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Palm Jewels BSE SME IPO review (Avoid)

Review By Dilip Davda on May 23, 2018

Palm Jewels Ltd. (PJL) is  engaged in the wholesale business of gold jewellery. It essentially sells gold based chains, bracelets and necklaces while  outsourcing  and manufacturing of jewellery through job workers based in Ahmedabad and Mumbai. The major raw material used for making products is gold & silver. Company procures gold & silver majorly through the bullion market and partially from the local markets in Ahmedabad. Gold bars and other necessary material are provided to the job workers who are based either in Ahmedabad and Mumbai. However, no formal agreement has been executed with either of these job workers. The finished jewellery is sold by company’s marketing and sales team directly to other jewellery stores only through B2B marketing and/ or Direct/Outbound marketing strategy.

To part finance working capital and general corpus fund needs, PJL is coming out with a maiden IPO of 2968000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 8.90 cr. Issue opens for subscription on 25.05.18 and will close on 01.06.18. Minimum application is to be made for 4000 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 40.20% of the post issue paid up capital of the company. Having raised initial equity at par, it raised further equity at a price of Rs. 30 per share and then issued bonus in the ratio of 3 for 2 in March 2018. Average cost of acquisition of shares by the promoters is Rs. 5.32 and Rs. 10.76 per share. Post issue, its current paid up equity capital of Rs. 4.42 cr. will stand enhanced to Rs. 7.38 cr.

On performance front, for last four fiscals, PJL has posted turnover/net profits of Rs. 0.42 cr. / Rs. 0.002 cr. (FY14), Rs. 0.98 cr. / Rs. – (0.004) cr.. (FY15), Rs. 1.57 cr. / Rs. 0.005 cr. (FY16) and Rs. 5.52 cr. / Rs. 0.02 cr. (FY17). Surprisingly for first 11 months ended on 28.02.18 it has earned net profit of Rs. 0.44 cr. on a turnover of Rs. 19.75 cr. For last three fiscals it has posted an average EPS of Rs. 0.28 and an average RoNW of 2.63%. Issue is priced at a P/BV of 1.04 on the basis of its NAV of Rs. 28.87 as on 28.02.18 and at a P/BV of 1.58 on the basis of post issue NAV of Rs. 19.02. If we annualize latest superb earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 46 thus it is exorbitantly priced against industry average of 41. On the basis of its FY 17 earnings, asking price is at a P/E of around 1000. As per offer documents it is showing PC Jewellers, Renaissance Jewellery and Uday Jewellers as its listed peers that are currently trading at a P/Es of around 18, 9 and 35 respectively (as on 23.05.18)

On merchant banker’s front, this is 18th mandate from its stable in last four fiscals. Out of last 10 listings, 8 issues opened at discount to offer price, 2 with a premium ranging from 1.67% to 9.5% on the day of listing. Thus it has poor track record. Latest listing of UH Zaveri was at a whooping discount of 29%.

Conclusion / Investment Strategy

Considering status of prevailing sentiments for jewellery sector and exorbitant pricing of the issue, investors may give it a miss. 

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 23, 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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Palm Jewels IPO FAQs

  1. 1. Why Palm Jewels IPO?

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

  2. 2. How is Palm Jewels IPO?

    Read the Palm Jewels IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Palm Jewels IPO what should investors do?

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

  4. 4. Is Palm Jewels IPO good?

    Our recommendation for Palm Jewels IPO is to avoid.

  5. 5. Is Palm Jewels IPO worth Investing?

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

  6. 6. When will Palm Jewels IPO allotment status?

    The Palm Jewels IPO allotment status will be available on or around June 6, 2018. The allotted shares will be credited in demat account by June 7, 2018. Visit Palm Jewels IPO allotment status to check.

  7. 7. When will Palm Jewels IPO list?

    The Palm Jewels IPO will list on Tuesday, June 12, 2018, at BSE SME.