P N Gadgil Jewellers Limited (Subscribe)

Highlights

P N Gadgil Jewellers Limited (PNGJL) incorporated on 2013, is second largest among the prominent organised jewellery players in Maharashtra, in terms of the number of stores. They also had the highest revenue per square feet in FY24 among the key organised jewellery players in India.

The PNG brand derives its legacy from the P N Gadgil brand, which has a rich heritage dating back to 1832 and a legacy of over a century. Leveraging the legacy and heritage of the PNG brand, they have created a strong brand recall and presence in Maharashtra offering a wide range of precious metal / jewellery products including gold, silver, platinum and diamond jewellery, across various price points.

Their products are primarily sold under their flagship brand, PNG, and various sub – brands, through multiple channels, including their 39 retail stores (as on Q1FY25) and various online marketplaces, including website.

As on Q1FY25, they had expanded to 39 stores, which includes 38 stores across 21 cities in Maharashtra and Goa and one store in the U.S. with an aggregate retail area of approximately 108,282 sq. ft. All their stores are operated and managed by them with 28 being owned stores and 11 franchised stores, on a franchisee owned and company operated (FOCO) model.

PNGJL has 8 sub-brands which cater to gold jewellery collections for different occasions, 2 subbrands which cater to the diamond jewellery collections and 2 sub- brands which cater to platinum jewellery collections. In addition to the sale of their branded jewellery products, they also provide make to order jewellery options to their customers.

Out of the total proceeds of Rs. 11,000 mn, Rs. 3,925 mn would go towards funding expenditure towards setting-up of 12 New Stores. ~Rs. 3,000 mn would go towards repayment of outstanding borrowings of the company. ~Rs. 1075 would use for general corporate purpose and Rs. 2,500 mn would go towards existing selling shareholders of the company.

Key Highlights

• Currently, the Retail market in India is valued at USD 951 bn in FY23 out of this 7.3 pct is Jewellery market. Retail market is expected to grow at a CAGR of 10.5 pct to reach USD 1,417 bn FY27. The Indian jewellery retail sector’s size in FY23 was close to USD 70 bn and it is estimated to grow at a CAGR of 16 pct over FY23-28P and reach to 145 bn.
• The company operate majority of their stores in Maharashtra, which is the largest market for BIS-registered outlets in India. They plan to further expand their stores network by opening 12 new stores in Maharashtra by FY26. They select store locations strategically to ensure a well-diversified presence across larger and smaller cities, semi – urban regions.
• PNGJL generally aim to enter under-served jewellery markets where they can potentially gain market share from local jewellers by carving a niche through offering a diverse product mix, designs and price structure and utilizing their brand and goodwill. They aim to establish showrooms to tailor to local preferences, with comprehensive offerings from various product ranges, to target various customer and price segments as well as to provide custom made jewellery.
• Their diamond jewellery is certified by various agencies including Gemological Science International and they procure diamonds from vendors who provide a certification that the diamonds provided to the company is compliant with the Kimberley certification as conflict free. This process prevents the conflict diamonds (i.e. an uncut diamond mined in armed conflict zone or region) from entering the mainstream rough diamond market.
• PNGJL formulated specific loyalty and Future Purchase Plan (FPP). Under FPP, their customers are required to pay instalments for a period of 10 months and thereafter redeem the aggregate amount at the end of their scheme period at their store by purchasing jewellery at a discounted price. Under their Dajikaka Promise Plan, customers can buy jewellery at the prevailing market rate in future as per their requirement by paying one bullet instalment in advance, which can be redeemed anytime within a period of 12 months. As of FY24, they had a deposit of Rs. 2,180.54 mn under these schemes.
• Their key strategies include (i) To expand retail network in western India by leveraging brand (ii) Continue to invest in marketing and brand building initiatives. (iii) Focus on increasing footfalls in existing stores and increasing the average transaction value and (iv) Increase digital presence to increase customer base and sales.
• Sales of the company has grown by 54.63 pct CAGR during the period FY22-24 and EBITDA and Profit grew 39.7 pct CAGR and 49 pct CAGR over FY22-24. During FY24, company reported sales of Rs. 61,109 mn which grew by 35.6 pct YoY while EBITDA rose by 59 pct YoY to Rs. 2,774 mn as EBITDA margin expanded from 3.87 pct in FY23 to 4.54 pct in FY24. As of FY24 the company reported profit of Rs. 1543 mn which was grew by 64.7 pct YoY.

Key Risk

• PNGJL are dependent on third party artisans for the production and manufacturing of all of their products. Any disruptions at such third-party production or manufacturing facilities, or shortage or scarcity of Karigars in the jewellery industry especially in Maharashtra can affect business of the company.
• Their income and sales are subject to seasonal fluctuations and lower income in a peak season may have a disproportionate effect on their results of operations.
• Regional concentration may deprive them of participating in the growth of other sizeable markets which may have adverse impact on the growth prospects of the Company.

Financial Performance

Peer comparison based on FY24 Financials

Valuation

P N Gadgil Jewellers Limited is the 2^nd largest among the prominent organised jewellery players in Maharashtra. The PNG brand derives its legacy from the ‘P N Gadgil’ brand, which has a rich heritage dating back to 1832 and a legacy of over a century.As of Q1FY25 the company has 39 stores and expecting 12 more stores FY26. At the upper end of the price band of Rs. 480 the issue is priced at a PE of ~42.2 its FY24 post issue earnings. The issue looks fairly priced. One can apply for long term perspective.

Also read: Why Is Financial Advisory Important?

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