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R O Jewels BSE SME IPO review (Avoid)

Review By Dilip Davda on March 7, 2020

•    ROJL is engaged in the business of wholesale of gold and silver chains.
•    It operates in Ahmedabad with just one store and a total of 9 employees.
•    Perhaps it has window dressed IPO year FY20 H1 financial performance.
•    The company operates in a low margin high competition segment.
•    Its main bankers are trouble ridden Yes Bank Ltd.
•    Lead Manager has a poor track record.

R O Jewels Ltd. (ROJL) is engaged in the wholesale business of gold and silver chains with its operation limited to Ahmedabad. It procures readymade chains and other jewellery from the manufacturers or independent jewellery wholesales located in Ahmedabad and Mumbai. Besides selling third party products through own showroom, ROJL also sales it in Gujarat through B2B marketing. It operates from premises on 11 months leave and licence.

To part finance its working capital (Rs. 4.60 cr.) and general corpus fund needs (Rs. 0.06 cr.),  ROJL is coming out with a maiden IPO of 1365000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilize Rs.4.91 cr. The issue opens for subscription on 12.03.20 and will close on 17.03.20. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 48.20% of the post issue paid-up capital of the company. This issue is solely lead managed by First Overseas Capital Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. is acting as a market maker for this issue. ROJL is spending Rs. 0.25 cr. for the entire IPO process. Bankers to the company is trouble ridden Yes Bank Ltd.

Having issued/converted initial equity at par, ROJL converted further equity for Rs. 40 per share between January 2019 and May 2019. It has also issued bonus shares in the ratio of 1 for 6 in August 2019. The average cost of acquisition of shares by the promoters is Rs. 8.57, Rs. 33.63 and Rs. 34.20 per share. ROJL's current paid-up equity capital of Rs. 1.47 cr. will stand enhanced to Rs. 2.83 cr. post this issue.  Post this issue, ROJL is looking for a market cap of Rs. 10.20 cr.

For the last three fiscals, as per restated financial data, ROJL has posted turnover/net profits of Rs. 5.74 cr. / Rs. 0.06 cr. (FY17), Rs. 9.76 cr. / Rs. 0.07 cr. (FY18) and Rs. 4.24 cr., / Rs. 0.01 cr. (FY19). Thus it has shown inconstancy in the top and bottom lines. For the first half of FY20, it has earned a net profit of Rs. 0.15 cr. on a turnover of Rs. 10.47 cr. There appears to be window dressing in the IPO year. However, according to offer documents, an amalgamation of Ravi Ornaments with the newly formed limited company i.e. ROJL has transpired boosts in the top and bottom lines. FY17 and FY18 financial data related to Ravi Ornaments only and thereafter it is for ROJL.

ROJL has posted an EPS of Rs. 2.51 for FY19 and Rs. 1.03 (not annualized) for H1FY20. It has posted RoNW of 1.38% and 2.91% for the said periods respectively. The issue is priced at a P/BV of 1.02 based on its NAV of Rs. 35.21 as on 30.09.19 and at a P/BV of 1.03 based on post-issue NAV of Rs. 35.06. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 34 against industry composite of 40 P/E, making it a fully priced issue based on super earnings for H1 FY20. Sustainability of such performance appears remote as the company is in a highly competitive segment with organized/unorganized players around.  

As per offer documents, ROJL has shown Narbada Gems and Vaibhav Global as its listed peers. They are currently trading at a P/E of around 8.59 and 105.89 (as on 06.03.20).  However, they are not at all comparable on an apple to apple basis.

This is the 14th mandate from its stable in the last four fiscals (including the ongoing one). Out of last 10 listings, 5 opened at discount, 1 at par and the rest with a premium ranging from 1.67% to 25% on the day of listing. Thus it has poor track records. Some of the issues brought by this LM are U H Zaveri, Gautam Gems, Kenvi Jewels etc.

Conclusion / Investment Strategy

ROJL's financial performance is showing inconsistency. It has only one showroom with just 9 employees (including 2 directors and 1 company secretary) as on filing of offer documents. On the basis of supper earnings for H1 FY20, the issue appears fully priced. Company's bankers are trouble ridden Yes Bank Ltd. LM has a poor track record with similar issues in the past. Simply stay away from this IPO.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on March 7, 2020

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: ).

RO Jewels IPO FAQs

  1. 1. Why RO Jewels IPO?

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

  2. 2. How is RO Jewels IPO?

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

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

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

  4. 4. Is RO Jewels IPO good?

    Our recommendation for RO Jewels IPO is to avoid.

  5. 5. Is RO Jewels IPO worth Investing?

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

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

    The RO Jewels IPO allotment status will be available on or around March 20, 2020. The allotted shares will be credited in demat account by March 24, 2020. Visit RO Jewels IPO allotment status to check.

  7. 7. When will RO Jewels IPO list?

    The RO Jewels IPO will list on Wednesday, March 25, 2020, at BSE SME.