Utssav CZ Gold Jewels coming with IPO to raise Rs 69.50 crore

Utssav CZ Gold Jewels

• Utssav CZ Gold Jewels is coming out with initial public offering (IPO) of 63,18,000 shares in a price band Rs 104-110 per equity share.
• The issue will open on July 31, 2024 and will close on August 2, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 10.40 times of its face value on the lower side and 11.00 times on the higher side.
• Book running lead manager to the issue is Choice Capital Advisors.
• Compliance Officer for the issue is Rachna Jajoo.

Profile of the company

The company is in the business of designing, manufacturing, wholesaling and exporting of 18Karat 20Karat and 22Karat CZ Gold jewellery. The company specializes in light weight production of cubic zirconia (CZ) gold and rose gold casting jewellery. It manufactures and offers wide collection of products such as Rings, Earrings, Pendants, Bracelets Necklacess, Watches and Broaches etc. The company was established in 2007 in the name of Utsav CZ Gold Jewels. In 2008, it transitioned to a public limited company under the name Utsav CZ Gold Jewels.

Its forte lies in crafting exquisite CZ casting gold jewellery and designer pieces, tailored to the preferences of today's youth. Whether for daily wear or special occasions, its designed rings, earrings, pendants, bracelets, and necklaces resonate with its target audience. Cubic zirconia (CZ) is a synthetic gemstone known for its similarity to diamonds. Composed of zirconium dioxide, CZ is renowned for its clarity and can be crafted into various shapes and sizes, such as round, emerald, and pear cuts. These stones are popularly known as ‘American Diamonds’.

While it is much more affordable than diamonds, it still offers impressive durability and a sparkling appearance, making it a popular choice for jewellery. The company specializes in Gold jewellery studded with CZ stones, combining the elegance of gold with the dazzling beauty of cubic zirconia. It customizes designs to accommodate diverse regional preferences, ensuring that it meets the unique needs of its clientele in every market it serves. The company's key strengths lie in its focus on design and innovation, its deep understanding of consumer preferences and market dynamics, and the quality of its products. It caters to a wide range of customers by offering high-end, medium-range and affordable CZ gold jewellery, all hallmarked by the Bureau of Indian Standards (BIS).

Proceed is being used for:

• Funding working capital requirement of the company
• General corporate purpose

Industry Overview

The Indian Gems and Jewellery (G&J) business has traditionally been fragmented with consumers mainly purchasing from family jewelers. The fragmented nature of this sector makes it difficult to quantify the number of jewelers in India. However, the industry has seen structural transformation in the recent decade with more G&J players moving up the value chain with a greater focus on branded jewellery. Jewellery retailing is not only profitable and high-margin but also an underpenetrated industry in India, which means there is a lot of room for growth. Moreover, consumers are more predisposed to branded jewellery particularly in metro & tier I cities, given the rising media and Western influences and willingness to pay a premium.

The Indian G&J industry broadly consists of gold jewellery, studded jewellery and other jewellery types like platinum jewellery, fashion jewellery, and silver jewellery. The domestic gold jewellery wholesale industry is expected to grow from 378 tonnes (out of 600 tonnes total gold jewellery demand) in 2022 to 402 tonnes by 2025 and 475 tonnes by 2030, at a CAGR of 2.5%. In value terms, the industry size is expected to increase to Rs 2,340 billion in 2030 from Rs 1,713 billion in 2022. 

In India, a large percentage of raw materials are imported, as the domestic supply is limited. The raw material is converted into finished goods that are sold in the domestic and international markets. India is a net importer of raw gold and meets over 90% of its gold requirement through imports. The total gold imported (in value terms) by India was Rs 3,441 billion in FY22 and Rs 2,805 billion in FY23. In 10MFY24, the total gold imported was Rs 2,977 billion. Gold is imported from Switzerland, South Africa, the United Arab Emirates, and Australia, among other countries.

Pros and strengths

Catering to fast growing daily and fashion wear gold jewellery market: Gold jewellery consumption in India is broadly categorised as bridal, daily wear & fashion jewellery. Further, Daily and Fashion wear jewellery accounts for 40-50% of the domestic gold jewellery consumption while rest is attributable to the Indian weddings/marriages. Gold jewellery demands from the weddings/marriages are occasional, whereas daily wear & fashion jewellery are with contemporary styles available in 18K and 22K variants and are lighter in weight (ranging from 5-30 gms in weight).

