Senco Gold IPO, which is set to close today, is witnessing a premium of over 35% in the grey market. Some brokers have expressed concerns about their debt on the company’s balance sheet. As of March FY23, the company’s debt stood at INR 1,177.2 crores, compared to INR 863 crores in FY22 and INR 532 crores in FY21.
The jewelry retailer, Senco Gold, has seen a significant premium in the grey market, surpassing the price band set by the IPO. Analysts have indicated that this is the third IPO company that is expected to receive a substantial premium in the grey market, following Ideaforge Technology (75% premium) and Cyient DLM (45% premium) in the current calendar year 2023.
The INR 405 crore public issue will close on July 6. On the second day of bidding, the issue received a good response from subscribers, with a subscription rate of 2.07 times as per the available subscription data on exchanges.
So far, retail investors and high-net-worth individuals have shown interest in subscribing to the IPO. Qualified institutional buyers have subscribed for 3.05 times the allotted portion, while non-institutional investors have subscribed for 2.34 times. Prominent institutional investors have placed bids for a 14% stake.
The grey market is an unofficial market for trading IPO shares until listing. Investors refer to the grey market to gauge the expected prices.
With a history of more than five decades, a strong presence in eastern India, robust financial performance, and a well-established brand with Malabar Gold franchise, Kolkata-based organized jewelry retailer Senco Gold is attracting available valuations, as highlighted by analysts. Senco Gold has a P/E (Price-to-Earnings) ratio of 15.5 for FY23, compared to Titan Company and Kalyan Jewelers India, which have traded at P/E ratios of around 83 and 33.8, respectively.
Post the issue, the high-end of the price band at INR 301-317 per share is expected to fetch a market cap of INR 2,462 crores.
Senco Gold is the largest organized jewelry retail company in eastern India and has the highest number of stores based on the count of gold sellers in the region. As of March 2023, they have a total of 136 stores, of which 75 showrooms are operational.
Senco focuses on achieving optimal balance in their operational showrooms and expanding their inventory management in line with the franchise model of Malabar Gold. They use a hub-and-spoke approach to enter new geographical areas and streamline their inventory management. This is a crucial challenge, as stated by StocksBox, who recommended subscribing to the IPO.
The company has shown a revenue growth of 23.8% CAGR during the financial years 2021-23. During this period, their net profit grew by 60.6% CAGR, and EBITDA (earnings before interest, taxes, depreciation, and amortization) increased by 34.4%.
Hem Securities finds favor with the company’s business model and the rate of growth they have achieved, which has uplifted both the top line and bottom line. They recommend considering the IPO as it shows promising financials and attractive valuations.
In this offering, the company plans to issue new shares worth INR 270 crores from SAIF Partners India IV, who have been investing in the company since 2014. The IPO also includes an offer for sale of INR 135 crores. A significant portion of the fresh issue proceeds is expected to be utilized for reducing debt.
The concern lies mainly with the debt on Senco’s books. As of March FY23, the company’s debt stood at INR 1,177.2 crores, compared to INR 863 crores in FY22 and INR 532 crores in FY21.
According to Canara Bank Securities, “The company’s equity-to-debt ratio for FY2023 stands at 1.25x, which is higher than the industry average of 0.80x. This could create pressure on the company’s future prospects.” Hence, they suggest that investors pay close attention to the company’s debt levels.
Senco focuses on achieving optimal balance in their operational showrooms and expanding their inventory management in line with the franchise model of Malabar Gold. They use a hub-and-spoke approach to enter new geographical areas and streamline their inventory management. This is a crucial challenge, as stated by StocksBox, who recommended subscribing to the IPO.
The company has shown a revenue growth of 23.8% CAGR during the financial years 2021-23. During this period, their net profit grew by 60.6% CAGR, and EBITDA (earnings before interest, taxes, depreciation, and amortization) increased by 34.4%.
Hem Securities finds favor with the company’s business model and the rate of growth they have achieved, which has uplifted both the top line and bottom line. They recommend considering the IPO as it shows promising financials and attractive valuations.
In this offering, the company plans to issue new shares worth INR 270 crores from SAIF Partners India IV, who have been investing in the company since 2014. The IPO also includes an offer for sale of INR 135 crores. A significant portion of the fresh issue proceeds is expected to be utilized for reducing debt.
The concern lies mainly with the debt on Senco’s books. As of March FY23, the company’s debt stood at INR 1,177.2 crores, compared to INR 863 crores in FY22 and INR 532 crores in FY21.
According to Canara Bank Securities, “The company’s equity-to-debt ratio for FY2023 stands at 1.25x, which is higher than the industry average of 0.80x. This could create pressure on the company’s future prospects.” Hence, they suggest that investors pay close attention to the company’s debt levels.