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December 09, 2012


Issue Highlights

Price Band
Rs. 125-135
Issue Period
10/12/2012-12/12/2012
Issue Size
Rs. 609 crore/4,51,33,500 shares
Face value
Rs. 10
Lot Size
90 shares
Issue Type
100% Book Building
Listing
BSE,NSE
Registrar
Karvy Comutershare
Maximum Retail Subscription
Rs. 1,94,400/ 16 lots
Industry
Gems & Jewellery
              Discount to Retail Investors
Rs. 5

Company Profile

PC Jewellers is a leading jewellery company in India and is involved in manufacturing, retailing and export of the gold jewellery.  The company is a dominant retail player in the Delhi & NCR region with around 1,64,572 square feet of retail area and is trying to expand its footprints in the southern and western India. Around 33 % of the revenue comes from the exports. ‘PC Jewellers’ has got its manufacturing facilities situated in Deharadun & Noida. Deharadun units cater the domestic needs while Noida units take care of the exports.



Objects of the issue

·         Towards the establishment of new showrooms : Rs. 517 crore
·         General corporate purposes : NA

Strengths

·         PC jewelers has already set up 30 showrooms located across 23 cities in India and the company intends to open 20 more by fiscal 2014
·         PC jewelers is also involved in the online sales of the jewellery
·         The company exports gold & diamond jewellery on a wholesale basis to international distributors in Dubai and Hong Kong
·         The company is known for customer-oriented marketing initiatives like ‘Jewels for less’ scheme

·         Pc Jewellers export gold and diamond jewellery to Honk Kong and Dubai on a wholesale basis  – Hong Kong and UAE being the largest market for the Indian jewellery industry-augurs well for the company’s future prospects




Concerns

·         MD cum promoter is availing a hefty pay package – a remuneration of Rs. 6 crore per year against the company’s net profit of Rs. 230 crore for the FY 2012 figures out to be 2.6 per cent- which is against the spirit of professional management
·         PC Jewelers requires higher working capital and any sharp rise in  gold prices could cause a reduction in sales
·         PC Jewellers’ operations are highly concentrated in Delhi and NCR region and around 60 % of the total revenue comes from this region.
·         PC Jewellers is a high-leveraged company (relatively) and it has seen a negative cash flow from operations for the FY 12
·         Though interest cover is satisfactory but higher interest rate regime will be negative for the company



Financial analysis #

# EPS calculation has been done using post issue equity
# All calculations at the upper price band of Rs. 135

Parameters
FY 13 Annualized
FY 12
EPS
Rs. 15.9
Rs. 12.8
P/E
8.5
10.5
P/B
3.5
4.4
NPM
8%
8%
ROE
40.7 %
41.4%
Net Asset per Share
Rs. 39
Rs. 31
Debt/Equity Ratio
2.5
2.7
Current Ratio
1.3
1.3
Interest Coverage
3
3.4
Inventory Turnover Ratio
2.7
2.6
M-Cap/Sales
.7
.8
Profit CAGR (4 years)
96%
110%

Comparison to peers   #

# Peer data is for FY 12 as per moneycontrol & iforp.in –duly updated as on 7/12/12
PC Jewellers
TBZ
Gitanjali  Gems
Titan
Tara Jewellers
P/E
10.5
29.96
18.57
42.32
9.88
ROE
41.4 %
35.78 %
15.62 %
41.87 %
19.5 %
Debt/Equity
2.7
1.27
1.28
.007 *
3.2
NPM
8%
4.13 %
3.85 %
6.71%
4 %

*     FY 2011 figure

Inference

PC Jewellers is offering its shares at very attractive levels- especially in the peer comparison perspective -thanks to PC Jewelers’ stupendous profit growth. As mentioned above, PC Jewelers boasts better profit margin & ROE in its peer group. PCJ is a high-leveraged play with higher debt-to-equity ratio in the pack. Short term borrowing shot up 4.2 times coupled with a negative cash flow from operations in the FY 12 and it is a big concern. This stock is not a fundamentally-sound one and does not fall in the value buying category. But the past observations have taught us that market often overlooks the structural concerns and reacts more on the growth prospects. So, to cut a long story short, investors who are comfortable with the underlying risks may play on this growth story.


    Disclaimer

Analysis is for the information purpose only. Though due diligence has been taken while preparing this  report, analyst shall not be responsible for any error and shall not bear any financial liability to the users of the report.

