Shares of Kolkata-based leading jewelry retailer, Senco Gold, witnessed a significant premium of 35.96 percent on their opening day, aligning with market expectations. The impressive surge can be attributed to various factors, including the robust subscription for its IPO, a strong brand presence in eastern India with five decades of industry experience, healthy financial performance, attractive valuations compared to listed competitors, and an asset-light franchise model.
On the BSE, the stock debuted at Rs 431 per share, a substantial increase from the issue price of Rs 317. The trading price on the NSE was not updated at the time. Market analysts had predicted a premium of 35-40 percent for Senco Gold’s listing, while the grey market premium stood at 41 percent above the issue price.
This listing marks the first entry in the jewelry industry since Kalyan Jewellers India in March 2021. Senco Gold’s IPO received an overwhelming response from investors, with a subscription rate of over 73 times between July 4-6, making it the second-highest subscription of the year after Ideaforge Technologies.
Qualified institutional investors demonstrated significant support for the IPO, subscribing 181 times the allocated portion. High-net-worth individuals also showed substantial interest, bidding 65 times the allotted quota. Retail investors subscribed 15.5 times the set-aside portion.
Most brokerages recommended a “subscribe” rating for Senco Gold’s maiden public issue, considering its dominant market position in eastern India, diverse product offerings, well-managed operations, robust financial performance, and a brand legacy of over five decades. The company’s price-to-earnings (P/E) multiple of 15.5x (based on its FY23 earnings) was at a discount compared to its peers, with Titan Company at 83.5x P/E and Kalyan Jewellers at 35x P/E. Senco Gold’s market capitalization stood at Rs 2,462 crore.
Choice Broking assigned a “subscribe” rating for the issue, stating optimism about the company’s medium-term outlook due to its dominant market position, diversified product offerings, and well-managed operations. They forecasted an 8.5 percent CAGR expansion in the jewelry showroom network and an 8.1 percent CAGR growth in retail sales area over FY23-25.
However, some brokerages raised concerns regarding Senco Gold’s debts and challenges in generating positive operating cash flow over the past two years. Despite its decent profitability compared to peers, the company has faced difficulties in generating positive operating cash flow. Additionally, the debt-to-equity ratio of 1.2x as of March 2023 may further impact the company’s profitability, as noted by Nirmal Bang, who recommended subscribing to the issue for potential listing gains. As of March FY23, the company’s debts amounted to Rs 1,177.2 crore, up from Rs 863 crore in FY22. The cash flow from operations was at Rs (76) crore in FY23, compared to Rs (70) crore in the previous year, and cash flow from investing stood at Rs (198) crore, up from Rs (157) crore in FY22.
