Joyalukkas to tap primary market with Rs.2,300 crore IPO

One of India’s most respected retail jewellery brands, Joyalukkas, is planning to tap the primary market through the issue of shares. Joyalukkas India Ltd is planning to raise a sum of Rs.2,300 crore entirely via a fresh issue of shares.

While there are already other listed jewellery stocks like TBZ, P Chandra and Thangamayil, Joyalukkas would compete in terms of size with listed names like Kalyan Jewellers and Titan.

Out of the net proceeds of the issue of Rs.2,300 crore net of issue related costs, Joyalukkas India Ltd plans to allocate Rs.1,400 crore for the repayment of loans availed by the company.

In addition, a sum of Rs.464 crore will be allocated by Joyalukkas India Ltd towards financing the rollout of 8 new showrooms across India. The last big jewellery retailer listing was Kalyan Jewellers, which was a little over a year ago. 

Let us turn to the financials of Joyalukkas India. For the financial year ended March 2021, Joyalukkas India had reported total sales of Rs.8,066 crore with net profit margins of 5.8%.

For the half year ended September 2021, Joyalukkas reported net profits of Rs.269 crore on revenues of Rs.4,012 crore, implying net profit margins at a robust 6.7%. In the year FY22, the company did see a revival in revenge buying with full opening of its stores across India. 

The company has maintained consistent return on equity (ROE) in the range of above 16.4%. The industry overall has a high P/E ratio but that is more because Titan enjoys a very high P/E ratio and that tends to distort the overall industry P/E ratio.

The issue of Joyalukkas will be lead managed by Edelweiss Financial Services, Haitong Securities, Motilal Oswal Investment Advisors and SBI Capital Markets. The registrar will be Link Intime India.

Joyalukkas has a strong franchise in gold and diamond jewellery. Its diamond jewellery are certified by Forevermark, IGI, GIA and DHC. The international jewellery market is estimated at around $320 billion with diamond and gold accounting for nearly 50% of the total demand.

The three major jewellery markets in the world are the US, China and India. India is also a key player in the supply chain of gold and diamonds, apart from jewellery. 

One of the big advantages for Joyalukkas is that in India, gold is not just a rational purchase but also quite often an impulsive purchase. Gold is also seen as a store of value and most Indian families have an emotional connect with gold due to its ability to span across generations.

As a result, among the FMCG products, the sale of jewellery is more of a pull product and less of a push product. That should help Joyalukkas sustain growth.

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