You may also like-  Bharti Infratel IPO Review , PC Jewellers Ltd. IPO Review
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December 09, 2012
care-ipo
Credit Analysis & Research Ltd (CARE) is the second largest credit rating company in India. CARE offers rating and grading services across a diverse range of instruments and industries including IPO grading, equity grading, and grading of various types of enterprises.The company being professionally managed has no identifiable promoter and has domestic banks and financial institutions as key shareholders.

Credit Analysis and Research (CARE) is entering the capital market on 7^th December 2012 through an offer for sale of 71.99 lakh equity shares of Rs.10 each in the price band of Rs. 700 - Rs. 750 Per Equity Share.

Issue Details:
  • Issue Open: Dec 07, 2012 - Dec 11, 2012.
  • Issue Size: 7,199,700 Equity Shares of Rs. 10. 
  • Face Value: Rs. 10 Per Equity Share.
  •  Issue Price: Rs. 700 - Rs. 750 Per Equity Share.
  •  Market Lot: 20 Shares.
  • Minimum Order Quantity: 20 Shares.
  • Listing at BSE and NSE. 
On a consolidated basis, for 6 months ended 30th September 2012, company’s total income was Rs. 104 crore, with a net profit of Rs. 50 crore, resulting in net margin of 54.6% and EPS of Rs. 17.43, on equity of Rs. 28.55 crore.

India’s largest credit rating agency and S&P’s 53% subsidiary CRISIL at current price of Rs. 1024, quotes at a PE multiple of 34 times and  ICRA, in which Moody’s holds 28.5% equity stake, trades at 32 times. Whereas CARE, at the current IPO price is offered at lower P/E multiple of 20 times at the estimated EPS Rs. 35, which is attractive at current market conditions.

Hence, considering the valuations, investors can invest with a long term view and current market conditions favor those who invest for listing gains too.
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December 08, 2012
CARE (Credit Analysis & Reaserch  Ltd.) IPO Review


CARE (Credit Analysis & Reaserch  Ltd.) IPO Subscription status as on 11/12/2012

Overall 40.98 times  Issue Subscription

QIB (Qualified Institutional Investors ): 45.8 times Subscription 
NII (Non Institutional Investors): 110.96 times  Subscription
RII (Retail Individual Investors): 6.18 times Subscription


CARE (Credit Analysis & Reaserch  Ltd.) IPO Subscription status as on 10/12/2012

Overall 2.25 times  Issue Subscription

QIB (Qualified Institutional Investors ): 3.5 times Subscription 
NII (Non Institutional Investors): 38% Subscription
RII (Retail Individual Investors):1.79 times Subscription


CARE (Credit Analysis & Reaserch  Ltd.) IPO Subscription status as on 8/12/2012

Overall 8.43% Issue Subscription

QIB (Qualified Institutional Investors ): 0 Subscription 
NII (Non Institutional Investors): 2% Subscription
RII (Retail Individual Investors): 24% Subscription
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December 07, 2012

Care Ratings IPO Review

    
     (1)    Issue Highlights
  
Price Band
Rs. 700-750
Issue Period
7/12/12-11/12/12
Issue Size
71,99,700 shares
Face value
Rs. 10
Lot Size
20
Issue Type
100% Book Building
Listing
BSE,NSE
Registrar
Karvy Computershare
Maximum Retail Subscription
Rs. 1,95,500 (13 lots )
Industry
Credit Rating & Grading

      (2)    Issue Details

Issue type: Offer for Sale by stake holders



(3) Industry profile

Credit rating business was conceptualized and pioneered in the USA. In India, CRISIL (a subsidiary of S&P) was the first rating agency to be set up in 1987, followed by the ICRA –a subsidiary of Moody’s (1991) - and CARE (1993).
There are 6 credit rating agencies in India- Besides CARE, other players are CRISIL Ltd, India Ratings & Research Pvt. Ltd (earlier known as Fitch Ratings India Private Ltd.), ICRA Ltd, SME Rating agency of India Ltd (SMERA)and Brickworks ratings India Pvt. Ltd.


