Varyaa Creations coming with IPO to raise Rs 20.10 crore

Varyaa Creations

• Varyaa Creations is coming out with an initial public offering (IPO) of 13,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 150 per equity share. 
• The issue will open for subscription on April 22, 2024 and will close on April 25, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 15.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is Akshita Agrawal.

Profile of the company

The company is engaged in the business of wholesale trading of gold, silver, precious stone, and semi-precious stone. The company also intends to focus on manufacturing and selling of jewellery‘s. The company manufactures its jewellery through job worker located in Mumbai. The company has earned its revenues from wholesale trading of gold, silver, precious stone, semiprecious stone and from sales of jewellery. Currently, its products are sold only through the offline market, i.e. from its registered office located in Mumbai. Its customers can also make inquiry through its online platform www.varyaacreations.com. Further, the company will also be selling its products through its own online platform, i.e. www.baubleberry.com. This online platform will facilitate and provide its customers with an experience of Phygital marketing, i.e., an option to browse variety of jewellery through its catalogue. 

The major raw material used for making its products is gold, precious stones, gemstones, semi-precious stone, silver etc. which is further provided to the job worker who manufacture the jewellery for the company. The job worker manufactures its products as per design and pattern provide by the company. Designing of its products are done in-house. It has not entered into any formal contract or agreement with the job worker. It gets its products manufactured based on the orders basis and as and when need basis. It procures gold, silver, gemstones, precious and semi-precious stones majorly through the bullion market and jewellery market dealers located in Mumbai. 

Its jewellery is widely sold through B2B and B2C platform. It also sells customized jewellery to customers. It offers its jewellery across different price points so as to maximize its potential customer base. It endeavours to maintain the finishing and quality of its jewellery by ensuring control quality, timely delivery and competitive prices. Its product portfolio includes Necklace, Earring, Tops, Ring, Bracelet, Bangles, Gemstones, Diamonds, Lab Grown diamonds, Pearls and it also make customized jewelleries as per customer’s needs. 

Proceed is being used for:

• Financing the establishment of new showroom; a) Capital expenditure cost for the proposed new showroom and Purchase of Inventory for the proposed new showroom; (b) Purchase of Inventory;
• General corporate purposes.

Industry overview

As of February 2021, India’s gold and diamond trade contributed around 7.5% to India’s Gross Domestic Product (GDP) and 14% to India’s total merchandise exports. The gems and jewellery sector are likely to employ around 8.23 million persons by 2022, from around 5 million in 2020. Based on its potential for growth and value addition, the Government declared the gems and jewellery sector as a focus area for export promotion. The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote ‘Brand India’ in the international market. The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the 77 Reserve Bank or the Government of India.

India’s gems and jewellery market size was at $78.50 billion in FY21. Growth in exports is mainly due to revived import demand in the export market of the US and fulfilment of orders received by numerous Indian exhibitors during the Virtual Buyer-Seller Meets (VBSMs) conducted by GJEPC. India’s gems and jewellery exports reached $39.14 billion in 2021-22, a 54.13% rise from the previous year. In December 2022, India’s gems and jewellery exports was at $2.56 billion. The Government of India is aiming at $100 billion in jewellery export in the next five years (until 2027), up from $35 billion in 2020.

In the coming years, growth in the gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1-2% of the fine jewellery segment by 2021-22. Also, the relaxation of restrictions on gold import is likely to provide a fillip to the industry.

Pros and strengths

Established brand: It is well known through its brand named ‘Varyaa’ in the local jewellery market in Mumbai. This brand name has helped by the company earn the trust and goodwill of its customer which further has an influence on their buying decisions. Its well established and recognizable brand and the reputation built by the company, has and will enable it to increase its clientele list in the future. 

Well established relationship with supplier: It maintains long terms business relationships with its key suppliers and manufacturer with whom it has a mutual understanding. This long standing partnerships with them has ensured the company timely delivery of its raw materials, supply of quality raw materials, manufacturing of quality jewelleries, specialized services and superior finishing of its jewelleries. This has been beneficial for it as it is able to successful executes its orders on time and develops strong relationships with its suppliers and customers.

