You are on page 1of 3

IPO Snapshot

Tara Jewels Ltd.

November 20, 2012

Highlights of the issue:


Issue Snapshot:
Issue open November 21 November 23 2012
Price Band: Rs. 225 Rs.230
Issue Size: Rs. 179.50 crs
*Issue Size: 78,04,348 equity shares (incl fresh
issue of eq shares worth Rs.109.5 cr and offer for
sale of Rs 70 cr worth of shares)
QIB
upto
50% eq sh
Retail
atleast 35% eq sh
Non Institutional atleast 15% eq sh
*= assuming issue subscribed at the upper price band

Face Value: Rs 10
Book value - Consolidated: Rs 157.65 (May 31,
2012)
Bid size: 50 equity shares and in multiples thereof
100% Book built Issue
Capital Structure:
Pre Issue Equity:
Post issue Equity:

Rs
Rs.

19.80 crs
27.60 crs *

*= assuming issue subscribed at the upper price band

Listing: BSE & NSE


Lead Manager: Enam Securities Pvt Ltd, ICICI
Securities Ltd.
Registrar to issue: Link Intime India Pvt Ltd.
Current Shareholding Pattern
Pre issue
Shareholding Pattern
%
Promoters & Promoters
Group
74.55
Public (incl Employees &
others)
25.45
Total
100.0

Post issue
%*
53.47
46.53
100.0

*= assuming issue subscribed at the upper price band

CARE Fundamental
average fundamentals

Grade:

3/5

indicating

Tara Jewels Ltd (TJL) is an integrated player in the jewellery industry with
experience ranging from designing to retailing of jewellery. Its portfolio of
products includes gold, platinum, honeydium, pristinium and silver
jewellery with or without studded precious and semi-precious stones and
has presence across different price points and cater to customers across
high-end, mid-market and value market segments. It has four
manufacturing units, of which one is located in Panyu, China. The other
three units are located in Mumbai, India out of which two units are situated
in SEEPZ and one in MIDC. For the two months period ended May 31,
2012, Fiscal 2012, 2011 and 2010 TEL has achieved an aggregate
production of 554.77 kgs, 10,616.40 kgs, 4,753.25 kgs and 2,562.91 kgs
of jewellery, respectively. Its manufacturing units are spread over an area
of 84,584 square feet employing 35 designers and 955 craftsmen, as on
September 30, 2012.
TJL exports studded jewellery, which is manufactured by it and by third
party manufacturers. It exports studded jewellery to jewellery chains
including Christ Uhrean & Schmuck and retailers including Walmart and
primarily export to Australia, China, Canada, European Union, South
Africa, UAE, UK and USA. In the European Union, it exports to 12
countries including Austria, Germany and Switzerland. TJLs income from
export operations has grown at a CAGR of 19.77% from Fiscal 2010 to
Fiscal 2012. For the two months period ended May 31, 2012, Fiscal 2012,
2011 and 2010, its income from export operations constitutes 78.82%,
80.90%, 80.99% and 97.59% of its total income, respectively.
TJL conducts its jewellery retail operations under the brand Tara
Jewellers and has entered in jewellery retailing in India in October 2008
with the launch of its existing Store at Andheri, Mumbai and as on the date
it operates 30 Existing Stores spread over an aggregate area of 29,949.01
square feet. It intends to launch 20 Project Stores across India by March
31, 2013. Its retail stores span across suburban areas of metro cities, mini
metros and cities with higher concentration of mid-income segment. Sales
of TJL from retail operations increased to Rs. 1,834.81 million in Fiscal
2012 from Rs. 142.74 million in Fiscal 2010 at CAGR of 258.53%.
Objects of Issue:
The objects of the Issue are:
Meet the expenses of establishing retail stores.
Repayment of Pre-payment Loans.
General Corporate Purpose
The companys total consolidated revenues were Rs 14,010.56 million for
the year ended March 31, 2012 as against Rs 11,435.68 million in FY11
and PAT was Rs.541.28 million in FY12 as against of Rs 406.85 million in
FY11.
Means of Finance:

The fund requirement will be met entirely from the Net proceeds of the
Issue.
Cost of Project:
S. No.
1
2
6

Particulars
Establishment of retail stores
Repayment or pre-payment of loans
General corporate purposes
Total

Amount
664.80
500.00
*
*

Rs. Million
Estimated schedule of deployment of Net
Proceeds (Up to March 31, 2013)
664.80
500.00
*
*
(Source: RHP)

Retail Research

TJLs strengths:

Leadership in exports market for studded jewellery.


