Dev Labtech Venture coming with an IPO to raise upto Rs 11.22 crore

Dev Labtech Venture

• Dev Labtech Venture is coming out with an initial public offering (IPO) of 22,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share.
• The issue will open for subscription on March 17, 2023 and will close on March 21, 2023.
• The shares will be listed on SME Platform of BSE.
• The share is priced 5.1 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Pratik Ashokbhai Patel.

Profile of the company

The company is in business of manufacturing, marketing and sourcing of diamonds - natural and lab grown having wide application in Jewellery. It is equipped with all facilities to execute all types of manufacturing activities from rough natural stone to finished polished diamonds and from Seed to finished lab grown diamonds with various sizes, shapes, clarity and colours.

The company establishes a long-term relationship with its customers by providing good quality product, which will go a long way and benefit the company. The company is backed by a team of creative for creating innovative designs. The company’s team has been a major strength as it understands the varied needs of the customers and works accordingly.

The company has recently started manufacturing of lab grown diamonds before that it was engaged in processing of natural diamonds only. it has developed the skill and expertise with application of computer software and laser technology for mapping, designing, cutting, polishing with innovation & optimum output with less wastage in rough to natural polish diamonds. Further, it has also developed the In-house technical & Design team to make Laboratory grown diamonds. This technology and process has immense advantage to the company to produce the Lab grown diamonds with more purity & clarity and required sizes and shapes with much cheaper than natural diamonds. With the background and experience in natural diamonds it has developed in-house team with manufacturing facilities new and innovative lab grown diamonds. The technology known as - Microwave Plasma Chemical Vapour Disposition (MPCVD) to make lab grown Diamonds from Diamond Seed. This technology well tested and used in large scale in China. MPCVD is a pure and fast diamond deposition process, hence best suited for commercial uses. 

Proceed is being used for:

• Meeting the capital expenditure requirements
• Meeting working capital requirement
• General corporate purposes
• Public Issue Expenses

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 is 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 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 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 April 2022, India’s overall gems and jewellery exports were at $3.23 billion. The Government of India is aiming at $70 billion in jewellery export in the next five years (until 2025), up from $35 billion in 2020.

In the coming years, growth in gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organized market and are opening opportunities to grow. Increasing penetration of organized 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 of gold import is likely to provide a fillip to the industry. The improvement in availability along with the reintroduction of low-cost gold metal loans and likely stabilisation of gold prices at lower levels is expected to drive volume growth for jewellers over short to medium term. The demand for jewellery is expected to be significantly supported by the recent positive developments in the industry.

Pros and strengths

Wide varieties of products: Its product portfolio consists of wide range of products which differentiate it from other companies. The wide variety of products in lab-grown diamonds and natural diamonds enable it to cater its customer taste and preferences. Also it has well established systems and procedures for staffing and the implementation of current and long term objectives so it will able to market its products more effectively. Its diversified product portfolio enables it to cater to a wide range of preferences and consumer segments. Its products are primarily targeted to customers in lab-grown diamonds and natural diamond studded jewellery manufacturers.

Well-established relationship with supplier: Quality and authenticity of diamonds is the upmost priority in any diamond business. In order to ensure customer satisfaction, quality supply of diamonds, timely delivery of orders and purchase of authentic diamonds, it deals with its suppliers with only those suppliers who are certified by a recognized government authority. Further, in order to compete in the diamond market, it has created and maintained an independent sales and distribution network for its products within the local markets which has led to developing and maintaining long-term and stable relationships with its key suppliers although it has not entered into any formal contracts with them.

Integrated manufacturing facility: It does continuous endeavour to maintain the requisite infrastructure and technological upgradation for the smooth running of the manufacturing process as well as to cope with the changing market demand situation time to time. There is a continuous change in the technology and the markets are very dynamic to the change in technology. It keeps ourselves technologically upgraded with the latest machines and infrastructure.

Risks and concerns

Maximum revenue comes from top 10 customers: Its top ten customers have contributed 72.64%, 50.70%, 58.19% and 54.63% of its revenues for the period ended September 30, 2022, March 31, 2022, March 31, 2021 and March 31, 2020 based on Restated Financial Statements in respect of the natural diamond business. However, its top customers may vary from period to period depending on the demand and thus the composition and revenue generated from these customers might change as it continues to add new customers in normal course of business. Since its business is concentrated among few significant customers, it could experiences a reduction in its results of operations, cash flows and liquidity if it loses one or more of these customers or the amount of business it obtains from them is reduced for any reason, including but not limited on account of any dispute or disqualification.

Limited operating history: The company was in business of processing of Natural Diamonds such as polishing and cutting. In the year 2022, it has started the manufacturing of lab grown diamonds. It has very limited operating history in manufacturing of lab grown diamonds from which one can evaluate its business, future prospects and viability. Its future revenues and profitability are difficult to estimate and could fluctuate significantly.

Stiff competition: The market in which the company is doing business is highly competitive on account of both the organized and unorganized players. Players in this industry generally compete with each other on key attributes. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. Moreover, the unorganized sector offers their products at highly competitive prices which may not be matched by it and consequently affect its volume of sales and growth prospects. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and its financial condition.

Outlook

Incorporated in 1993, Dev Labtech Venture is in business of manufacturing, marketing and sourcing of diamonds - natural and lab grown having wide application in Jewellery. It is equipped with all facilities to execute all types of manufacturing activities from rough natural stone to finished polished diamonds and from Seed to finished lab grown diamonds with various sizes, shapes, clarity and colours. On the concern side, its top suppliers may vary from period to period depending on the demand-supply mechanism and thus the supply process from these suppliers might change as it continues to seek more cost effective suppliers in normal course of business. Besides, the unorganized sector offers their products at highly competitive prices which may not be matched by it and consequently affect its volume of sales and growth prospects. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and its financial condition.

The company is coming out with a maiden IPO of 22,00,000 equity shares of Rs 10 each at a fixed price of Rs 51 per share to mobilize Rs 11.22 crore. On performance front, revenue from operations has increased by 119.40% from Rs 1223.85 lakh in Fiscal 2021 to Rs 2685.13 lakh in Fiscal 2022. The change was primarily due to increase in sales. Moreover, after accounting for taxes at applicable rates, the company reported a net profit of Rs 43.62 lakh in Fiscal 2022 as compared to a net profit of Rs 3.65 lakh in Fiscal 2021. Going forward, the company will continue to add new design to its existing product portfolio to cater to various customer and price segments in the markets. Its endeavour to maintain the quality of its products and follow strict procedures to ensure quality control, timely delivery and competitive prices. The company intends to strengthen its product development effort by leveraging skills of its employees and focusing on changing trends in the designs and customers demand, which will help to increase the sales of the company and retain customers. Moreover, the company will focus on improving operational efficiencies, expansion of business and leveraging its market skills and relationships.