Senco Gold IPO (Day 1): Issue subscribed 39% in first two hours of bidding on retail push

The Rs 405-crore initial public offering (IPO) of Senco Gold saw a mixed response from the investors during the first two hours of the bidding process. The bidding was majorly led by retail investors and non-institutional bidders (NIIs).

Senco Gold is selling its shares in the range of Rs 301-317 apiece, with a lot size of 47 equity shares until July 4. The issue includes fresh equity shares amounting to Rs 270 crore and an offer-for-sale (OFS) of Rs 135 crore from its existing shareholders existing SAIF Partners India IV.
 

According to the data from the BSE, the investors made bids for 94,18,603 equity shares, or 22 per cent, compared to the 94,18,603 equity shares offered for the subscription by 12.05 pm on Tuesday, July 4, 2023.

The quota for retail investors was booked 39 per cent, whereas the allocation for non-institutional bidders fetched 14 per cent bids but qualified institutional bidders was not even off the mark.

A day ahead of its IPO, Senco Gold raised Rs 121.50 crore from 21 anchor investors by allocating 38,32,807 equity shares at Rs 317 apiece to them, a BSE circular said. Anchor investors included Ashoka Whiteoak Emerging Markets Trusts, Jupiter India Fund, Sundaram Mutual Funds, Bandhan Emerging Business Fund, Templeton India, 3P India Equity Fund among others.

Incorporated in 1994, Senco Gold is a pan-India jewelry retailer, which sells its products under its brand name 'Senco Gold & Diamonds' through its 136 showrooms across 96 cities and towns in 13 states throughout the country. It is the largest organized jewelry retailer in eastern India in terms of number of stores.

Brokerage firms are majorly positive on the issue and suggest investors to subscribe for it citing the growth potential, strong market share, sound financial performance and structural shift. However, others believe that the issue is aggressively priced, leaving limited upside potential on the table.

Compared to its nearest peers, Senco Gold is reasonably valued. Investors shall 'subscribe' to the issue considering legacy of over five decades, largest organized jewelry retail player in eastern India, asset-light ‘franchise’ model and consistent strong financial performance, said Eureka Stock & Share Broking Services.

For the financial year ended on March 31, 2023, the company reported a net profit at Rs 158.48 crore, compared to Rs 129.10 crore in the year ended on March 31, 2022, while its total revenue stood at Rs 4,108.54 crore in FY23, which was Rs 3,547.41 crore in the previous financial year.

Senco has delivered 24 per cent revenue growth over FY21-23 with margin improvement from 6.6 per cent in FY21 to 7.8 per cent in FY23. Although, company’s decent performance in terms of profitability amongst its peers, it has observed challenges generating positive operating cash flow during the last two years, said Nirmal Bang Securities.

"Further, debt to equity ratio at 1.2 times as on March 2023 may lead to further contraction in the company's profitability. However, the IPO is issued at 15.5 times PE valuation based on its FY23 EPS which is at discount relative to average PE valuation of its peers," it added with a 'subscribe' to the issue for listing gains.

IIFL Securities, Ambit Capital and SBI Capital Markets are book-running lead managers to the issue, while Kfin Technologies has been appointed as the registrar to the issue. Shares of the company will be listed on both BSE and NSE, with July 14 as the tentative date of listing.


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