Tara Jewels is entering the capital market on 21st November, 2012 with an IPO of Rs. 179.50 crores, in the price band of Rs. 225 to Rs. 230 per share, with face value of Rs. 10. Issue closes on 23rd November. Of this, fresh issue is of Rs. 109.50 crores and offer for sale is of Rs. 70 crores. Over and above, a pre-IPO placement of 18 lakh shares was made on 12-9-12, at Rs. 225 per share, for Rs. 40.50 crores, to Crystalon Finanz AG.
The company is an integrated player in the jewellery industry, with company having its 30 Stores, carrying out retail operations under the brand Tara Jewellers. The company is having four manufacturing units, with 3 located in Mumbai and 1 in China.For year ending 31st March 12, total income of the company was placed at Rs. 1,400 crores, with PAT at Rs. 54.13 crores, resulting in an EPS of Rs. 30, on an equity base of Rs. 18 crores. Book value per share, stood at Rs. 154 on 31-3-12.
The company is now planning to open 20 Stores in 18 cities by March, 13 for which, requirement is estimated at Rs. 66 crores. In addition, Rs. 50 crores is being mobilised for repayment of loans to bankers of the company.
However, operations of the company are highly working capital intensive, as can be seen from its financials. With 30 Stores, it had an inventory of Rs. 589 crores and receivables of Rs. 467 crores, which are largely financed by bank finance of Rs. 536 crores, having availed from 12 banks. Receivables of Rs. 467 crore, represents for about 5 months, on export sales of Rs. 1,134 crores in FY12. Domestic sales of Rs. 265 crores in FY12, are largely from 30 Stores, which needs to be ramped up, going forward, as annual average of Rs. 9 crores is seen quite low.
Still, considering a good foothold having gained in the last 3 years, company is likely to improve its retail sales mix in FY14. Share at Rs. 230, at the upper band is recommended for investment, as it can give a listing gain of about Rs. 15 and a gain of about 20% in next 6-8 months.