Sky Gold Ltd. (SGL) is engaged in the business of designing, manufacturing and marketing of gold jewelleries since its incorporation.
BUSINESS
It mainly deals in 22 Karat gold jewellery, offering a wide variety of designs to suit preferences of the end customer.
Company provides an extensive range of designs and also uses studded American diamonds and / or coloured stones in many of jewellery products.
SGL’s product range includes necklaces, rings, pendants, bracelets, earrings and bangles and customized jewellery based on customer demand.
Besides, various clients in Mumbai and nearby areas, it also caters to various jewellery brands.
The company operates from a 2,740 sq. ft. sole manufacturing facility which is located in the heart of Mumbai city in Mulund (West) where it makes casting based jewellery using rubber dye, wax moulds and machines.
ISSUE
To part finance its plans for repayment of loans (from promoters), working capital and general corpus fund needs, SGL is coming out with a maiden IPO of 1420000 equity shares of Rs. 10 each with a fixed price of Rs. 180 per share.
Issue opens for subscription on 18.09.18 and will close on 21.09.18.
SGL mulls mobilizing Rs. 25.56 crore via this issue. Minimum application is to be made for 800 shares and in multiples thereon, thereafter.
Post allotment, shares will be listed on BSE SME. Issue constitutes 26.43% of the post issue paid up capital of the company.
Issue is solely lead managed by Aryaman Financial Services Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue.
Having raised initial equity at par, it raised further equity in the price range of Rs. 50 to Rs. 100 per share between January 2011 and May 2015.
It has also issued bonus shares in the ratio of 3 for 1 in March 2018. Average cost of acquisition of shares by the promoters is Rs. 15.88 and Rs. 15.99 per share.
Post issue its current paid up equity capital of Rs. 3.95 cr. to Rs. 5.37 cr.
PERFORMANCE
On the performance front, for last four fiscals, SGL has posted turnover/net profits of Rs. 127.77 cr. / Rs. 0.82 cr. (FY15), Rs. 183.31 cr. / Rs.0.94 cr. (FY16), Rs. 164.41 cr., Rs. 0.94 cr. (FY17) and Rs. 548.90 cr. / Rs. 2.63 cr. (FY18).
Sudden jump in pre-IPO year for top and bottom line is the major concern and raises doubt on sustainability of the same performance going forward.
For last three fiscals, it has posted an average EPS of Rs. 4.52 and an average RoNW of 14.21%. Issue is priced at a P/BV of 5.11 based on its NAV of Rs. 34.11 as on 31.03.18 and at a P/BV of 2.48 on the basis of post issue NAV of Rs. 72.68.
Based on superb earnings of FY18 the asking price is at a P/E of around 37 making it aggressively priced offer as industry average is around 31.
As per offer documents, it has shown Patdiam, Kenvi and Renaissanse as its listed peers that are currently trading at a P/E of around 36, 84 and 15 respectively (as on 17.09.18).
All these are, however, not strictly comparable with Silver.
On merchant banker’s front, this is the 38th mandate from its stable in last four fiscal years.
Out of last 10 listings, 1 opened at discount, 3 around par and the rest with premium ranging from 1 to 6% on the day of listing. Thus it has a poor track record.
CONCLUSION
Currently sentiment for jewellery sector is very weak. Company’s financial too are not that appealing except FY18 which raised IPO with superb earnings in pre-IPO year.
Pricing of the issue is very aggressive and major chunk of fund is going for repayment of loans from promoters. There is no harm in giving this issue a miss. (AVOID)
