Sharekhan has come out with its report on Tara Jewels (Tara) IPO. According to the research firm, the company is an integrated player in the jewellery industry, with experience ranging from designing to retailing of jewellery. The strong expansion plans and working capital intensive nature of business would continue to put pressure on the balance sheet of the company in the near term.
To read the full report click here
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Tara is coming out with an initial public offering (IPO) of ~79.8 lakh equity shares (at a lower price band) and ~78.0 lakh equity shares (at an upper price band), with a face value of Rs10 each. Post- issue, the shareholding of the promoters in the company will fall to 59.7% at lower end of the price band (~60% at the upper end of the price band) from the current holding of 74.4%. The issue is priced at Rs225-230 per share. Based on the post-issue equity, the company would trade at 10.3x (at the lower end of the price band) and 10.4x (at the upper end of the price band) FY2012 earnings. Tara intends to raise Rs179.5 crore from the issue. It has allotted 0.18 crore shares to Crystalon Finanz AG at a price of Rs225 crore through the route of pre-IPO placement (raising around Rs 41crore).
Company background: Tara was incorporated as Tara Ultimo Pvt Ltd in 2001 and was later renamed as “Tara Jewels Pvt Ltd” after the merger of Tara Jewels Export Pvt Ltd and T Two International Pvt Ltd. The company is an integrated player in the jewellery industry, with experience ranging from designing to retailing of jewellery. Tara is engaged in three segments namely manufacturing, exporting and retailing.
The company has grown its revenues at a brisk pace in the last five years. The revenues increased at a compounded annual growth rate (CAGR) of 23.9% from Rs754.2 in FY2009 to ~Rs1,400 crore in FY2012. The strong top line growth can be attributed to a robust performance by the export and retail segments. The revenues of the retail operations increased to Rs183.5 crore in FY2012 from Rs14.27 crore in FY2010, while the export segment posted a healthy performance, with the revenues growing at a CAGR of 14.7% over the same period. Also, the improved revenue mix aided the EBITDA margins, which stood close to 10% in FY2012 in comparison with 7.6% in FY2009. The profit after tax (PAT) grew almost 7.7x (CAGR of 97.4%) from Rs7.04 crore in FY2009 to Rs54.1 crore in FY2012, mainly due to a healthy growth in sales, an expansion in margins and tax benefits from its Seepz facility.
Outlook and valuationA growing organised domestic jewellery market, a strong brand amongst the international jewellery chain, a strong management expertise and a focus on enhancing its retail reach make Tara a serious player in India’s organised jewellery market. The company is focusing on improving its growth prospects by enhancing its domestic retail reach. However, the strong expansion plans and working capital intensive nature of business would continue to put pressure on the balance sheet of the company in the near term. At the lower end and upper end of the price band, the stock is offered at 10.3x and 10.4x its FY2012 earnings and FY2012 EV/EBITDA of 8.3x, which is close to average valuations of its domestic peers.
To read the full report click here
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