications for diamond products. Regular quality checks build customer trust and maintain product standards.
5. Financial Performance: PNG demonstrates strong financial performance. The company’s revenue from operations grew at a CAGR of 52.82% from 2021 to 2023. It also achieved the highest revenue per square foot among key organized jewelry players in India in 2023.

Weaknesses of Company

1. Company Brand Issues: The company relies heavily on its brand reputation. Any damage to their brand image can harm their financial condition and operations. There are some issues regarding owning the brand and used by the family under various names.
2. Operational Concentration: Their business concentrates primarily in Maharashtra. This geographic focus makes them vulnerable to local economic conditions, or political changes in the region. A major disruption in Maharashtra could impact their overall business performance.
3. Store Dependency: The company depends heavily on its top five stores for revenue generation. The underperformance of these key stores could affect their financial performance. They need to diversify their revenue sources to reduce this dependency.
4. Stress on Working Capital: PNG requires substantial working capital to purchase raw materials and expand operations. The inability to secure adequate financing on favorable terms might impact their growth potential and increase borrowing costs which could negatively impact their profitability.
5. Expansion problems: The company faces challenges in opening and managing new stores. They opened only four new stores between Fiscal 2021 and 2023, averaging two per year. Slow expansion and potential store closures due to underperformance could hinder their growth plans.

P N Gadgil Jewellers IPO – GMP

The shares of P N Gadgil Jewellers Ltd’s price in the grey market were trading at a 47.92% premium as of September 9^th, 2024. The shares in Grey Market traded at Rs.710. This gives it a premium of Rs.230 per share over the cap price of Rs. 480. 

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P N Gadgil Jewellers IPO – Key IPO Information

Promoters: Saurabh Vidyadhar Gadgil, Radhika Saurabh Gadgil, and SVG Business Trust.

Book Running Lead Manager: Motilal Oswal Investment Advisors Limited, Nuvama Wealth Management Limited and BOB Capital Markets Limited.

Registrar to the Offer: Bigshare Services Private Limited.

The Objective of the Issue

1. Capital expenditure funding is required to set up 12 new stores in Maharastra, which will cost Rs. 392.56 crore.
2. Prepayment or repayment of outstanding borrowings availed by the company – Rs. 300 crore.
3. General Corporate purposes.

Conclusion

P N Gadgil Jewellers is one of the prominent jewellery sellers, especially in Maharashtra. The company leverages its business through its brands and recently it has reflected on the financials. Their debt-to-equity ratio and their profitability have improved. PNG is planning on expansion through opening new stores and cutting down debt which might be beneficial for the company’s growth. However, the low store increase coupled with some closures in key markets is one of the key challenges faced by the company on the execution part. 

So what do you think of this company? Can the company be able to increase its market presence and maintain growth based on its competition with peers? What is your view? Let us know in the comments below.

Written by Santhosh

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