Skilled work force with contemporary designing capabilities: The company boasts a diverse team of skilled artisans and professionals with varied expertise in jewellery making. The company's workforce possesses a wealth of knowledge and execution capabilities. The company fosters creativity and innovation through collaborative design processes. By encouraging open communication and idea-sharing among designers, the company cultivates a culture of innovation where fresh and innovative design concepts emerge. With a team of 15 CAD designers on its payroll, it develops around 400 designs per month on a regular basis to stay ahead of market trends and customer demands.

Long-standing relationship with reputed jewellery retailers: The company is engaged in B2B sales of jewellery. Since its incorporation, it has engaged with prominent jewellery retailers, which are established brands in the domestic jewellery retailing market. Few of its jewellery retailers include D.P. Abhushan & Kalamandir Jewellers. Further, the company has an average association of 7-8 years with these jewellery retailers. Its business growth in the past is mainly attributed to such established relationships and it intends to continue to leverage such associations for future growth as well.

Risks and concerns

Depend on top ten customers: Its top ten customers contribute 55.58%, 53.28%, 53.53% and 61.75% of its total revenue from operations for the period ended January 31, 2024 and for the financial years ended on, March 31, 2023, 2022 and 2021 respectively. its business operations are highly dependent on few of its customers. The loss of one or more of these significant or key customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. It has not entered into long-term contracts with all of its customers, which exposes it to risks emanating from the inability to retain its established customers. It cannot assures that it shall generate the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations.

Gold price fluctuations: Gold is the key raw material it uses in its operations. Majority of its expenses go toward purchasing gold, and thus changes or volatilities in the price of this precious metal might affect its business, financial condition and results of operations. Gold prices are influenced by domestic and global factors, including industrial and jewellery demand, sales and purchases by government agencies and central banks, mining, production, inflation, global currency exchange rates, etc. Any volatility in the gold prices may result in a negative impact of gold jewellery demand in the short-term. 

CZ gold jewellery business faces risk due to market volatility: Its CZ gold jewellery business faces heightened risk due to market volatility and shifting consumer preferences, compounded by the current record-high gold rates that may continue to rise. Fluctuations in commodity prices, especially in gold, directly impact its cost of raw materials and overall profitability. The current peak in gold prices presents a particular challenge, as further increases could escalate its production costs, potentially squeezing profit margins unless it adapts its pricing strategies accordingly. Conversely, sudden declines in gold prices could impact inventory valuation and profitability, especially if it has materials acquired at higher costs.

Outlook

Utssav CZ Gold Jewels is in the business of designing, manufacturing, wholesaling and exporting of 18Karat 20Karat and 22Karat CZ Gold jewellery. The company specializes in light weight production of cubic zirconia (CZ) gold and rose gold casting jewellery. It manufactures and offers wide collection of products such as Rings, Earrings, Pendants, Bracelets Necklaces, Watches and Broaches etc. On the concern side, the markets in which it operates are competitive. Its competitors include both organised pan-India jewellers as well as unorganised local players in the markets in which it operates. Some of its competitors in both manufacturing and retail segment have achieved significant recognition for their brand names or have considerable financial, distribution, marketing, bargaining power with suppliers and other resources.

The company is coming out with a maiden IPO of 63,18,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 104-110 per equity share. The aggregate size of the offer is around Rs 65.71 crore to Rs 69.50 crore based on lower and upper price band respectively. On performance front, its total income has increased by 94.22% to Rs 23,971.52 lakh in Financial Year ended March 31, 2023 from Rs 12,342.53 lakh in Financial Year ended March 31, 2022. It recorded an increase of 114.09% in profit after tax from Rs 333.95 lakh in Financial Year ended March 31, 2022 to Rs 714.96 lakh in Financial Year ended March 31, 2023. Meanwhile, it plans to strengthen its existing relationships through repeated and higher quantum of sales while also expanding its geographical footprints. It is also looking to expand its client base by adding new jewellery retailers across India. In Financial Year 2023, it has also resumed its export operations by exporting to USA and UAE. It aims to grow its business internationally by participating in jewellery exhibitions and expanding its distribution network.