After a lull of nearly five months, the Indian primary equity market is finally seeing some action. Betting on an improvement in market conditions and revival in investor sentiment, as well as strong earnings growth in the retail jewellery sector, Mumbai-based Tara Jewels has proposed to tap the capital market with its R179.5-crore initial public offering (IPO).
Of the total, the company intends to raise R109.5 crore by fresh issue and the balance R70 crore by way of offer for sale (OFS). Tara Jewels has 30 stores across India and we are aiming to roll out next 20 stores through the net proceeds, mainly in north and central India, said Rajeev Sheth, CMD,
Tara Jewels, addressing a press conference.
The price band is fixed at R225 to R230 per share with a face value of R10. The issue, which opens on November 21 and closes on November 23, has been assigned IPO grade 3 by CARE Ratings. Bids can be made for a minimum of 50 equity shares, followed by a multiple of 50 shares thereafter, and the shares would be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Axis Capital and ICICI Securities are bookrunning lead managers (BRLMs) to the issue.
Though the timing seems suspect, the lead managers to the issue remained optimistic on the success of the IPO and said the issue was attractively price in context of the current market conditions.
The issue is attractively priced. Some of the peers are trading at much higher multiples and we are expecting a good response. In addition, recent government reforms have brought improvement in the secondary market and revival in investor sentiment, which prompted us to go ahead with the IPO, said a lead manager on the sidelines of the conference.
Tara Jewels is engaged in manufacturing, exporting and retailing of diamond jewellery. The company intends to use the proceeds for expanding its chain of retail stores and repayment or pre-payment of loans.
The company primarily exports to Australia, China, Canada, European Union, South Africa, the UAE, the UK and the US and 12 countries in the European Union, including Austria, Germany and Switzerland.
The company has four manufacturing units, of which one is located in Panyu, China. The other three units are located in Mumbai, India out of which two units are situated in Santacruz Electronics Export Processing Zone (SEEPZ) and one in Maharashtra Industrial Development Corporation (MIDC), in Mumbai.
Primary market experts were of the view that a lot depends on the success Tara Jewels' IPO as it would pave a way forward for other companies planning to tap the primary market. Further, experts also highlighted the importance of right pricing to attract retail investors, who have remained on the sidelines for the last six to eight quarters as a result of poor market conditions and below-par returns on their investments.
Prithvi Haldea, CMD, Prime Database, said IPOs are based on timing and the market may not see a revival unless large-sized IPO (R3,000-5,000 crore) tap the market. Bharti Infratel IPO is around the corner and is crucial for the market. If it does well, then we can see a revival in the primary market, Haldea said.
According to exchange data, primary market listings in the first nine months of CY12 have been at their lowest level since 2003, with seven companies successfully listing their IPOs. Two companies Plastene India and Samvardhana Motherson Finance withdrew their IPOs due to poor response.
* Previous IPO in main market was VKS Project in June end
* 9 IPOs were launched in 2012, but two were withdrawn
* 2012 was the worst year for primary market, lowest number of IPOs since 2004