Senco Gold files draft prospectus to float IPO. Key highlights here

Of the total, Senco Gold IPO will comprise a fresh issue worth ₹325 crore, and an offer for sale (OFS) up to ₹200 crore. The selling shareholder will be SAIF Partners India IV.

The equity shares offered under the IPO will have a face value of ₹10 each. Although, details of price bands, number of equity shares, lot size, and IPO period among others will be revealed in due course.

50% of the IPO size will be reserved for qualified institutional buyers (QIBs), while 35% of the portion will be kept for retail individual investors (RII), and the remaining 15% will be reserved for non-institutional investors (NII).

Companies like IIFL Securities, Ambit, and SBI Capital Markets will act as the book running lead managers (BLRM) for the IPO.

The net proceeds of the fresh issue will be utilised for funding working capital requirements and general corporate purposes. While the proceeds of the offer for sale will be utilised by the selling shareholders.

Furthermore, the company may consider a private placement of equity shares for cash consideration of ₹65 crore. If the pre-IPO placement is undertaken then the amount raised will be deducted from the fresh issue.

Senco Gold has a history of more than five decades and has a fourth-generation entrepreneur in the jewellery industry. The company was incorporated in August 1994. Since then, the company has emerged as the e largest organized jewellery retail player in the eastern region of India based on number of stores and among eastern India based jewellery retailers. That said, the company has the widest geographical footprint in non-eastern states.

Primarily, Senco Gold sells gold and diamond jewellery alongside jewelleries made of silver, platinum, and precious and semi-precious stones and other metals. Other offerings include costume jewellery, gold and silver coins, and utensils made of silver. The products are sold under the tradename “Senco Gold & Diamonds” through multiple channels including their 70 company-operated showrooms and 57 franchisee showrooms. The company continues to expand its geographic presence and work towards an omnichannel network.

As of date, the company has 127 showrooms, which have a total area of approximately 393,342 sq. ft., in 89 cities and towns over 13 states across India. Some of the company’s franchisee showrooms are located in areas other than metros and tier-I, providing us greater reach in tier-2 and tier-3 locations.

Earlier on April 7, the company entered into a share purchase agreement with Oman India Joint Investment Fund Trustee Company, the trustee of Oman India Joint Investment Fund II for the issue and subscription of 26,63,541 Equity Shares for an aggregate consideration of nearly ₹75 crore.

Among its business strategies going forward, the company plans to expand its presence through a strong and diverse distribution channel. In addition to its regular Senco Gold & Diamonds Showroom format, the company intends to expand with the addition of new and future generation showroom formats including, D’Signia Showrooms in areas of comparatively higher affluence and Everlite Showrooms in areas with comparatively lower age median.

Senco Gold also focuses on increasing its overall operating margins by adapting an optimal product mix. The company plans to prioritize diamond jewellery, as diamond-studded jewellery typically involves higher gross margins than gold jewellery according to CRISIL Report. In Fiscals 2019, 2020, 2021 and in the eight months ended November 2021, the sale of diamond and precious/semi-precious stones represented 5.62%, 6.13%, 5.06%, and 4.84% respectively, of the company’s revenue from operations.

Also, the company will continue to invest in marketing and brand building initiatives through hyperlocal strategy. It believes that effective marketing is important for future revenue growth,

enhancing our brand visibility, establishing relationships with target customers, and selling products in a competitive cost-effective manner.

As of January 31, 2022, the company has implemented a loyalty program with over 630,000 active customers.

Additionally, to cater to the changing needs of consumers, specially of the young generation, the company may look at exploring complementary products to jewellery in the business of luxury and lifestyle such as perfumes and bags.

Another strategy of the company is to increase their business through the digital platform and leverage our manufacturing capability on creation of an asset light sales channel thereby offering a seamless combination of both offline and online buying choice for customers.

Senco Gold’s revenue from operations has increased at a CAGR of 9.92% from Fiscal 2020 to Fiscal 2021 while its profit for the year has reduced at a CAGR of 32.39% from Fiscal 2020 to Fiscal 2021.

Gold jewellery demand in volume terms will likely improve over the next five years.

In its draft, Senco Gold highlighted that a low base, pent-up demand, expected gold price reduction and more weddings are likely to boost jewellery demand in the near term. Over the long term, improving economic growth (7-8% annual real GDP growth projected over the next five years), easing short-term disruptions caused by Covid-19, rising urbanisation, and increasing disposable income levels are expected to aid growth. The formulation of a comprehensive gold policy, which was announced during the Union Budget 2018-19, and mandatory hallmarking are also expected to be positive for the industry, especially organised players in the long term.

CRISIL Research expects consumption demand for gold to increase at 13-15% CAGR over the next five years. Inflation and geopolitical events are likely to impact demand.

Senco Gold will compete against major players such as Kalyan Jewellers India and Titan Company on stock exchanges post IPO. As per the draft, Senco Gold has a diluted EPS of ₹9.25 per share as of March 2021, while Kalyan Jewellers and Titan has a diluted EPS of ₹(-0.07) and ₹10.96 respectively. Return on Net Worth (RoNW) of Senco is at 10.65%, while Kalyan’s at -0.25% and Titan’s at 13.74%. NAV per equity share is ₹90.64 at Senco versus Kalyan and Titan who have NAV at ₹27.44 and ₹84.45 per equity share.