What you must know about Motisons Jewellers IPO?

Motisons Jewellers Ltd was incorporated in October 1997 and it is currently engaged in the business of selling Jewellery made of gold, diamonds, and Kundan. In addition, Motisons Jewellers Ltd also sells jewellery products like pearl, silver, platinum, and other precious and semi-precious metals. In terms of its product offering and positioning, Motisons Jewellers Ltd offers traditional, contemporary, and combination designs across various jewellery lines. It has jewellery products that cater to all age groups and specifically cater to special occasions and celebrations like weddings and festivals; apart from jewellery for daily wear. Its flagship store, Motisons Towers, is located in the Pink City of Jaipur in Rajasthan. The store is spread across over 16,000 SFT and is a three-storeyed structure with dedicated floors for silver, gold, and diamond jewellery. One of the edge that the company holds is that its showrooms are strategically located in key demand segments and the product portfolio is diversified across price points and categories. Its 25 year legacy and its risks management systems and processes are an added advantage to its business model.

Motisons Jewellers Ltd has unique products targeted at men, women, children and for special gifting occasions. Some of its subsidiaries or group companies include Motisons Shares Private Ltd, Bholenath Real Estate Private Ltd, Godawari Estates Private Ltd, Motisons Buildtech Private Ltd and Shivansh Buildcon Private Ltd. In FY23, the domestic gems and jewellery market was valued at ₹470,000 crore as per the estimates of Dun & Bradstreet; with gold jewellery being the leading segment. The bigger opportunity is that in the last few years, the share of organized sector has just about moved up to 15-20% and as this share picks up, the prospects for companies like Motisons Jewellers is likely to be huge. The fresh issue portion will be largely utilized to repay borrowings from commercial banks and for general corporate purposes. The IPO will be lead managed by Holani Consultants Private Ltd. Link Intime India Private Ltd will be the registrar to the issue.

Highlights of the IPO issue of Motisons Jewellers Ltd

Here are some of the key highlights to the public issue of Motisons Jewellers IPO.

• The IPO of Motisons Jewellers Ltd will be open from December 18, 2023 to December 20, 2023. The stock of Motisons Jewellers Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹52 to ₹55 per share. The final price will be discovered within this band through the process of book building.
   
• The IPO of Motisons Jewellers Ltd will be entirely a fresh issue of shares with no offer for sale (OFS) component. As you would be aware, a fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. However, OFS is just a transfer of ownership and does not entail dilution of equity or of EPS.
   
• The fresh issue portion of the IPO of Motisons Jewellers Ltd comprises the issue of 2,74,71,000 shares (274.71 lakh shares), which at the upper price band of ₹55 per share will translate into an offer for sale (OFS) size of ₹151.09 crore.
   
• Since there is no offer for sale (OFS) component in the IPO, the fresh issue portion will also be the overall size of the IPO. Therefore, the overall IPO of Motisons Jewellers Ltd will comprise of the sale of 2,74,71,000 shares (274.71 lakh shares), which at the upper price band of ₹55 per share translates into total IPO size of ₹151.09 crore.
   
• It may be recollected here that the company had done a pre-IPO placement of 60 lakh shares at a price of ₹55 per share resulting in total pre-IPO placement size of ₹33 crore. As a result, the total shares available for the public offer were proportionately reduced from 334.71 lakh shares to 274.71 lakh shares, which is the current size of the IPO of Motisons Jewellers Ltd.

The IPO of Motisons Jewellers Ltd will be listed on the NSE and the BSE on the IPO mainboard.

Promoter holdings and investor quota allocation quota

The company was promoted by Sandeep Chhabra, Sanjay Chhabra, Namita Chhabra, Kajal Chhabra, and others. Currently the promoters hold 91.55% stake in the company, which will get diluted post the IPO to 66.00%. As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The table below captures the gist of the allocation to various categories.

It may be noted here that the Net Offer above refers to the quantity net of employee quota, if any. The anchor portion, will be carved out of the QIB portion and the QIB portion available to the public will be reduced proportionately.

Lot sizes for investing in the IPO of Motisons Jewellers Ltd

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Motisons Jewellers Ltd, the minimum lot size is 250 shares with upper band indicative value of ₹13,750. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Motisons Jewellers Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Motisons Jewellers Ltd IPO and how to apply?

The issue opens for subscription on 18th December 2023 and closes for subscription on 20th December 2023 (both days inclusive). The basis of allotment will be finalized on 21st December 2023 and the refunds will be initiated on 22nd December 2023. In addition, the demat credits are expected to happen on 22nd December 2023 and the stock will list on 26th December 2023 on the NSE and the BSE. Motisons Jewellers Ltd will test the appetite for market proxies to consumption and luxury goods related stocks The credits to the demat account to the extent of shares allotted will happen by the close of 22nd December 2023 under ISIN (INE0FRK01012). Let us now turn to the more practical issue of how to apply for the IPO of Motisons Jewellers Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Motisons Jewellers Ltd

The table below captures the key financials of Motisons Jewellers Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (FY refers to Apr-Mar period)

There are few key takeaways from the financials of Motisons Jewellers Ltd which can be enumerated as under

1. In the last 3 years, revenue growth has been robust and growing. However, what stands out about Motisons Jewellers Ltd is that the net profits have more than doubled in the last two years. The focus on organization of the jewellery market in India surely appears to be helping the company.
    
2. Being a proxy for consumers shifting from the unorganized segment to the organized segment, it is the net profit margin that really matters and that has been in the 5-6% range in last few years with ROE quite robust at over 16%.
    
3. The company has had just above average sweating of assets, but it may not too relevant at this juncture when the company is on a high growth path. However, it would be the key to enhancing the ROE and justifying valuations at a future date.

Let us turn to the valuations part. On the latest year diluted EPS of ₹3.42, the stock is available in the IPO at a P/E of 16.08 times. That is a fairly reasonable P/E ratio if you compare with the similar P/E ratio of these jewellery companies in the organized sector in India. On a weighted average basis, the P/E is around 20.22 times. The latest year valuations would be more relevant for a business that is focused on near term growth and where the underlying paradigm is changing. However, other financials like ROE and PAT margins are relatively robust and should be able to hold valuations.

Let us look at some of the qualitative advantages that Motisons Jewellers Ltd brings to the table. The company has shown robust growth and it brings some smart qualitative advantages to the table.

• It has a well-established business that combines heritage with market sensitivity and style that is suited to each of the granular segments of the market.
• Most showrooms are in strategic locations which substantially increases the prospects of continually enhancing the revenue per square feet.
• Its product portfolio is more than 3 lakh products and it leverages the omnichannel approach with strong visibility in offline and online selling
• Top of the line surveillance systems and risk management, apart from established and audited processes to mitigate risk in a volatile business

It is a high return business and works best when an omnichannel approach is leveraged to the hilt. The valuations look reasonable, since this is a niche business with high growth potential. Investing in the IPO is suitable for investors looking for a proxy to the organization of the consumer and jewellery space in India. However, the risks are high and hence a longer term investment horizon is advisable. The IPO may be a good price point to enter.