Rating agency business is continuously rising in India


Increasing bank credit to the industry
 corp. bonds as a % of GDP are rising 
 (4)    Company profile
CARE’s rising prowess in the IPO market

The company was established in 1993 and is mainly engaged in providing credit rating and grading services primarily for debt instruments. Revenue from this source accounts for the 85 % of the total income. Besides rating services, CARE earns from investment activities.
In terms of turnover CARE holds second position among Indian rating companies.
CARE’s client list includes reputed banks and financial institutions like IDBI bank, Canara Bank, SBI and IL&FS. The company offers rating services for instruments like Commercial Paper, Debentures, Bonds, Preferential Shares, and Bank Loan Facilities etc.
Besides this, CARE also offers grading services like IPO grading, equity grading and various types of grading for enterprises.
CARE covers a diverse range of sectors like manufacturing, services, banks and infrastructure. CARE’s product pool includes product like SME & MSE rating, Edu-grade (grading of educational courses), Equi-grade (equity research and grading), Real estate Project Grading and Market Linked Debenture Valuation.

(5)    Objects of the Issue

·         This issue is a stake sell by existing shareholders and company shall not get any proceeds from it.
·         CARE shall be availing listing benefits
·         Only a few issue expenses shall be borne by the  CARE (rest shall be borne by the stake sellers )

       (6)    Strengths & opportunities

·         The company has already started its operation in Maldives and intends to fortify its presence in countries like Nepal & Mauritius.
·         The company holds 75%  stake in Kalypto- a company providing risk management software, could turn into  a game changer in future

        (7)    Concerns

·         High interest regime is unfavorable for overall debt market and is capable of hampering the new issuances of debt instruments thus negatively affecting the profitability of the company.
·         Besides ailing Indian economy and tight monetary policy, unfavorable global economic and political conditions could cause a negative  impact on the Indian debt market  and the same could act negatively on the company’s  profitability
·          Under Basel 2 framework banks can migrate to IRB approach or Internal Rating Base approach and the same could turn fatal for the company as around 24% of the total rating income (better called as income from bank facilities which involves initial rating  income and annual surveillance fee ) comes that way.
·         Limited exposure to overseas markets

        (8)    Financial Analysis #

·         All calculations at the upper price band of Rs.750
·         FY 12 data was considered for the calculation
Parameter
FY 12
FY 13(Annualized)

P/E
40.5
21.5

P/B
5.7
5

ROE
30.7 %
23.3%

ROCE
26.4  %
21.4 %

NPM
53 %
48 %

Current Ratio
5.7
5.4

M-Cap/Sales
9.8
10.3
Profit CAGR  (4 year) #
44.3%
NA
Net Asset per share
Rs. 132
149

# derived from restated standalone/unconsolidated data

       (9)    Comparison with peers #

  
#  Peer data as per moneycontrol site for FY 12 
CRISIL **
ICRA
CARE
P/E
36.87
22.88
40.5
P/B
19.68
4.89
5.7
ROE #
44.12
12.99
30.7%
NPM #
28.39
35.12
53%
Profit CAGR (4 years)
27 %
17.58 %
44.3%

**CY 11 data
      
     (10)Inference

In terms of turnover, CARE is the second largest rating agency in India and since its inception way back in 1993 CARE has rated debt instruments worth around Rs. 44,000 billion.
The company is registered with SEBI as a Credit Rating Agency under CRA (Credit Rating Agency) regulations. CARE boasts an awesome client count in excess of 4600.
The company mainly draws its income from the rating of debt instruments in India. CARE is now treading successfully on the path of IPO grading and since FY 11 it has been surpassing the market leader CRISIL in the IPO business. CARE is steadily expanding its footprints abroad as mentioned earlier.
If we go by FY 12 data, CARE issue seems little expensive but its awesome profit CAGR justifies it. CARE’s annualized FY 13 results make it a lucrative bet with a Price to Earnings Multiple of 21.5. Besides, CARE has seen impressive net profit margin of 44 % in FY 12 and that is a way higher than its peers.
CARE is a debt free company and holds a consistent dividend paying track record. In the rating business what matters is the credibility and the absence of any foreign parentage makes it more credible in the Indian context by ensuring absence of any possible foreign vested interest.
This stock might not give overnight returns but over a longer term this defensive play is expected to give good returns. This stock being eclipsed by the Bharti Infratel’s forthcoming IPO might miss retail investors’ patronage but long term investors should go for this issue.

       Disclaimer

Analysis is for the information purpose only. Though due diligence has been taken while preparing this  report, analyst shall not be responsible for any error and shall not bear any financial liability to the users of the report.

You may also like-  Bharti Infratel IPO Review , PC Jewellers Ltd. IPO Review
Read more »
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