Eighty Jewellers coming with an IPO to raise upto Rs 11.07 crore

Eighty Jewellers

• Eighty Jewellers is coming out with an initial public offering (IPO) of 27,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 41 per equity share.
• The issue will open on March 31, 2022 and will close on April 5, 2022.
• The shares will be listed on SME Platform of BSE.
• The share is priced 4.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Nikesh Bardia.

Profile of the company

Eighty Jewellers was originally incorporated as a private limited company in the name of ‘Eighty Jewellers Private Limited’ under the Companies Act, 1956 pursuant to Certificate of Incorporation dated September 15, 2010 issued by the Registrar of Companies, Madhya Pradesh & Chhattisgarh. The company has been converted into a public limited company under the Companies Act, 2013 and its name has been changed to Eighty Jewellers Limited pursuant to a fresh certificate of incorporation consequent upon conversion to public limited company dated October 28, 2021 issued by the Registrar of Companies, Chhattisgarh.

It is part of the Anopchand Tilokchand group which is a well-known name and established brand in the Jewellery sector since many decades in and around Chhattisgarh. It is currently engaged as a master franchisee of Anopchand Tilokchand Jewellers Private Limited (ATJPL) and involved in the trading of various jewelleries, ornaments, watches and luxury articles made out of gold, silver, diamonds and platinum studded with precious and semi-precious stones under the B2B model in the name “Anopchand Tilokchand Jewellers”. Its product portfolio includes rings, earrings, armlet, pendants, gajrahs, nose rings, bracelets, chains, necklaces, bangles, watches, luxury items and other wedding jewellery. Its products cater to the customers across high-end, mid-market and value market segments.

The company is currently operating on a B2B business Model and offer its customers a broad variety of jewelleries, ornaments, watches and luxury articles made out of gold, silver, diamonds and platinum studded with precious and semi-precious stones in order to cater to both regional and modern tastes. It also deals in diamond and silver jewellery and ornaments. It procures its majority stock of jewellery from its group Company Anopchand Tilokchand Jewelers Private Limited and Adorable Jewels India Pvt. Ltd. who undertake the major designing and job work of its products. But sometimes it also gets the items manufactures from independent job workers depending upon the customer requirements and taste.

Proceed is being used for:

• Meeting working capital requirements.
  
• General corporate purpose.
  
• Meeting issue expenses.

Industry Overview

The Gems and Jewellery Sector plays a significant role in the Indian economy, contributing around 6-7% of the country’s GDP. One of the fastest growing sectors, it is highly export-oriented and labor-intensive. Based on its potential for growth and value addition, the Government of India declared the Gems and Jewellery Sector as a focus area for export promotion. India is deemed to be the hub of the global jewellery market because of its low cost and availability of high-skilled labour. India is the world’s largest cutting and polishing centres for diamonds, with the cutting and polishing industry being well supported by government policies. The Gems and Jewellery market in India is home to more than 500,000 players, with the majority being small players.

Gems and jewellery exports, which were contracting in 2019-20, slumped further in 2020-21 due to COVID-19 related demand and supply disruptions. The contraction was particularly severe in Q1:2020-21, but export growth finally returned into positive territory in November 2020 due to revival in demand for pearls and precious stones. Gold jewellery, which is the other major component, remains in a deep contractionary mode. The UAE used to be the largest destination of gold jewellery exports, accounting for more than 50 per cent of India’s total gold jewellery exports. However, travel restrictions and the reluctance of Indian exporters to ship goods on credit owing to the uncertainty created by COVID-19 led to a massive slump in exports of gold jewellery to the UAE.

India is one of the biggest consumers of gold, but it imported its lowest monthly volumes in April 2020, reflecting a significant fall in demand in the pandemic. However, gold imports, in value terms, picked up in Q2 and have continued to remain at an elevated level since then. The growth in gold imports has been essentially driven by steep rise in global gold prices, though even in volume terms they have recovered to levels seen last year. In particular, during Q4:2020-21, several factors, ranging from base effect to pre-festival impact (Akshaya Tritiya), pent up wedding induced demand contributed to the sharp surge in gold imports. According to a recent report by the World Gold Council, high gold prices supported an increase in global recycling of gold, which spiked sharply in Q2 and Q3:2020. Meanwhile, Piyush Goyal said, “Continuing the government’s endeavor for better protection and satisfaction of customers, mandatory hallmarking in 256 districts will be implemented from 16 June.” No penalty will be imposed till August 2021. This will help develop India as a leading global gold market centre.

