The Chembur head quartered co-op bank will open its fourth branch at Sea wood,(E), Nerul, next month. At present, the bank has branches at Bhandup(W),Chembur and Mulund (W).The group has also promoted various educational institutions in Sree Narayana Nagar,Chembur and rendering exemplary service to the society.
Goenka Diamond and Jewels, which is in the business of diamond manufacturing and retailing of diamond jewellery, plans to raise Rs 145cr from the market through IPO. The issue will open on 23-03-10 and closes on 26-03-10. The company is offering 1, 00, 000, 00 equity shares of Rs 10 each, in the price band of Rs 135-145. CARE has awarded grade -2 for the IPO. SBI Capital Markets Limited is the sole BRLM.
BUSINESS
The company is one of the leading manufacturer and trader of cut and polished diamonds (CPDs) in the country. The company is also engaged in manufacturing and marketing of studded jewellery through its retail stores - G Wild and CERES. Goenka has state of the art facilities at Surat (Gujarat) and Goregaon (Mumbai).
Goenka Diamond initially was in the business of export of coloured stones and has since then expanded into diamond trade in 1994 and manufacturing of diamond studded jewellery in 2003. The manufacturing activity got boost in 2006, when the company established its own diamond-processing unit at an SEZ in Surat for processing of rough diamonds. In 2007, the company also set up a facility for processing of rough diamonds in Mumbai to cater to the local market and for in-house jewellery making operations. Goenka scaled up the diamond jewellery making operations by establishing a dedicated manufacturing facility in Mumbai and launched the first jewellery retail store in July 2008.
OBJECTS OF THE ISSUE
The company intends to utilize the proceeds from the issue, among others, for retail expansion, for working capital requirements and establishing a jewellery manufacturing facility.
FINANCIALS (RS IN CRORES)
07
08
09
TOTAL INCOME
73.61
200.62
451.29
NET PROFIT
2.70
12.41
27.38
EPS (RS)
1.93
9.56
20.60
RONW (%)
7.55
27.34
37.14
COMPARISON WITH THE PEERS
TURN OVER (FY 09)
NET PROFIT
EPS
P/E
BV
CLASSIC DIAMOND
677.20
3.50
16.60
7.5
57
GEETANJALI
2693.90
126.90
14.60
7.20
226
SU-RAJ
2417.80
33.40
5.40
6.5
123
SHRENUJ
911.40
13.40
1.90
14.80
29
GOENKA
451.29
27.38
20.60
**
55
RISKS FACTORS
1.The company faces execution risks in scaling up the retail business, where its track record is limited.
2. The diamond processing facility is geographically located in one area. Any localized unrest, political disturbances in the area could adversely affect results of operations.
3. The requirement of high working capital will put pressure on the margins.
4. Family owned, controlled business enterprise.
VALUATION AND RECOMMENDATIONS
Other than Rajesh Exports Limited (Leading gold jewellery exporter), the stocks in this sector are not fancied by investors. Su-Raj Diamonds and Geetanjali Gems, whose turnover, net profit and BV is much more than the Goenka Diamonds are available at less than 7.5 P/E. At Rs 135-145, the valuation looks expensive compared to the established players in the industry. Investors may stay away from the issue.
The Kolkata based, manufacturer and exporter of hand crafted gold jewellery is entering the capital market with issue of 1,42, 69,831 equity shares of Rs 10/- each, including the offer for sale of 21, 33,334 equity shares. The issue opens on 19-03-10 and closes on 23-03-10.
Nilesh Parekh and associates are the promoters of the company.
A Four Star Export House, exports its products to U.A.E, Singapore and Hong Kong. The Company’s export income has grown at a CAGR of 72.71% from FY 2007 to FY 2009 and Company’s share in the India’s gold jewellery exports has increased from 1.83% to 6.10% during the same period. During the FY 2007, 2008 and 2009 the company exported 86.73%, 94.19% and 99.23% of its products, respectively.
The Company’s export performance has been recognized by the Gems and Jewellery Export Promotion Council (“GJEPC”) in 2007 – 2008 and in 2008 – 2009 and has been awarded the ‘Outstanding Export Performance and Contribution in the Trade for Plain Precious Metal Jewellery Exports by Unit from EoU/EPZ’ for both the years.
