Shubhlaxmi Jewel Art IPO opens today for subscription and we have compiled a set of 25 parameters to assess the quality of the business. Here is a snapshot of Shubhlaxmi Jewel Art IPO Review, please scroll down for the total score.
Shubhlaxmi Jewel Art IPO Review: Business Basics
Are the company’s annual revenues more than INR50 crore?
No, the company had revenues of INR46.8 crore in FY2018. Revenues haven’t increased significantly from FY2015 levels of INR45.1 crore.
Are the company’s annual profits after tax in excess of INR5 crore?
No, Shubhlaxmi Jewel Art’s net earnings stood at only INR82 lakh in FY2018.
Has the company got a strong and recognizable brand?
No, the company hasn’t got a widely recognizable brand.
Is there a strong moat in place in the form of entry barriers, market reach etc?
No, Shubhlaxmi Jewel Art stands vulnerable to competition from unorganized market.
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Is the company free of big client risks in terms of impact on revenues?
Yes. The company primarily caters to the retail market and has no big customers.
Do exports contribute a sizeable chunk to annual revenues, giving the company an edge over its competitors?
No.
Is there a strong connect between the company and retail consumers?
Yes. The company operates a showroom in Bhavnagar that was set up in 2013.
Shubhlaxmi Jewel Art IPO Review: Management analysis
Is the company’s top management experienced enough to lead operations through difficult times?
Yes, Shubhlaxmi Jewel Art is led by promoters Narendrasinh Chauhan and Jitendrakumar Chauhan which have more than two decades of experience in the gems and jewellery business.
Are the management members/promoters paying themselves fairly without jeopardizing shareholders’ interests?
Yes, we didn’t find management paying itself excessively.
Do the promoters have sizeable equity left in the company after the IPO?
Yes.
Is the current management trustworthy? Are there instances of putting shareholders’ interests at risk for personal gains?
Yes, the disclosures in the prospectus do not hint otherwise.
Are there serious litigations or criminal proceedings against the company in courts?
There are some cases pending in courts but they appear to be inconsequential and involve small sums.
Has the company management pledged shares with banks or financial institutions?
No. As on the date of the prospectus, no promoter shares are pledged.
Are there external investors such as private equity or venture capital firms on board?
No, the company is essentially owned by the promoters.
Shubhlaxmi Jewel Art IPO Review: Financial performance
Have the company revenues grown at a CAGR of at least 10% in the last three years?
No.
Have the company profits after tax grew at a CAGR of at least 25% in the last three years?
Yes.
Average Return on Equity (ROE) in the last three years more than 15%?
No. The company’s average Return On Net Worth (RONW) in the last three years stood at 14.1%.
Has the company maintained positive operating cashflows in the last three years?
No, cash flow from operations was negative in the attest year.
Has the company witnessed a declining trend in debt/equity (D/E) in the last three years?
Yes, Shubhlaxmi Jewel Art has managed to lower its D/E ratio in each of the last three years.
Are the company’s working capital requirements less than 20% of its annual sales?
No, the company required a significant working capital of INR11.75 crore in the latest year. This was 42% of its annual revenues.
Is the Debt/Equity ratio less than 1?
No. Despite the financial leverage coming down, the company’s D/E ratio as of 31 March 2018 is still high at 1.69.
Shubhlaxmi Jewel Art IPO Review: IPO objectives and valuations
Are the IPO objectives in line with the broad corporate guidelines? Debt reduction is fine, funding fancy furniture with IPO funds is not.
Yes, the funds will be primarily used to bring down working capital requirements.
Is the company offering some discount on Price/Earnings (P/E) ratio compared to its peers?
No, valuations are in line with the competition.
Is the company offering some discount on Price/Book Value (P/BV) ratio compared to its peers?
No, P/BV is on the higher side when compared with its competitors.
Are the contingent liabilities less than 10% of latest annual revenues?
Yes. Contingent liabilities are the doubtful cases which may create liabilities in future and thus, are major risk factors.
Shubhlaxmi Jewel Art IPO Review gets a score of 12/25. It appears to be an average issue and nothing stands out strongly in its favor. Head to our IPO discussion page to get latest subscription details.
Good review and analysis although this IPO doesn’t look worth investing