Access to advanced technology and modern machinery.
Strong and long-term relationship with customers.
Integrated player with domain knowledge.
Experience of Promoter and a strong management team.
Strong sales and marketing network.

TJLs strategy:

Expand retail operations with focus on market expansion.


Strategic marketing tools to create brand differentiation for retail business.
Continue to strengthen relationship with major customers.
Continue to focus on exports for wholesale business.
Increased production capacity.
Pursue strategic acquisitions in India.

Risks & Concerns:


Business of TJLs depends, in part, on factors affecting consumer spending that are out of its control.
TJL proposes to invest major portion of Net Proceeds towards establishing retail stores. However, it has limited operating

history in retail business.


Any fluctuation in price and supply of gold and polished diamonds, which account for the majority of its total raw material

costs, could adversely impact its income.


TJLs business is seasonal in nature with significant sales in the period from August to December and February to March.
TJL faces significant competition. Any failure to compete effectively may have a material adverse effect on its business and

operations.
Top 10 customers for Fiscal 2012 accounted for 70.40% of TJLs total revenue from export operations in Fiscal 2012. It

cannot be assured that sales from export operations will continue; if not, its income may decline.
TJL is exposed to currency exchange risks, since its income on account of overseas clients is denominated in U.S. Dollar

and its operating expenses are denominated in Rupees.


TJLs Promoter and few members of its Promoter Group are engaged in business activities similar to its.
Failure to develop and introduce new jewellery designs that achieve customer acceptance could result in a loss of market

opportunities.
Ineffective execution of marketing programs and reduced marketing expenditure could have an adverse effect on TJLs

sales.
Failure to manage TJLs inventory could have an adverse effect on its net sales, profitability, cash flow and liquidity.
Entire sales for export operations are made utilizing credit provided by TJL to its customers. Therefore, any deterioration in

the consumers financial position could adversely impact sales and income.
TJL obtains gold on loan basis, which remains subject to RBI regulations. Any adverse change in the regulations governing

gold on loan basis may adversely affect its financial condition and results of operation.
Changes in consumer attitudes to jewellery could be unfavourable and harm jewellery sales.
TJL has significant working capital requirements and its inability to meet its working capital requirements may have an

adverse effect on its results of operations.


TJL avail certain tax benefits under SEZ Act and other fiscal statutes. These tax benefits are available for a definite period of

time, which upon expiry or if withdrawn prematurely, may adversely affect its financial condition and results of operations.
TJL has entered into an MoU with M. Fabrikant & Sons which contained certain restrictive covenants.

Retail Research

Theft and other incidences in TJLs manufacturing units and retail stores will adversely impact its profitability. Its insurance

may not be adequate to protect it against all potential losses to which it may be subject to.
Increases in interest rates may adversely impact TJLs results of operations.

Extract from grading rationale by CARE:


The grading of Tara Jewels Limited (TJL) reflects the experience of the promoters in the Gems & Jewellery industry, fully
integrated operations with established marketing and distribution channel and established relationship with clients. The
grading also takes into account the consistent growth in the operating income and the companys diversified product profile.
The grading is constrained by TJLs high operating risk arising out of the customer and geographical concentration of sales,
working capital intensive operations, susceptibility to volatility in raw materials prices and foreign exchange fluctuation risk.
The grading also factors TJLs planned expansion in highly competitive jewellery retail business in India and economic
uncertainty in the companys major export market.

RETAIL RESEARCH Fax: (022) 30753435 Corporate Office


HDFC Securities Limited, I Think Techno Campus, Bulding B, Alpha, Office Floor 8, Near Kanjurmarg Station Opp.
Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Fax: (022) 30753435 Website: www.hdfcsec.com
Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not
for circulation. This document is not to be reported or copied or made available to others. It should not be considered to be
taken as an offer to sell or a solicitation to buy any security. The information contained herein is from sources believed
reliable. We do not represent that it is accurate or complete and it should not be relied upon as such. We may have from time
to time positions or options on, and buy and sell securities referred to herein. We may from time to time solicit from, or
perform investment banking, or other services for, any company mentioned in this document. This report is intended for Noninstitutional Clients only.

Retail Research