Pros and strengths

Use of the established brand name: Over the years Anopchand Tilokchand Jewellers has established itself as a renowned brand in the Central India and the adjoining areas. As a franchisee partner it has entered into a franchisee agreement with its group company to open Brand store in India as well as outside India. As per the agreement and NoC dated November 01, 2021 provided to the company by its group company it can use the Brand name for business purpose. Dealing in the brand name of Anopchand Tilokchand Jewellers provides it with the advantage of the customers relying on the quality of the product. Over the years, through the customer centric approach it has maintained the trust the customers’ have in the brand name, which has been rewarded through the customers’ loyalty.

Design, innovation and product range: The wide experience of the company’s promoters in the Gold industry helps it to know about the exact requirement of the customers, which in turn helps to decide the products accordingly. Its wide range of product offerings caters to diverse customer segments, from the value market to high-end customized Jewellery.

Prime location of showroom: The selection of the franchisee and the location of the store plays a crucial role in the success of its business. The location of the store is important from two aspects i.e., increasing the foot fall of the customers and secondly safety of the store. Its franchisee stories located in the area which help in increasing the customer footfall which in-turn is converted into sales.

Risks and concerns

Fully dependent on master franchisor: The company has entered into a Master Franchise agreement with Anopchand Tilokchand Jewelers Private Limited under which it has been allowed to use the Brand name and open Jewellery stores for sale of the Jewellery and related items supplied to it by them, either directly or through sub-franchisee arrangement or at its point of sale. The Master Franchise Agreement provides it with the right and license to develop, establish, operate and franchise and permit the sub-franchisees. As per the agreement, it is also required to seek the prior approval of its Master Franchisee for undertaking operations including: opening and operating each of the company-owned store or sub-franchising stores. Further, the company cannot control or influence the actions of its Master Franchisee at any time in case they have any economic, business or legal interests or goals that are inconsistent with the company. If the Master Franchisee takes certain actions that it does not agree with, its business operations may be adversely affected, which would have a material adverse effect on its business, results of operations and financial condition.

Limited number of customers: The company operates under a B2B model, where it sells its goods to other business enterprises as wholesalers or Franchisee. It currently has entered into sub-franchisee agreement for the store opened at Korba, Chhattisgarh which is operated by Ms. Chhattisgarh Sales Corporation. Apart from that it also sells its good to M/s Grand Bhagwati under a B2B model who then sells the goods to ultimate customers. It has also provided a No objection to M/s Grand Bhagwati to sell the goods under the name of “Anopchand Tilokchand Jewellers” but it has not entered into any definitive agreement with them for the same. Its inability to identify new franchisee partners or new customers or any inability to maintain the relationship with the existing customers may adversely affect its business, results of operations and financial condition.

Geographical concern: The company’s sub-franchisee showroom is based in Korba, Chhattisgarh. As a result, any localized social unrest, natural calamities, distress or breakdown of services and utilities in and around these regions, could have material adverse effect on its business, financial position and results of operations. Further, any continuous addition of similar industries/shops in and around these areas, without commensurate growth of its infrastructural facilities may put pressure on the existing infrastructure, which may affect its business.

Outlook

Eighty Jewellers operates as a master franchisee of Anopchand Tilokchand Jewellers Private Limited. The company is engaged in the trading of various jewellery, ornaments, watches and luxury articles made out of gold, silver, diamonds and platinum under the brand name of Anopchand Tilokchand Jewellers. The company is located in Chhattisgarh. Eighty Jewellers Limited has the right to open stores in the Brand name of Anopchand Tilokchand Jewellers either directly opening a showroom or through sub-franchise arrangements. On the concern side, the company’s business depends on the continued success and reputation of its Master Franchisee brand, and any negative impact on the brand may adversely affect its business, results of operations and financial condition. Moreover, any deterioration in the performance or its relationships with its customers or sub-franchisee may adversely affect the company’s business, results of operations and financial condition.

The company is coming out with a maiden IPO of 27,00,000 equity shares of Rs 10 each at a fixed price of Rs 41 per share to mobilize Rs 11.07 crore. On performance front, the revenue from operations during the period ended September 30, 2021 was Rs 4414.29 lakh. Revenue from operations includes revenue generated from trading of gold and silver ornaments and other jewelry.  Moreover, the restated net profit during the period ended September 30, 2021 was Rs 83.06 lakh representing 1.87% of the total revenue of the company. The company intends to open more Showrooms either directly or through sub-franchisee in and around Chhattisgarh region and also expand its showroom in other cities of nearby states. Before opening of the showroom, it generally conduct the detailed market survey and market analysis to determine the requirement of the customers. Further, the company is aiming to expand its customer base by targeting different stores, discount chain stores and fine jewellers. In this regard, it proposes to adopt the marketing and branding strategies for the specific needs of target market for these retailers.