Extensive product list: It has an extensive product list which includes earrings, necklaces, pendants, chains, finger rings, bracelets, anklets, nose pins, mangal sutra, pendant set, bangles in brass or silver for females of age groups as well as male accessories such as rings, cufflinks, button set, that cater to its customers taste, preference, choice and the ever-changing trends in the chain and jewellery designs. Its portfolio offers its customers a wide variety of traditional, Indo-western, & modern design and jewellery for special occasions such as weddings and festivals to daily-wear for all ages, genders and across various price points.

Risks and concerns

Dependent upon few supplier: Its top 10 suppliers contributed 93.60%, 91.65%, 98.53% and Nil of the purchases for the period ending on December 31, 2023 and for the financial year ending on March 31, 2023, 2022 and 2021, respectively. Further, 23 as on March 31, 2021, due to the outbreak of Coronavirus (COVID-19) pandemic globally and in India and restriction/ constriction on the purchase and sale of gold, silver, precious stone, semi-precious stone, its company had not purchased any additional inventory and sold its existing inventory itself. In its industry, generally there are no definitive agreements with the suppliers of the products it sells. It also does not have any long-term supply agreements with its suppliers or distributors and it procures its products on a purchase order basis. Since there are no fixed terms of trade, the discounts and schemes for its customers are decided based on the negotiation skills of the procurement team. If it is unable to continue to procure supplies at competitive prices, its margins and business will be adversely affected.

Fail to protect jewellery designs: It changes its jewellery designs on a regular basis and do not register such designs under the Design Act, 2000. As such, it would be difficult for the company to enforce its intellectual property rights in its designs, and if its competitors copy its designs, in particular the designs of its products available on its website or the designs given to third party job workers/ suppliers, it could lead to a loss of revenue, which could adversely affect its results of operations and financial condition. 

Highly fragmented and competitive: The Company would not only compete with organized players but also a high percentage of unorganized entities such as individual jeweler‘s, retailer stores, jewellery showrooms and galleries and small scale companies. Some of them may offer better designs and patterns to the clients and may be capable of providing more personalized services to each client due to the smaller number of orders placed with them. Further, these unorganized entities offer their services at highly competitive prices having well established presence in their local markets. Aggressive discounting by competitors, including liquidating excess inventory, may also adversely impact its performance in the short term. This is particularly the case for easily comparable pieces of jewellery, of similar quality, sold through stores that closely resemble to those that it operates. In addition, there are minimal entry barriers in this sector and hence it may also faces competition from new entrants.

Outlook

Varyaa Creations is engaged in the business of wholesale trading of gold, silver, precious stone, and semi-precious stone. Its product portfolio includes Necklace, Earring, Tops, Ring, Bracelet, Bangles, Gemstones, Diamonds, Lab Grown diamonds, Pearls and it also make customized jewelleries as per customer’s needs. Its products are sold only through the offline market, i.e. from its registered office located in Mumbai. On the concern side, it faces competition from both the organized and unorganized sectors of the jewellery retail business. It competes with its competitors on a regional or product line basis. Many of its competitors have substantially large capital base and resources than it does and offer broader range of products. It faces competition from listed Companies like PNGS Gargi Fashion Jewellery, Ashapuri Gold Ornament, Titan Company, Bhakti Gems and Jewellery, PC Jewellers etc.

The company is coming out with an IPO of 13,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 150 per equity share to mobilize Rs 20.10 crore. On performance front, the total income of the company for fiscal year 2023 was Rs 538.03 lakh against Rs 253.13 lakh total income for Fiscal year 2022. An increase of 96.40% in total income was due to increase in Sales. Profit after tax for the Fiscal 2023 was at Rs 78.93 lakh against profit after tax of Rs 57.98 lakh in fiscal 2022, a 36.12% increase. The profit is higher due to revenue increase, expense reduces and no tax expense in fiscal 2023 due to carried forward losses setoff in fiscal 2022. Meanwhile, it aim to focus on deepening its penetration in its existing markets and thereby increase its domestic presence by expanding its customer network. At present, it sells its products in Mumbai. It aims to focus on increasing its customer base by exploring domestic markets. It proposes to set up a showroom in Agra. Besides, it will continue to add new design to its existing product portfolio to cater to various customer and price segments in the jewellery markets.