Deepa Jewellers

By Geetanjali Kedia

about 12 days ago

IPO Size: Rs. 460 cr

Fresh Issue of Rs. 250 cr (15% dilution) for funding Rs. 215 cr working capital till FY28E
Offer for Sale (OFS) of Rs. 210 cr by promoter (100% to shrink to 73% post IPO)

Price band: Rs. 168-177 per share

M cap: Rs. 1,701 cr (IPO is 27% of m cap)

IPO Date: Tue 1^st Sep to Thu 3^rd Sep 2026, Listing Tue 8^th Sep 2026

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Hyderabad-based B2B Jeweller

Deepa Jewellers is a 25 year old B2B gold jeweller, specializing in vaddanam (waist band) and CNC machine cut bangles, which account for ~3/4^th of Rs. 1,927 cr revenue in FY26. It generates nearly 85% of revenue from Andhra, Telangana and Tamil Nadu. Current processing capacity of 2,925 kg is only 56% utilized, yet company is establishing a 6,700 sq ft manufacturing facility in Hyderabad, with capex of Rs. 3 cr, to be operational by Sep 2026, to reduce dependance on karigars. Volume has degrown 5% in past 3 years, from 1,739 kg in FY24 to 1,644 kg in FY26.

Unjustified Surge in Margin

EBITDA margin which stood between 3.5%-3.6% in FY23 and FY24, rose to 4.0% in FY25, and more than doubled to 7.6% in FY26. As a result, PAT margin also expanded to 5.4% in FY26, which was 2.4% in FY23 and FY24.

Company attributes the strengthening margin to improving mix of higher-margin studded jewellery, but mix of studded jewellery is not disclosed in the RHP! Another reason attributed for higher margin is improving sales mix from standalone stores due to new sales office in Vijaywada since Nov 2025. However, revenue mix from standalone stores has deteriorated from 22.6% of FY24 topline to 18.9% of FY26 topline. Thus, FY26 margins look unsustainable in the long term, as they are likely attributed to gold price surge. Amidst the busy IPO season, Deepa is another jeweller enjoying gains from gold price rise of the past 18 months. Company mentions hedging 76% to 84% of gold inventory, but quantity sold during the year may not have been hedged in the same proportion. Thus, the substantial gains of FY26 look unrepeatable.

Working Capital Heavy Business

FY26 PAT of Rs. 105 cr is probably the highest in company’s history, yet cash on hand is just Rs. 10 lakh. Even debt has risen to Rs. 111 cr from Rs. 83 cr three years ago, with trade receivables nearly doubled in FY26, to Rs. 252 cr. Company is even undertaking a heavy dilution of 15% for working capital requirements of the future. Thus, financial position does not appear very strong. RoE, though 50% in FY26, may decline to teens, post IPO dilution.

Expensively-priced Regional Player

M cap of Rs. 1,701 cr implies historic PE multiple of 13.8x on FY26 EPS of Rs. 12.8. This is much higher than PE of 10-11x for B2B peers RBZ, Shanti Gold, recently listed Shankesh. Even Priority Jewels IPO, closing on Tue 1^st Sep, is priced at a PE of 12x, making Deepa IPO aggressively priced.

If one were to consider pre-money m cap of Rs. 1,451 cr and attributing even half of FY26 net profit to gold price movement, Rs. 52 cr profit leads to a PE multiple of 28x, which is extremely stretched for a regional B2B player.