Tribhovandas Bhimji Zaveri Limited (TBZL)

IPO Snapshot

April 23, 2012

Highlights of the issue:

Issue Snapshot:
Tribhovanda Bhimji Zaveri Ltd (TBZL) is a well-known and trusted jewellery retailer
in India with 14 showrooms in 10 cities across five states, which have a total carpet
area of approximately 48,818 sq. ft. It primarily sells gold jewellery and diamondstudded jewellery and other products, including platinum jewellery and jadau
jewellery. The design and manufacture of its products is done either in-house or by
third parties

Issue period April 24 April 26 2012

Price Band: Rs. 120 Rs.126
Issue Size: Rs. 200 crs 210 crs
Issue Size: 16,666,667 equity shares
QIB
Upto
Retail
not less than
Non Institutional not less than

8,333,332 eq sh
5,833,334 eq sh
2,500,001 eq sh

Face Value: Rs 10
Book value - Consolidated: Rs 32.08 (December
31, 2011)
Bid size: 45 equity shares and in multiples thereof
100% Book built Issue
Capital Structure:
Pre Issue Equity:
Post issue Equity:

Rs
Rs.

50.00 crs
66.66 crs

Listing: BSE & NSE

Lead Manager: IDFC Capital Limited, Avendus
Capital Pvt Ltd.
Registrar to issue: Karvy Computershare Pvt Ltd.
Current Shareholding Pattern
Pre issue
Shareholding Pattern
%
Promoters & Promoters
98.90
Group
Public (incl Employees &
others)
1.10
Total
100.0

Post issue
%
74.17
25.83
100.0

CRISIL IPO grading: 3/5 indicating average

fundamentals

Out of its 14 showrooms, 11 are what it term large format high street showrooms
(carpet area of 3,000 sq. ft. or more) and three are what it term small format high
street showrooms. TBZL plans to open an additional 43 showrooms (25 large
format high street showrooms and 18 small format high street showrooms) by the
end of Fiscal 2015, which would give it a total of 57 showrooms (with a total carpet
area of approximately 150,000 sq. ft.) in 43 cities across 14 states. It offers its
customers a wide variety of jewellery from across India in order to cater to regional
tastes. It also offers jewellery from various parts of the world such as Italy, Turkey
and Thailand and also customise jewellery for individual needs. It also offers its
jewellery across different price points so as to maximise its potential customer
base.
TBZL has its own manufacturing facilities for diamond-studded jewellery. In
addition, it outsources the production of jewellery as well as purchase jewellery
from third parties and procures jewellery from suppliers in different regions across
India, which helps to gain an insight into differing regional preferences. It has a
centralised procurement policy and generally purchase in large volumes in order to
stock its 14 showrooms. By purchasing in large volumes, it is able to purchase
inventory at lower prices than its competitors in the unorganised sector, which
enables it to sell its products at competitive prices.
Objects of Issue:
The objects of the Issue are:
To finance the establishment of new showrooms.
To finance incremental working capital requirements; and.
General corporate purposes.
Means of Finance:

The entire requirement of funds towards the objects of the Issue, other than
working capital requirements, will be met from the Net Proceeds. The working
capital requirements will be met through the Net Proceeds (to the extent of Rs.
1,604.49 million), the working capital loans from banks and internal accruals.
For FY11, it reported a total income of Rs.1194.31cr and a PAT of Rs.40.03cr. For
the nine month ended Dec 31, 2011, it reported total income of Rs.1117.77 cr and
a PAT of Rs. 50.31 cr.
Cost of Project:
S. No. Particulars
1
To finance the establishment of new showrooms
2
To meet incremental working capital requirements
3
General corporate purposes
Total

Rs. Crs
Amount
19.19
160.45
*
*
(Source: RHP)

TBZLs strengths:
Long History and a Strong Brand Name.
Design, Innovation and Product Range.
Well-Established Systems and Procedures.

Please read important disclosures on the last page

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Expansion Experience.
Own Manufacturing Facilities
Experienced Management
Procurement Advantage.

TBZLs strategy:

Expanding its Retail Network.

Focusing on Increasing Same Showroom Sales.
Increasing Diamond-Studded Jewellery Sales.
Taking Advantage of Economies of Scale
Increasing its In-house Manufacturing and Outsourced Manufacturing Activities
Leveraging the Tribhovandas Bhimji Zaveri Brand Name and Continuing to Distinguish its Business from other Businesses Using
Similar Names.

