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7/27/2019 initialpublicoffering-120923155920-phpapp01

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COMPARATIVE STUDY ONINITIAL PUBLIC OFFER (IPO)

Submitted to : Dr. Prof. Paresh Shah

IIM - Ahmedabad

Management of Indian Financial Systems

Submitted by :

Prashant Maharshi

ISBE/PGP/SS/2011-13


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What is IPO?

Process of selling securities to public in primary market

Made with 2 types

Fixed Price Issues

Book building Issues

Majorly done to raise Capital

Process is directed towards both institutional & the retail investors


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Why IPO is done?

New capital

Almost all companies go public primarily becausethey need money to expand the business

Future capitalOnce public, firms have greater and easier access

to capital in the future

Mergers and acquisitions

Its easier for other companies to notice andevaluate a public firm for potential synergies

IPOs are often used to finance acquisitions


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SEBI Guidelines for IPO

1. It must have a pre-issue net worth of not less than Rs. 10,000,000 (Rupees One

crore) in 3 out of the preceding 5 years, with a minimum net worth to be met

during the 2 immediately preceding years.

2. It must have a track record of distributing dividends for at least 3 out of the

immediately preceding 5 years, and3. The issue size, i.e., the offer through the offer document, the firm allotment and

the promoters contribution through the offer document, should not exceed five

times the pre-issue net worth as per the last available audited account, either at

the time of filing the draft offer document with the Securities and Exchange

Board of India (SEBI) or at the time of opening of the issue.

If the above conditions are not satisfied, then the IPO can be made only through a

book-building process, provided that sixty percent (60%) of the issue size must be

allotted to Qualified Institutional Buyers (QIBs).


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The Process of IPO

Company nominates lead merchant banker(s)

Disclose of securities to be issued & price band for bidding

Appointment of syndicate members

Bidding process Process normally remains for 5 days

Bids have to be entered within the specified price band

On the closure of the process, the book runners evaluates the price

levels At last the book runners & the issuer decides the final price

Allocation of securities is made to the successful bidders

Rest get refund orders.


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TRIBHOVANDAS BHIMJI

ZAVERI

IPO


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About the Company

The 148 year old company, Tribhovandas Bhimji Zaveri,

Mumbais local jeweller, plans to raise around Rs. 200 crore

through 16.7 million shares.

The company is in the retail jewellery business with 14

showrooms across 5 states mainly in western and central

India.

Around 72% revenue comes from gold jewellery and 25%

from diamonds


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About IPOOffer Date 24 26 April

Price Band Rs. 120 126 per Share

Minimum Application 45 Shares

Reserved for QIB 50%

Reserved for Non Institutional Bidders 15%

Reserved for retail 35%

Total Amount to be raised Rs. 200 Crore

Total No. Of Share on sale 16.7 million

Got BID for 1.62 crore shares

Subscribed by 1.15 times


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Plans

To finance establishment of new showrooms

To expand this to around 57 showrooms, adding 43 new ones in

India by 2015

To use about Rs. 20 Crore to open 9 new large format showrooms

by the end of fiscal 2013.

To finance working capital requirements

The remaining amount would be used for general corporate

purpose


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Financial Information

In Rs. Crore FY 10 FY 11 9 Months FY 12

Net Sales 885 1194 1117

% Change 32.3 34.9 NA

Operation Profit 47 87 102

% Change 11 37.2 NA

Net Profit 17 40.4 50.5

% Change 63.5 137.6 NA


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Competitors / Peers

Tanishq

Rajesh Exports

Gitanjali Gems

Shri Ganesh Jewellery

Suraj Diamond


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Share holding pattern post IPO

74.17%

11.85%

3.17% 10.81%

%

Promoter holding

FII

DII

Others


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Day 1 trading

104

106

108

110

112

114

116

118

120

122

Open High Low Close

BSE

NSE

Listing Day Trading Information

BSE NSE

Issue Price: Rs. 120.00 Rs. 120.00

Open: Rs. 115.00 Rs. 115.05

Low: Rs. 110.00 Rs. 110.50

High: Rs. 119.80 Rs. 120.00

Last Trade: Rs. 111.20 Rs. 111.00

Volume: 1,157,892 1,253,983


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No. of times issue is subscribed

1.29

1.91

0.68

1.16

Subscribed by

Qualified Institutional Buyers

Non Institutional Investors

Retail Investors

Anchor Investors


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Strength of TBZ

Strong and trusted Brand Name

Focus to develop new design and products by understandingcustomer requirement with constant interaction

The company has substantial experience in expanding operations and

managing the launch of new showrooms.

The company has its own manufacturing facilities in Kandivali with a

carpet area of 5,755 sq. ft.


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Weakness of TBZ

Inventory risk and gold price fluctuation is also high

Working capital situation of the company is not good

Financial performance of the company is also not encouraging

Peers are doing good in compare to TBZ


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Opportunities for TBZ

Branded retail chains are expanding their presence by creating

growth opportunities in jewellery market

The Indian gold jewellery sector accounted for 61% total domestic

gold demand in 2011

It is expected that domestic industry to grow at a CAGR of 10% 12%

up to 2015 because of:

Higher disposable income

Rising young population with the urge to spend

Higher no. of women investing her saving in gold/diamond

jewellery

Conscious marketing efforts by companies

Steady rise in gold prices across the global market.


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Threats of TBZ There is intense competition in the jewellery retailing market

Branded players are also willing to expand

Devaluation of gold may affect the business

The company has not registered its jewellery designs so it could be

duplicated by competitors

The new tax policy where the customer has to give his/ her PAN

number on purchase made above `5 lakh is likely to hinder the

business.


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Future Strategy of TBZ

The company is planning to add 43 showrooms by end of fiscal year

2014

It is building additional facility at Kandivali with a carpet area of

Approx. 17739 sq. ft.

Increasing marketing activities to increase footfalls and sales at

showrooms.

Focusing to increase its diamond studded jewellery sales which will

improve its overall profit margin.


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Conclusion

IPO of TBZ got moderate response because:

The Shares are offered quite expensive in compare to its peers

As it intend to utilize 70% of its raised funds for working capitalneeds , this may affect the performance of the company.

The opening of new stores will mount pressure on profitability

due to time taken for break-even of new stores, higher marketing

expenses and working capital requirement

Even though the gross margin in the gold segment is around

10.86 %, while that in the case of diamond jewellery is around 36

%, company intent to invest in gold business.


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THANK YOU

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