What you must know about RBZ Jewellers IPO?

RBZ Jewellers Ltd was incorporated in year 2008, and is a leading gold jewellery manufacturer specialising in antique designs. The company designs and manufactures a wide range of antique gold jewellery consisting of jadau, meena and kundan work and sells it on wholesale and retail basis. Its wholesale customers are largely the national and regional jewellery brand names as well as the family jewellers. It reaches out to nearly 72 cities in India. It is a leading player in the retail jewellery business in Ahmedabad and operates under the "Harit Zaveri" brand name. It employs more than 250 skilled artisans and over 183 sales people in its rolls. RBZ has a 23,966 SFT manufacturing facility in Ahmedabad, that can design and manufacture gold jewellery under one roof. 
The major customers of RBZ Jewellers Ltd include marquee names in the organized jewellery retail business like Titan, Malabar Gold, Joyalukkas India Limited, Senco Gold Limited, Hazoorilal Jewellers, and others. The issue is entirely a fresh issue and the proceeds will be used by RBZ Jewellers to fund its working capital funding needs and for general corporate purposes. The IPO will be lead managed by Arihant Capital Markets Ltd. Bigshare Services Private Ltd will be the registrar to the issue.

Highlights of the IPO issue of RBZ Jewellers Ltd

Here are some of the key highlights to the public issue of RBZ Jewellers Ltd.    

• The IPO of RBZ Jewellers Ltd will be open from December 19, 2023 to December 21, 2023. The stock of RBZ 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 ₹95 to ₹100 per share. The final price will be discovered within this band through the process of book building.

• The IPO of RBZ 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 RBZ Jewellers Ltd comprises the issue of 1,00,00,000 shares (100 lakh shares), which at the upper price band of ₹100 per share will translate into a fresh issue size of ₹100.00 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 RBZ Jewellers Ltd will also comprise of the issue of 1,00,00,000 shares (100 lakh shares), which at the upper price band of ₹100 per share translates into total IPO size of ₹100.00 crore.
The IPO of RBZ 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 Rajendrakumar Kantilal Zaveri and Harit Rajendrakumar Zaveri. Currently the promoters hold 100.00% stake in the company, which will get diluted post the IPO to 75%. 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 RBZ 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 RBZ Jewellers Ltd, the minimum lot size is 150 shares with upper band indicative value of ₹15,000. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of RBZ 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 RBZ Jewellers Ltd IPO and how to apply?

The issue opens for subscription on 19th December 2023 and closes for subscription on 21st December 2023 (both days inclusive). The basis of allotment will be finalized on 22nd December 2023 and the refunds will be initiated on 26th December 2023. In addition, the demat credits are expected to happen on 26th December 2023 and the stock will list on 27th December 2023 on the NSE and the BSE. RBZ 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 26th December 2023 under ISIN (INE0PEQ01016). Let us now turn to the more practical issue of how to apply for the IPO of RBZ 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 RBZ Jewellers Ltd

The table below captures the key financials of RBZ 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 RBZ Jewellers Ltd which can be enumerated as under   

a) In the last 3 years, revenue growth has been modest and growing at a standard clip of around 12-14%. However, what stands out about RBZ Jewellers Ltd is that the net profits have more than doubled in the last 2 years resulting in an improvement in the PAT margins and also in the ROE.

b) The company operates in a segment which is poised to gain from the jewellery industry becoming more of an organized business and that shift is already happening. To justify valuations, the company has robust net margins of over 7% and attractive ROE of over 24%. ROA is also at above 10%.

c) The company has competitive sweating of assets, but it may not too relevant at this juncture when the company is on a high growth path. However, the asset turnover ratio becomes a lot more relevant when you look at the robust ROA numbers.

Let us turn to the valuations part. On the latest year diluted EPS of ₹7.44, the stock is available in the IPO at a P/E of 13.44 times. That is P/E ratio that is very reasonable considering that it has largely institutional clients and a stable business model. 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. Now, for some qualitative aspects.

• The company offers end-to-end integrated manufacturing under one single roof which is a big advantage that it brings to the table.

• The company has made a mark with its institutional clients based on design and innovation and that is strong entry barrier.

• Already an established brand, and is also being integrated forward into retail space.
Investors must appreciate that the IPO does entail higher risk due to the volatile nature of the business but there is relative comfort on valuations front. Investors must be willing for a higher risk appetite and also take a longer term perspective in this IPO of over a year.