The opening day of trading for Senco Golds’ stock on July 14th brought about considerable excitement with an impressive premium of 35.96%. This boost can be attributed to several factors including robust investor interest in their initial public offering (IPO) long standing brand recognition among consumers in Kolkata and beyond; positive financial indicators; alluring valuations that attracted potential buyers and utilization of an asset-light franchise model. Despite the company’s noteworthy revenue and net profit growth. Reservations have been expressed regarding their debts and operating cash flow.
Senco Gold, the jewellery retailer based in Kolkata, witnessed a surge of 35.96 percent premium in its shares’ opening on July 14, a development that was anticipated.
The remarkable rally can be attributed to several factors, including the overwhelming response to its initial public offering (IPO), its strong brand presence in eastern India accumulated over five decades, the company’s sound financial performance, attractive valuations compared to its listed counterparts, and its asset-light franchise model.
The stock commenced trading on the BSE at Rs 431, a significant jump from the issue price of Rs 317 per share. The price on NSE had yet to be updated. Market analysts had predicted a premium of 35-40 percent for Senco Gold’s listing, and the grey market premium stood at an impressive 41 percent over the issue price.
This marks the first listing in the jewelry industry since Kalyan Jewellers India went public in March 2021. Senco Gold’s IPO received an overwhelming response from investors, with a subscription rate of over 73 times during July 4-6, making it the second-highest subscription rate in the current calendar year, surpassed only by Ideaforge Technologies.
Senco Gold entered the market at a discounted valuation compared to its peers. Based on the FY23 financials, Titan Company traded at a price-to-earnings (P/E) ratio of 83.5x, Kalyan Jewellers at 35x, whereas Senco Gold stood at 15.5x with a market capitalization of Rs 2,462 crore.
The company experienced a robust revenue growth rate from operations, achieving a compounded annual growth rate (CAGR) of 24 percent during FY21-FY23, with revenues reaching Rs 4,077 crore by the end of March FY23. Furthermore, its net profit witnessed a CAGR of 61 percent during the same period, totaling Rs 158.5 crore.
Through its public issue, Senco Gold successfully raised Rs 405 crore, including the issuance of fresh shares worth Rs 270 crore. The proceeds, excluding issue expenses, will primarily be utilized for fulfilling the company’s working capital requirements. The price band for the offer ranged from Rs 301 to Rs 317 per share.
However, brokerages have raised specific concerns regarding the company’s debts and its ability to generate positive operating cash flow over the past two years. Senco Gold’s debt increased to Rs 1,177.2 crore by the end of March FY23, compared to Rs 863 crore in FY22.
Additionally, its cash flow from operations for FY23 was negative at Rs (76) crore, slightly higher than the previous year’s Rs (70) crore, while the cash flow from investing activities stood at Rs (198) crore, compared to Rs (157) crore in FY22.
