Will Senco Gold IPO sparkle in your portfolio?

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All that glitters is not gold. Similarly, all the IPOs are not multi-baggers. We are talking about gold and IPO because the latest IPO to hit the market is for gold company Senco Gold. It is a gold and diamond retailer which came into existence in 1994. The company dominates the jewellery retail market in the eastern region as it is the biggest player but it has a pan-India presence with showrooms in 13 states. The company’s products are sold under ‘Senco Gold & Diamonds’ brand.

IPO Details:

Price band ₹301-₹317 / share IPO will be open for subscription from 4th July to 6th July The company is looking to raise ₹405.00 crore from IPO It will raise ₹270.00 crore as a fresh issue Current investors will get ₹135.00 crore through OFS By 12 PM today (4th July) IPO got subscribed 23% It’s GMP is ₹120/share The amount raised will be used for working capital needs

Advantages: Customers across the segments are looking to upgrade towards premium and organized products. So, companies like Senco Gold will stand to gain. At the same, it follows a hub and spoke operating model. In this model, there is one center (Which is known as hub) and small branches across that hub (Which is called spoke). This model leads to high productivity, lower logistics costs and more flexibility and all this leads to better inventory management.

Risks: The company’s major risk lies in the fact that jewellery market works on trust and this has become a bigger factor as buyers become more aware. Now either buyers trust local jewellers with which they have long-term relations or they trust big brands. The company is a big name in the eastern region but can it spread its brand name across the country? Another risk for the companies are legal matters. Income Tax department conducted ‘search and seizure’ operation against company whcih led to criminal as well as taxation charges against the compay.

Brokers Recommendation: Generally, brokers have given subscribe ratings. Geojit Financial Services, SMIFS Limited, Choice Broking have given subscrbe ratings while Canara Bank Securities have given subscribe for listing gain rating.

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