Risks & Concerns:

The use of the words Tribhovandas Bhimji Zaveri in the corporate and trading names by certain third parties who has the right to
use those words in their names may lead consumers to confuse them with TBZL and if they experience any negative publicity, it
could have an adverse effect on its business, results of operations and financial condition. This confusion might also lead to losing
business to such competitors and might adversely affect its goodwill.
TBZL has not identified the exact locations where it propose to establish new large format high street showrooms and have not
entered into any definitive agreements to utilise the Issue proceeds.
Negative publicity could adversely affect its reputation and results of operations.
Decrease in the value of gold and diamonds would reduce the value of TBZLs inventory, which could have a material adverse effect
on its results of operations and financial condition.
If TBZL fails to anticipate, identify or react appropriately or in a timely manner to trends in the jewellery industry, it could experience
reduced consumer acceptance of its products, a diminished brand image, higher markdowns and costs to recast overstocked
jewellery.
If TBZL is unable to deliver as per its business plan, it could have an adverse impact on its business and growth prospects.
If TBZL fails to manage growth effectively it could have an adverse effect on its results of operations.
TBZL has substantial working capital requirements and if it is unable to obtain working capital loans to help finance these
requirements it would a have significant adverse effect on its business, results of operations and financial condition.
The RBI has advised banks to classify accounts of jewellers as high-risk, requiring banks to apply enhanced due diligence before
granting loans to jewellers. This may adversely affect its ability to obtain financing in a timely manner and on acceptable terms, or at
all.
Past showroom sales may not be comparable to and indicative of future showroom sales and there can be no assurance that the
opening of new showrooms will result in increased profitability.
TBZLs business experiences an increase in sales during seasons of weddings and festivals. Any substantial decrease in its sales
during such periods would have a material adverse effect on its results of operations.
Taxes and other levies imposed by the Government of India or other State Governments may have a material adverse effect on
TBZLs business, financial condition and results of operations.
TBZL maintain a relatively large inventory and if a material amount of this inventory is lost due to theft and such loss is not covered
by insurance, its results of operations may be adversely affected. Losses on account of shrinkage can also negatively impact TBZLs
profitability.
TBZL is subject to restrictive covenants under its credit facilities that could limit its flexibility in managing its business.
Due to the geographic concentration of TBZLs sales in the western and southern regions of India, its results of operations and
financial condition are subject to fluctuations in regional economic conditions.
Please read important disclosures on the last page

Retail Research

 The operations of TBZL are subject to manufacturing risk and may be disrupted by failure in the facilities.
TBZL requires certain approvals; permits and licenses in the ordinary course of business, and the failure to obtain or renew them in a
timely manner may adversely affect its operations.
Business depends on TBZLs ability to maintain consistency in customer service and other operations.
Jewellery purchases are discretionary and may be particularly affected by adverse trends in the Indian economy.
The Indian retail jewellery industry is extremely competitive.
Increases in the prices of gold and diamonds may have an adverse effect on the demand for jewellery, which may have an adverse
effect on TBZLs results of operations.
Any increases in interest rates would have an adverse effect on TBZLs results of operations
Extract from grading rationale by CRISIL:
The assigned grade reflects TBZs century-old presence in the retail jewellery business and the resultant strong brand recall. The
grade factors in the resilience of demand for gold jewellery in India despite a significant rise in gold prices, 28% y-o-y in 2011, which
has added shine to TBZs top line. Compared to other gold jewellery players, TBZs revenue mix leans towards higher-margin diamond
jewellery, which bodes well for TBZ in the wake of increasing acceptance of diamond jewellery in India. The grade has also taken into
account the expected increase in organised retail penetration in jewellery vis--vis the single-store format, which will benefit established
players like TBZ. The company has steadily expanded from one store to 14 stores in the past decade.
The grade is restrained by competition in the jewellery retailing market, which will likely intensify following planned expansions by
regional/traditional players. TBZ too plans to expand to 22 stores by end-FY13 at a faster-than ever pace, which could throw up
execution challenges even though its strategies (regarding store location, size, format, personnel and schedule) are in place. Opening
of new stores will also put pressure on profitability due to higher marketing expenses and working capital requirement. Further, with the
Tribhovandas Bhimji Zaveri brand being used by other Zaveri family members, the risk of brand dilution cannot be ignored, especially if
they underperform on quality.
TBZs revenues increased at 40% CAGR between FY08-11 to Rs 11.9 bn, largely driven by branch additions and a steady increase in
gold prices. A higher proportion of diamond-studded jewellery has supported the ~6-7% EBITDA margin in a competitive market.
EBITDA increased at a CAGR of 52% during FY08-11. During the same period, PAT increased at a CAGR of 74% and was Rs 394 mn
in FY11.

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information generally available to the public. No representation is made that it is accurate or complete. Notwithstanding that HDFC
Bank is acting for Tribhovanda Bhimji Zaveri Ltd. this report is not issued with the authority Tribhovanda Bhimji Zaveri Ltd. Readers of
this report
areimportant
advised to take
an informed
decision
the issue after independent verification and analysis.
Please
read
disclosures
on the
last on
page

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