Shree Ganesh Jewellery intends to utilize the issue proceeds, apart from expanding the existing facilities, to set-up new manufacturing facilities and for meeting the working capital requirements.
FINANCIALS (Rs in crores)
07
08
09
TOTAL INCOME
827.24
1283.03
2218.20
NET PROFIT
48.53
89.66
132.45
EPS (Rs)
11.32
20.65
27.29
RONW (%)
51.39
33.45
33.31
The NAV per share as on 30-09-10 is Rs99.01
RISKS
The company proposes to diversify into the manufacture of machine made jewellery, diamond studded jewellery at the proposed plants, and intend to expand the chain of retail outlets. The limited experience in setting up and operating a manufacturing facility and under taking retail operations at a larger scale poses risks.
The government, stung by the poor response to stake sale in NTPC, REC and NMDC has decided to review the performance of the investment bankers in the earlier issues managed by them, before it gives them the mandate. Under the new rules being considered, 70% Weightage for quality aspects and 30% for transaction fees. Currently, the merchant bankers are selected purely based on bids. Again, the thinking of the government on the above matters is off the track. Although the credibility and reputation of the merchant bankers are required, you cannot sell an issue on that alone. Pricing and valuation are very important.
UBS Securities, CITI group global, Edelweiss Capital, Kotak Mahindra Capital, Morgan Stanely, managed NMDC FPO. These private merchant bankers are reputed and have good track record in issue management. However, the FPO of NMDC got poor response and had to be bailed out by government controlled financial institutions. As compared to that, in the same week NMDC FPO opened for public, SBI capital Markets Limited, a public sector out fit, managed the public issue of DQ international which was over subscribed by 86 times. There was nothing wrong with the timing of NMDC issue. Then what went wrong? Definitely, there was some thing wrong with the pricing. NMDC FPO issue had all the plus points – operating margin is in excess of 75%, net profit margin of 51% and RNOW is around 40%. Zero Debt Company. Healthy dividend pay out record. The bonus component in the capital is 66.66%. However, the investor response to the issue was poor. In the FY 2010-11, government plans to mobilize Rs 40,000cr from disinvestment. The valuations of the issues have to be attractive to get good investor response. Government should think on this aspect instead of blaming the merchant bankers.
Other than preparing a quality offer document and giving sound investment advice, the strength and capability of all the merchant bankers, so far as attracting/inducing the investors for subscription for an issue, are the same. I don't think that there is any merchant banker in the country, who can sell an issue, only on his strength, irrespective of valuations and market conditions.
The NAVRATNA’S follow on public offer received decent recent response on the first day, with bids for 17 percent of the shares on offer. Considering the size of the issue this response is very good. However, the offer received bids mostly at the lower end of its price band of Rs300. NMDC shares ended at 379.85 rupees, up 1.1 percent in the exchanges.
RS 40,000CR DIS INVESTMENT IN NEXT FISCAL
The government is likely to go ahead with divestment in 12-15 public sector units, including SAIL, Coal India, Hindustan Copper, SJVNL and EIL and others next fiscal to raise Rs40,000 crore, as indicated in the budget. The said divestment in some of these companies will be through initial public offers while in some others it will be follow-on public offers.
The base rate, which will replace the current benchmark prime lending rate (BPRL) from July 1, should keep the all categories of home loans out side the base rate. Currently, home loans are offered at 8.5% p.a. The base rate is expected to be around 10% p.a. Even an increase of one percent in interest rate will push up the EMI of housing loans substantially, since the tenure of the loans ranges from 10 to 25 years. A shelter for themselves is what the middle class and the poorer section of the society always want to own. Affordable housing loans should be made available these deserving sections of the society. The economics of cost of funds for banks, while lending to this section, must be kept out of the purview.
The Gulf Finance Home (GFH) will develop a special economic zone in Navi Mumbai that will be spread over 1700 acres and will attract investments in excess of Rs 45,000cr. The economic zone will constitue Energu City India,Telecom City Mumbai, Software City Mumbai and Entertainment City Mumbai.
