Motisons Jewellers IPO review (May apply)

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Review By Dilip Davda on December 12, 2023

•    MJL is a jewellery retail player in the city of Jaipur, Rajasthan wit 4 outlets. 
•    It marked consistent growth in its top line with fluctuating earnings. 
•    Based on FY24 annualized super earnings, the issue appears fully priced.
•    It is operating in a highly competitive and fragmented segment of jewellery business.
•    Well-informed investors may park moderate funds for the medium term. 

ABOUT COMPANY:
Motisons Jewellers Ltd. (MJL) is a Jewellery retail player with a history of more than 2 decades in the jewellery industry having experienced entrepreneurs as our Promoters with more than 20 years of experience. Its jewellery business includes the sale of jewellery made of gold, diamond, kundan and sale of other jewellery products that include pearl, silver, platinum, precious, semi-precious stones and other metals. Its other offerings include gold and silver coins, utensils and other artifacts. 

The company commenced its business through a partnership firm 'M/s Motisons Jewellers' in 1997 which was subsequently converted into public limited company in 2011 and currently have presence across multiple prominent locations in Jaipur, Rajasthan. It is a hyperlocal jewellery retail chain in Jaipur, Rajasthan with 4 showrooms (inclusive of one flagship showroom).  All these stores are located in Jaipur only.

The company started jewellery business in 1997 with a single showroom in Jaipur, Rajasthan. Its first outlet, famously known as the 'Traditional Store' was set up amidst the famous lanes of the busiest Johri Bazaar, renowned jewellery hub in the heart of the city. This Johri Bazaar showroom displaying gold and diamond jewellery was approx. 304 sq. ft. in area which was expanded to 1355 sq. ft. by 2002 with growth in the business. 

It has, since then, expanded network of showrooms and the product portfolio and currently operates 4 showrooms under the "Motisons" brand, located across the city of Jaipur, Rajasthan. The flagship store 'Motisons Tower' is located at the high street of Tonk Road, Jaipur, Rajasthan. The showroom at Tonk Road spans in an area of 16,002.06 Sq. Ft and has 3 floors with a dedicated floor space for silver, gold, and diamond jewellery respectively. The most recent outlet, opened in the year 2021, is situated in the affluent neighborhood in the southwestern part of Jaipur, Rajasthan at Vaishali Nagar. 

In addition to selling products at showrooms, it also sells products through its online platform at https://www.motisonsjewellers.com/. The company primarily source finished jewellery from third party suppliers located across India. This includes all types of jewellery made of gold, diamond and other precious and semi-precious stones. Additionally, to cater to the increasing demand in the market, MJL also engaged artisans on job work basis and has its own manufacturing facilities located in Jaipur, Rajasthan for diamond and gem stone studded jewellery. The company outsources the work of making ornaments to various artisans with whom it has developed relationships. 

MJL's product profile includes traditional, contemporary and combination designs across jewellery lines, for special occasions such as weddings and festivals to daily wear jewellery for all ages, genders and across various price points. Its offerings include gold jewellery, diamond jewellery and other silverware from handmade Indian ethnic to the cutting-edge styles of the urban world. Its gold, diamond and other jewellery inventory in each showroom reflects customer preferences and designs. As of October 31, 2023, it had 151 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route IPO of 27471000 equity shares of Rs. 10 each and has announced a price band of Rs. 52 - Rs. 55 per share and mulls mobilizing Rs. 151.09 cr. at the upper cap. The issue opens for subscription on December 18, 2023, and will close on December 20, 2023. The minimum application to be made is for 250 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 27.90% of the post-IPO paid-up capital of the company. (This info is not available in RHP). From the net proceeds of the IPO funds, it will utilize Rs. 58.00 cr. for repayment of existing borrowings, Rs. 71.00 cr. for working capital and the rest for general corporate purposes. 

The company dis a pre-IPO placement of 6000000 shares at Rs. 55 per share (Rs. 33.00 cr.) and has pruned its IPO by the said quantum. The issue is solely lead managed by Holani Consultants Pvt. Ltd., and Link Intime India Pvt. Ltd. is the registrar of the issue.  

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 55 per share in October 2023. The average cost of acquisition of shares by the promoters is Rs. 4.30, Rs. 7.31, and Rs. 10.00 per share. 

Post IPO, MJL's current paid-up equity capital of Rs. 70.98 cr. will stand enhanced to Rs. 98.45 cr. Based on the upper cap of IPO price band, the company is looking for a market cap of Rs. 541.45 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs.  213.06 cr. / Rs. 9.67 cr. (FY21), Rs. 314.47 cr. / Rs. 14.75 cr. (FAY22), Rs. 366.81 cr. / Rs. 22.20 cr. (FY23). For Q1 of DY24, it earned a net profit of Rs. 5.48 cr. on a total income of Rs. 86.76 cr. The company has posted steady growth in its top lines with fluctuating profit margins. 

For the last three fiscals, the company has reported an average EPS of Rs. 2.72 and an average RoNW of 13.93%. The issue is priced at a P/BV of 2.50 based on its NAV of Rs. 21.98 as of June 30, 2023, and at a P/BV of 1.68 based on its post-IPO NAV of Rs. 32.66 per share (at the upper cap).

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 24.66. Thus the issue appears fully priced. 

For the reported financial performance, the company has posted PAT margins of 4.54% (FY21), 4.69% (FY22), 6.06% (FY23), 6.32% (Q1-FY24), and RoCE margins of 21.45%, 25.18%, 30.04%,7.47% respectively. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has adopted a dividend policy in September 2022, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Goldiam Intl., DP Abhushan, Thangamayil Jewellery, and Renaissance Global as their listed peers. They are trading at a P/E of 39.70, 25.07, 33.97, and 45.67 (as of December 12, 2023). However, they are not comparable on an apple-to-apple basis.  

MERCHANT BANKER'S TRACK RECORD:
This is the 7th mandate from Holani Consultants in the last three fiscals (including the ongoing one). Out of the last 6 listings, 1 opened at a discount and the rest with premiums ranging from 4.94 % to 242.11 % of the date of listing.

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