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Tara Jewels IPO Subscribed 2 Times
Nov 26, 2012 12:25 AM
By Dilipp S Nag
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RAPAPORT... Tara Jewels Ltd.’s INR 1.80 billion ($32.6 million) initial public offering (IPO) was subscribed 2 times on the final day of the issue on Friday, according to data from the National Stock Exchange (NSE).
The jewelry manufacturer and exporter's IPO received bids for around 13.5 million shares against the issue size of 6.8 million shares, the data showed. The company had fixed the price band of the issue at INR 225 to INR 230 per equity share.
The NSE data showed that the reserved category of qualified institutional investors and high-net-worth investors was subscribed 1.49 times and 3.10 times, respectively. The retail portion was subscribed 2.05 times.
With the IPO, Tara aimed to raise around INR 1.10 billion through new issue of equity shares, while its major shareholder Fabrikant H.K. Trading Ltd. was selling its stake in the company valued at INR 700 million. Tara had earlier allotted shares worth about INR 405 million by way of the pre-IPO placement to Crystalon Finanz AG, an affiliate of Daniel Swarovski company.
The Mumbai-based company’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.
The company, which currently operates 30 stores in India under the Tara Jewellers brand, plans to utilize the IPO funds to open 20 new stores in north and the central parts of the country and for the payment of debt to the bank, which is about INR 500 million.
Magnum Equity Broking Ltd. recommended investors to subscribe to the issue with a medium to long term time frame. “The [consumer] sentiments have started changing from looking at jewelry product as luxury or traditional wear to investments options which could turn the scenario going forward,” it noted.
However, brokerage firms K.M. Global Investment Research and GEPL Capital Private Ltd. advised investors to avoid subscribing to the IPO, citing expensive valuation compared with its listed peers such as Gitanjali Gems Ltd. and Renaissance Jewellery Ltd.
“The firm has a solid set of customers but it requires large amounts of working capital which could lead to margin pressures,” K.M. Global stated, while GEPL said that considering the high debt on books and negative cash flow from operations for the past two years, the company does not deserve such high valuations.
Tara supplies studded jewelry to retailers such as Christ Uhrean & Schmuck and Walmart. Exports accounts for about 80 percent of its total 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 plans to list its shares on the Bombay Stock Exchange (BSE) and the NSE. Enam Securities Private Ltd. and ICICI Securities Ltd. were the book-running lead managers for the issue.
* 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, ipo, Jewelry, retail, Tara Jewellers, Tara Jewels
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