P N Gadgil Jewellers IPO Analysis 2024: GMP, Subscription Status & More

The IPO (initial public offering) of P N Gadgil Jewellers Ltd (PNG) commences on September 10 and concludes on September 12, 2024. The IPO is a mix of fresh issue as well as an offer for sale (OFS) by the promoters and selling shareholders. 

The offering, carrying a Grey Market Premium (GMP) of 50%, attracted significant interest on its first day of bidding. However, investors need a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

P N Gadgil Jewellers IPO Details

• Issue Size: Rs 1,100 crore
• Fresh Issue: Rs 850 crore
• OFS: Rs 250 crore
• Price Range: Rs 456 – Rs 480
• Lot size: 31 shares

P N Gadgil Jewellers IPO Subscription Status

The IPO of P N Gadgil Jewellers Ltd witnessed robust demand on its first day, with subscriptions reaching 2.02 times by 5 p.m. Non-institutional investors subscribed 3.27 times their allocation, while retail investors subscribed 2.62 times. Meanwhile, qualified institutional buyers subscribed just 0.01 times their reserved portion.

Overview of P N Gadgil Jewellers

PNG ranks as Maharashtra's second-largest jewellery retailer by store count as of January 2024. The firm offers a diverse range of jewellery made from precious metals such as gold, silver, platinum, and diamonds. Sales are conducted through 39 retail stores and various online platforms. Of these stores, 28 are directly owned and managed by the company (CoCo), and 11 are managed under a franchisee owned and company operated (FoCo) model.

P N Gadgil Jewellers Key Strengths

• Market Position: PNG is the second-largest jewellery retailer in Maharashtra, a state responsible for ~15% of India's total jewellery retail spending. It also boasts the highest revenue per square foot among major Indian jewellery players at Rs 6.02 lakh in FY24.
• Extensive Product Range: PNG offers a vast selection of jewellery with over 10,000 SKUs in gold, 1,200 in silver, 2,700 in platinum, and 24,000 in diamond designs as of March 2024.
• Strong Financial Growth: PNG has shown impressive growth, with operational revenue and net profit CAGRs of 55% and 49%, respectively, from FY22 to FY24.

• Solid Return Metrics: In FY24, PNG demonstrated superior financial efficiency with a Return on Equity (RoE) of 28.88% and a Return on Capital Employed (RoCE) of 27.31%, surpassing its competitors.

P N Gadgil Jewellers Risk Factors

• Geographical Concentration: A significant portion of PNG's business is centralized in Maharashtra, especially Pune, where the top five stores notably drive revenues. About 68% of its total FY24 revenue came from Pune, making it vulnerable to regional disruptions or issues at these key locations.
• Legal Challenges: PNG faces various legal proceedings, including criminal cases involving its directors, promoters, and group companies. Unfavourable results in these cases could damage the company's reputation and financial stability.

P N Gadgil Jewellers Valuation & Recommendation

The IPO is priced attractively with a price-to-earnings (P/E) ratio of 22x based on FY24 earnings, which is below the industry average despite PNG's superior return metrics. The positive grey market premium (GMP) also indicates a strong market debut.

PNG has demonstrated robust growth in revenue and profits, with EBITDA nearly doubling from Rs 142 crore in FY22 to Rs 277 crore in FY24. A significant portion of the proceeds from this issue will be allocated to debt repayment, which is expected to substantially reduce interest costs and further boost profitability.

Given these factors, investors are advised to subscribe to the IPO from a medium-to-long term perspective.

For a deeper dive into this IPO, explore: IPO Corner on Liquide