U H Zaveri BSE SME IPO review (Avoid)

Review By Dilip Davda on May 5, 2018

U H Zaveri Ltd. (UHZ) has been incorporated as a gems & jewellery company. Its business operations are divided into two divisions i.e. into wholesale and retail of jewellery and into trading of jewellery. UHZ mainly sells gold jewellery and marginal percentage of revenue is earned through silver jewellery and other kind of jewellery and utensils. It does not manufacture but outsourced. However, the jewellery sold by it is either designed in house or through 3-D jewellery designer or by third party designers or purchase ready to sell jewellery directly from manufacturers. It’s registered office address and showroom address is the same, i.e., in Nikol Road, Ahmedabad and does not have any other outlet in India or abroad. It sells unique collection of contemporary, antique, kundan, polka and temple jewellery. Its products have presence across different price points and cater to customers across high-end, mid-market and value market segments.

To part finance its working capital and general corpus fund needs, UHZ is coming out with a maiden IPO of 2220000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilize Rs. 7.99 cr. Issue opens for subscription on 08.05.18 and will close on 14.05.18. 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 36.30% 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. 760 per share and then issued bonus in the ratio of 50 for 1 in February 2018. Average cost of acquisition of shares by the promoters is Rs. 0.20 and Rs. 14.06 per share. Post issue, its current paid up equity capital of Rs. 3.90 cr. will stand enhanced to Rs. 6.12 cr.

The company was incorporated on 28th August 2017 and hence has just about five month’s track record. For the period ended on 31.01.18 it has earned net profit of Rs. 0.75 crore on a turnover of Rs. 13.89 crore. As per offer documents it has posted an EPS of Rs. 1.92 (Not annualized n undiluted) and RoNW of 12.87% (for the five months period ended 31.01.18). If we annualize latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 20 plus against industry average of around 35. Issue is priced at a P/BV of 2.42 on the basis of its NAV of Rs. 14.90 as on 31.01.18 and at a P/BV of 1.60 on the basis of post issue NAV. As per offer documents it is showing Goldiam Intl, Renaissance Jewellery and Uday Jewellery as its listed peers that are trading at a P/E of around 10, 9 and 35 (as on 04.05.18). Current weak sentiment for jewellery segment is raising concern.

On merchant banker’s front, this is 17th mandate from its stable in last four fiscals. Out of last 10 listings, 7 issues opened at discount to offer price, 3 with a premium ranging from 1 to 10% on the day of listing. Thus it has poor track record.


Conclusion / Investment Strategy

Company has just five months working. Issue pricing appears aggressive. Merchant banker has poor track records. Considering current status of sentiment for jewellery segment, there is no harm in giving this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 5, 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

U H Zaveri IPO FAQs

  1. 1. Why U H Zaveri IPO?

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

  2. 2. How is U H Zaveri IPO?

    Read the U H Zaveri IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. U H Zaveri IPO what should investors do?

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

  4. 4. Is U H Zaveri IPO good?

    Our recommendation for U H Zaveri IPO is to avoid.

  5. 5. Is U H Zaveri IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the U H Zaveri IPO.

  6. 6. When will U H Zaveri IPO allotment status?

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

  7. 7. When will U H Zaveri IPO list?

    The U H Zaveri IPO will list on Tuesday, May 22, 2018, at BSE SME.

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