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Tara Jewels Files for IPO

Jan 12, 2012 5:14 AM   By Dilipp S Nag
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RAPAPORT... Tara Jewels Ltd. is again planning to raise funds through an initial public offering (IPO) of  equity shares with India's capital market regulator to raise up to INR 2.2 billion. Tara said it would raise INR 1.5 billion through a new round of equity shares, while major shareholder Fabrikant H.K. Trading Ltd. is selling a portion of its stake in the company valued at INR 700 million. Tara didn't provide the number of equity shares to be sold through the IPO or the price band for the issue.

In addition, Tara said it is considering raising INR 500 million through a private placement of up to 1.8 million equity shares before the IPO. If the pre-IPO placement is completed, the company will reduce the number of equity shares from the fresh issue.

Tara’s operations include manufacturing, exporting and retailing jewelry. Its products include gold, platinum and silver jewelry with or without studded precious and semi-precious stones. The company has four manufacturing units, of which one is located in Panyu, China and the other three in Mumbai.

In its related prospectus, Tara Jewels proposes the potential use of ''a major portion of net proceeds toward establishing retail stores,'' or INR 663 million, though this is not a definite plan, given what the company also identifies as the "execution risk, financing risk and effective communication risk" involved in the retail business.  Tara launched retail operations in October 2008 and as of November 2011, it operated 29 stores with a goal of opening 20 new stores across India by the end of 2012. It is also looking into joint ventures with designer boutiques to enter the high-end retail jewelry segment.

"We propose to utilize part of the net proceeds to repay or prepay amounts outstanding under some of our fund-based working capital facilities. We propose to utilize Rs 500 million from the net proceeds to repay or prepay Rs 300 million to State Bank of India and Rs 200 million to ICICI Bank Limited," according to the prospectus.

The company posted a net profit of $7.9 million (INR 408.31 million) on total revenue of $220 million (INR 11.41 billion) in the fiscal year that ended on March 31, 2011. Exports accounted for a major part of its sales with its main markets being the U.S., Australia, China, Canada, European Union, South Africa, the United Arab Emirates and the U.K. The company supplies studded jewelry to chains including Christ Uhrean & Schmuck and retailer Walmart.

Tara added that it is looking to enter select new markets, such as South and Central America, and plans to set up a manufacturing facility at Honduras.

The company has proposed to list its equity shares on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The book-running lead managers for the issue are Enam Securities Private Ltd. and ICICI Securities Ltd.

* Note: All data was published in rupee. Any references to U.S. dollar amounts were made according to exchange rate conversions by Rapaport News.

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Tags: Dilipp S Nag, gold, India, Jewelry, Rajeev Sheth, Rapaport, retail, Tara Jewellers, Tara Jewels, US
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