Should you subscribe to the IPO of PC Jeweller?

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Should you subscribe to the IPO of PC Jeweller?
PC Jeweller is planning to raise money through an IPO, comprising of over 4.51 crore equity shares, at Rs 125-135 per share having a face value of Rs 10 each. The public issue will open on December 10 and close on December 12.

Should you subscribe?

Even if you take the IPO price at the higher end of the price band of Rs 135, the price to earnings ratio works to around 10 times on post issued capital, considering the EPS of 2012.

Now, this is reasonable price considering that Tribhoovandas Tribhovandas Bhimji Zaveri (TBZ) and Tara Jewels were priced slightly higher.

In fact, TBZ has given whopping returns to investors and is currently trading at Rs 285, against its issue price of Rs 126.

PC Jeweller also has a sizeable presence and has a good brand equity. Currently, the company has 30 showrooms across the country and it has plans to open 20 retail showrooms by utilising funds raised through the IPO.

The company posted a turnover of about Rs 3,000 crore in 2011-12 financial year. It also has two jewellery manufacturing facilities in Uttarakhand that cater to the domestic market and two facilities at Noida for the exports market. P C Jeweller also exports gold and diamond jewellery on a wholesale basis to distributors in Dubai, Hong Kong and Singapore.

Jewellery retailing and diamond trading companies have never witnessed tremendous fancy and their valuations have always been modest.

It's unlikely that there would be huge gains on listing, but, one could expect returns in the medium to long term.
In any case retailers and consumption stories have attracted the fancy of investor off-late.

Read more about: pc jeweller
Story first published: Friday, December 7, 2012, 10:28 [IST]
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