Gautam Gems BSE SME lPO Review (Avoid)

Review By Dilip Davda on Jan 22, 2018

Gautam Gems Ltd. (GGL) has been principally incorporated as a Manufacturer & Trader of rough and polished diamonds. Its registered and corporate office is located in Surat, which is the diamond hub of India. Company sells diamonds of multiple category, shape, cut, size and color. The range of diamonds it manufactures and trades in purely depends on the demand and supply of diamonds in the local markets. Primarily, Round Brilliant and All Fancy shape, 0.18 carats upto15.00 carats Size and D to N color with all type of Fancy color diamonds are demanded by customers. GGL maintains stock of various shaped diamonds depending on the customer demand. The company procures diamonds from suppliers based in the domestic market. It deals with only those suppliers who are reputed. Trust, reliability, quality and authenticity of diamonds is the upmost priority in diamond business. Further, the sales of rough and polished diamonds depend on the kind of customer with whom the company is dealing with. Its polished diamonds are majorly purchased by jewellery manufacturers, jewellery wholesalers, jewellery retailers, jewellery traders, diamond wholesalers, diamond retailers and rough diamonds are majorly purchased by rough diamond traders and diamond manufacturers.

To part finance its working capital and general corpus fund needs, GGL is coming out with a maiden IPO of 2100000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilize Rs. 7.56 crore. Issue opens for subscription on 24.01.18 and will close on 30.01.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by First Overseas Capital Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 38.24% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity at a price of Rs. 450 per share in September 2017 and has also issued bonus shares in the ratio of 27 for 1 in November 2017. Average cost of acquisitions of shares by the promoters is Rs. 0.36 and Rs. 15.52 per share. Post issue, company’s current paid up equity capital of Rs. 3.39 crore will stand enhanced to Rs. 5.49 crore.

On performance front, GGL’s turnover and net profits were in the range of Rs. 0.04 crore and Rs. 0.0001 crore from FY14 to FY17. For first eight months ended on 30.11.17 it has reported net profit of Rs. 0.41 crore on a turnover of Rs. 11.54 crore. For last three fiscals, it has posted an average EPS of Rs. 0.38 and an average RoNW of 3.50% on an equity base of Rs. 0.01 crore. Issue is priced at a P/BV of Rs. 2.15 on the basis of its NAV of Rs. 16.73 as on 30.11.17 and at a P/BV of 1.49 on the basis of its post issue NAV of Rs. 24.10. If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of 32. Thus issue is fully priced and has very little performance track record. Its peers are trading in the range of 11 to 70 P/Es.

On merchant banker’s front, this is the 16th mandate from its stable in last three fiscals. Out of last 10 listings 5 opened at discount, 1 at par and the rest with a premium ranging from 1% to 13%.


Conclusion / Investment Strategy

There in no harm in giving this fully priced issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jan 22, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Gautam Gems IPO FAQs

  1. 1. Why Gautam Gems IPO?

    The initial public offer (IPO) of Gautam Gems Limited offers an early investment opportunity in Gautam Gems Limited. A stock market investor can buy Gautam Gems IPO shares by applying in IPO before Gautam Gems Limited shares get listed at the stock exchanges. An investor could invest in Gautam Gems IPO for short term listing gain or a long term.

  2. 2. How is Gautam Gems IPO?

    Read the Gautam Gems IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Gautam Gems IPO what should investors do?

    Gautam Gems IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Gautam Gems IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Gautam Gems IPO good?

    Our recommendation for Gautam Gems IPO is to avoid.

  5. 5. Is Gautam Gems IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Gautam Gems IPO.

  6. 6. When will Gautam Gems IPO allotment status?

    The Gautam Gems IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Gautam Gems IPO allotment status to check.

  7. 7. When will Gautam Gems IPO list?

    The Gautam Gems IPO will list on Wednesday, February 7, 2018, at BSE SME.








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