Gold rush to capital market

Traditionally staying away, gold jewelers are now keen to enter the capital market to expand

their businesses in face of the current volatility of global gold prices. The last one month saw three jewelry retailers filing their offer documents. On January 25, two jewelry retail chains Tribhovandas Bhimji Zaveri (TBZ) and Joyalukkas filed their offer documents with Securities and Exchange Board of India (SEBI) and C Mahendra Exports’ recent IPO was subscribed 2.78 times.

Jewelry retailer TBZ has filed an application with the market regulator for an initial public offering of up to Rs 2 billion. The issue for 16.7 million shares would constitute 25 per cent of its post-issue paid-up equity capital and the proceeds would be used for setting up new showrooms and for meeting working capital requirements. The retailer currently has 14 showrooms in India and plans to open another 44 in the next three years. TBZ’s offer document says the company plans on investing Rs 156 crores from its net IPO proceeds, of which the total amount is unspecified, to ‘meet incremental working capital requirements’; Rs 18 crores would be used for setting up nine showrooms. Each of these showrooms will have a minimum carpet area of 3,000 sq. ft.

Well known southern brand Joyalukkas would use its IPO funds for establishing new showrooms, as well as for repayment and prepayment of loans. The Kerala-based company plans to expand its reach in the four southern states by opening 13 showrooms by September 2013. The company plans to open a showroom in Delhi by April this year. Analysts see the jewelry retail segment, which is relatively under-represented in the capital market, catching up and generating greater interest among investors.