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Monday, April 23, 2012

Tribhovandas Bhimji Zaveri IPO shares prices outlook april 24 -26 2012

Tribhovandas Bhimji Zaveri IPO shares prices outlook april 24 -26 2012, : Tribhovandas Bhimji Zaveri (TBZ), an organised jewellery retailer, is coming out with an initial public offer of 16,666,667 equity shares to raise Rs 210 crore (at the upper price band). The fresh issue is equivalent to 25% of the company's post IPO equity and will result in the promoter's holding falling to 75%.

Of the total proceeds, the company will use Rs 19.2 crore to finance the establishment of new showrooms and Rs 160.4 crore for the incremental working capital, mainly for inventory. The remaining amount would be used for general corporate purposes. Given its strong business with good growth and cheap valuations, investors can apply for the company's IPO.

TBZ has set a price band of between Rs 120 and Rs 126 per share for its Rs 210 crore initial public offering (IPO). The company will issue 1.66 crore equity shares with a face value of Rs 10 apiece.

The public offering, which will open on April 24 and closes on April 26, constitutes 25% of its post-issue paid-up capital. Crisil has graded the IPO 3 out of 5, citing reasons related more to the industry than the company.

VALUATIONS

Other players in the retail gem and jewellery export business include Tanishq (part of Titan Industries), Gitanjali Gems, Shri Ganesh Jewellery and Thangamayil. The closest peer is Tanishq which is also into jewellery retailing. And it would be inappropriate to compare TBZ with other players because their business models are different. For instance, Gitanjali Gems has huge operations in foreign countries and a major chunk of its revenue comes from diamond trading while others players such as Shri Ganesh Jewellery are in jewellery exports.

When compared with Titan Industries (Tanishq), the company's shares are being offered at a big discount. Titan Industries is trading at price to earning multiple of 35, while the TBZ's shares are available at a multiple of 13.4 at the upper price band and 11.6 at the lower price band. Considering return on equity of as high as 30 and consistent growth, this is quite cheap.

BUSINESS

Tribhovandas Bhimji Zaveri is primary into selling gold and diamond studded jewellery. The company has 14 showrooms in 10 cities across five states. Out of these, 11 are large format, high street showrooms with a carpet area of 3,000 square feet or more.

In the last five years, TBZ's sales have more than quadrupled, while its net profit has become eight fold. For the first nine months of FY12, the company posted sales of Rs 11,177.7 crore and its net profit was Rs 503 crore

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