IPO Update: Gitanjali Gems

Diamonds are shining,but not the financials

Gitanjali Gems is entering the capital markets with its initial public offer of 1.7 Crore shares offered at a price band of Rs.170-195. Investment Guru recommend investors to subcribe to the issue. The company does not have any listed peers in the market and hence the listing of this stock will determine the valuation for such companies. Investment Guru expects moderate listing gains on listing of Gitanjali gems.

Let’s look at the Offering :

Gitanjali is the largest manufacturer and retailer of diamond and jewellery in India. The company has got two-diamond manufacturing facilities located at Borivali in Mumbai and at the SEZ in Surat. Facility at SEZ, mumbai caters to export and produces gold and platinum diamond studded jewellery.The facility at MDC, Mumbai caters to retail operations in Inida.

Gitanjali boasts of brands such as Nakshatra, Asmi, Gilli and D’Damas. These brands feature among top 10 jewellery brands in India.

For branded jewellery, the company has in place a large retail setup, which includes 26 exclusive distributors across India, around 620 outlets including those in host stores, five stand alone stores and 17 franchisee stores in 30 cities and towns in India

India continues to be a leading diamond processor in the world. India accounts for 55% of global polished diamond market in terms of value, 80% in terms of caratage and 92% in terms of pieces.

The company sources rough diamonds from countries such as Australia, Russia and South Africa. The major export destination of cut and polished diamonds are USA, Hongkong and UAE.

The object of the issue is to achieve benefits of listing and raising capital. The fund would be used for investment in subsidiaries, joint ventures and associates. The funds will also be used for setting up diamond manufacturing facility at Hyderabad and for future expansion puposes.

For Six months ended Sep,2005, the company has clocked revenues of Rs.11552 Million and a net profit of 245 million. If we expect the company to maintain the same growth in the next half of the year, the offer comes ata PE mutliple of 22 times.

The weighted average EPS for the consolidated entity comes to Rs.4.2 . Average return on networth comes to 6%. Net asset value per share comes to Rs.86.

Despite the not so exciting financials, the company future growth looks good with more market being captured by the organised sector. Also the demand for diamond jewellery is increasing in India which would further boost the local operations of the company.

Issue opens on : February 16, 2006
Issue closes on : February 21, 2006
Retail Investors :Rs. 100,000.
Registrar : Karvy Computershare

22 comments:

Anonymous said...

Hi Rajesh,

Its good that you also know lot about diamond and its market.

Its great help from your side.

Regards
Tarun

Anonymous said...

what % gain can we expect on listing ?

jaw_amo said...

what about pratibha ind?

mohan said...

Hello rajesh,

If you can please update on the listing strategy for INOX and the possible date for listing.

Will be heartily thankful to you,

Thanks

Mohan

Anonymous said...

Hi Rajesh
Radio Mirchi is coming down ?
What would you suggest sell or hold?

Ravi said...

hI SIRg,

Hope you are well and fine,tell something about INOX i have got 100 shares in IPO what should i do.....when will the share get listed.

One more querry,in one of ur previous blogs you recommended about RIIL,in one of the magazines i read that it is still a buy and will race to 1000 rs in a year's time.What do you say.Should i take it .

Your valuable suggestions are eagerly awaited.

Thanks sirg.

Anil Kumar said...

Hi Rajesh Ji,

Can we buy GSPL at this level for long term or let it be more down.

Thanks and Regards
Anil Kumar

ashish said...

Hello Rajesh,

Please comment on the INOX IPO,what next ipo do u think should be invested in.I think there is a dearth of quality IPO'S.

tHanks,
Ashish.

Anonymous said...

I regularly see your site. Its very good.
Under the prevailing market conditions,
you dont seem to update your site regularly..albeit you might be pre-occupied with your day-to-day official engagements.
Pl. find sometime to update your blog.

Jai Hind..!!!

Anonymous said...

so gitanjali is down what do you suggest ?

Retail Investor said...

hi, nice blog. question: how can US investors best participate in the Indian market other then through the usual routes:
1) overvalued closed end ETFs trading at a premium to the NAV
2) high fee-based mutual funds
3) the limited choice of ADRs?

suggestions? thanks and it will be awesome if you can post a blog on this topic.

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 Keep a watch on the industry of the particular stock. Most of the stock behaves according to their industry trend. Thus if in the budget the government committed to play large role in the infrastructure sector , all the stocks will go react as per the budget and the whole sector recorded the jump of 12% on the next day. But it might be the case that the industry is booming and the stock is going down, therefore along with Industry, Company information is also vital.
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