What you must know about Senco Gold IPO

Senco Gold Ltd is a company with a 30 years pedigree. The company was incorporated in the year 1994 as a pan-India jewellery retailer. The products are current sold under the brand name “Senco Gold & Diamonds.”  Apart from gold and diamond jewellery, the company also sells jewellery made of silver and platinum, as well as precious and semi-precious stones embedded in it. It also offers costume jewellery, gold, and silver coins. Currently, Senco Gold Ltd offers over 108,000 designs for gold jewellery and over 46,000 designs for diamond jewellery. It has put in place a pan-Indian team of craftsmen to cater to varying regional and ethnic tastes in different parts of India.

Among its key offerings are Everlite (lightweight jewellery), Gossip (silver and fashion) and Aham (jewellery for men). Most of its models cater to the young and the upwardly mobile at an appropriate price tag. It has a segment catering to the mass demand for jewellery as well as the D’Signia and Vivaha collections for the creamier market in India. The company has over 136 showrooms spread across the length and breadth of India with total area coverage of 409,882 SFT. Around 70 showrooms are owned and operated by the company while 61 are franchisee showrooms. It caters to nearly 99 cities spread across 13 states in India. The issue will be lead managed by IIFL Securities, Ambit and SBI Capital Markets. KFIN Technologies Ltd will be the registrar to the issue.

 Highlights of the IPO issue of Senco Gold Ltd

Senco Gold IPO will be a combination of a fresh issue and an offer for sale (OFS). The price band for the book built issue will be between ₹301 and ₹317. The shares have a face value of ₹10. The fresh issue will entail the issue of 85,17,350 shares, which at the upper end of the price band at ₹317 amounts to a fresh issue size of ₹270 crore. The offer for sale (OFS) component of the IPO will entail the issue of 42,58,675 shares, which at the upper end of the price band at ₹317 amounts to a total OFS size of ₹135 crore. Therefore, the total IPO of Senco Gold Ltd will entail the issue of 1,27,76,025 shares, which at the upper end of the price band at ₹317 amounts to a total IPO issue size of ₹405 crore.

The company was promoted by Suvankar Sen, Jai Hanuman Shri Siddhivinayak Trust and Om Gaan Ganapataye Bajrangbali Trust. Currently the promoters hold 76.92% of the company, which will get diluted post the IPO to 68.48%. The fresh portion of the IPO will be used for funding working capital requirements and for general corporate purposes. The minimum lot size for retail applications is 47 shares and retail investors can invest up to a maximum of 13 lots. Here is the detailed break up of lot sizes applicable to different categories.

As per the terms of the offer, the specific quotas for the retail, HNI / NII and the QIB portion have already been delineated as under. Senco Gold Ltd will be listed on the NSE and also on the BSE. Being a fresh issue of equity, combined with offer for sale, the IPO will result in dilution of equity and EPS, apart from transfer of ownership internally.

It must be remembered here that the allocations for QIBs are decided on maximum while the allocations for HNI/NII and retail are decided based on minimum

Key dates for Senco Gold Ltd IPO and how to apply?

The issue opens for subscription on 04th July 2023 and closes for subscription on 06th July 2023 (both days inclusive). The basis of allotment will be finalized on 11th July 2023 and the refunds will be initiated on 12th July 2023. In addition, the demat credits are expected to happen on 13th July 2023 and the stock will list on 14th July 2023 on the NSE and the BSE. Let us now turn to the more practical issue of how to apply for the IPO of Senco Gold 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 Senco Gold Ltd

The table below captures the key financials of Senco Gold Ltd for the last 3 completed financial years. These include the fiscal years FY23, FY22 and FY21.

Data Source: Company RHP filed with SEBI

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

1. In the last 2 years, the revenues have grown at a rapid clip and that is also visible in the profit growth over the last two years. The net margins for the company have been fairly steady at around 4% and that is very attractive for a company that is predominantly in the jewellery retail business.
    
2. While the net margins are healthy, the positive signal is the consistent improvement in the RONW over the last 2 years. Clearly, the profits are growing faster than the dilution and that also largely justifies this public issue of shares and the dilution therein.
    
3. The company has maintained an impressive rate of sweating assets as is evident from the asset turnover ratio which has hovered at an average of 1.5X.

While pricing of the IPO will matter here, it is relatively attractive if you compare with the other jewellery outlets in India. What is more important is the eventual PAT margins that will sustain. It is normally in the range of 3-4%, but anything above 4% can be exceptionally good and value accretive for the IPO. Jewellery is a growing market and the focus on the young and upwardly mobile assures them of a ready and trendy market. Investors can look at the IPO from a longer term perspective.