The buyback plan has not been approved by the promoter shareholders and has subsequently been cancelled.
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What can be the reason? Promoters announced the buyback and then voted against it?
The market price has been above the proposed buyback price of Rs 675 over the last few weeks. Buyback offer would have got tepid response. So, it makes sense to withdraw it and come up with a new buyback offer at higher price later.
Jewel Talks : The many facets of a Lab Grown Diamond
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Highlights from the concall
- Company reported the highest ever yearly sale in H1 FY2022. Revenue grew by 169% Y-o-Y to Rs 3299 million. EBITDA surged by 210% Y-O-Y to Rs 639 million in H1 Fy2022.
Co is seeing strong traction in Lab-Grown Diamonds. The company’s order book stands at 250 Crores. Cash and cash equivalent and investments stood at 246.2 crore - Expect Q3 to be a strong quarter due to Thanksgiving and Christmas.
- Margins have been impacted this quarter due to raw material price increase but have been passed on now so won’t see a decrease in margins
- Due to backward integration in lab-grown diamonds their margins are superior. Expect yields of about 30 to 35 per cent on lab-grown diamonds whereas about 18 to 20 % on the natural diamond on an annual EBITDA basis
- How is the company better than its competitors? Dominant in engagement and bridal jewellery segment in the US. Has around 1000’s of SKU’s ready so benefits the retailer. Offers 6- day deliveries on e-commerce that no company manages. .com development also is helping the company(the company recently launched its own website)
6)Incoming year hopes to cross 70 to 75 crores in the lab-grown diamond business. Focus on volume-oriented clients only in the US - Market size of Lab-grown diamonds globally is around $1 billion to $2 billion. The market is growing very fast.
- Sle mix in around 2-3 years- 25-30% Lab-grown diamond jewellery (LGD) and rest natural diamond.
9)Sustainable EBITDA margin would be around 20 to 22 % in LGD post-expansion - Not Looking to take away the market from Natural Diamond Business but looking to enhance LGD jewellery to customers who never bought natural diamond jewellery in the past. So creating a new customer base
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this post have now been deleted.
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And he also admitted to the tax fraud. He kept on denying it for good 3 years and admitted to it when only 3 days were left.
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Idk why the guy deleted the post he made some valid points
This is what he said-
hi All, was looking at Goldiam and found a bunch of red flags here -
Low number of permanent employees - since this has already been discussed above wont repeat it, but was surprised that bulk of the employee costs are promoter remuneration -
Year 2017 2018 2019 2020 2021
Promoter Remuneration 5.62 6.2 5.54 6.8 10.2
as a % of employee costs 49% 51% 41% 51% 64%
as a % of PBT 18% 19% 8% 11% 13%
if i ever to divide the remaining employee expenses among permanent and temp employees, their per month pay comes to less than INR 20,000. Isnt it too low?
A large part of the consol profits have been booked by the Goldiam Jewellery Ltd., an Indian subsidiary, which is not audited by the main auditor. In fact, the main auditor is not auditing bulk of the revenues -
image
Further found revenues going from Holdco to Goldiam Jewellery to Goldiam US, with difficulty in reconciling the differences.
It has been having both cash and bank borrowings in every year in last 10 years. While this per se is not a red flag, what i was surprised by was it traded at less than its EV (less than cash on its books) in 3 of the last 9 years before 2021. Was wondering why this was despite it paying a dividend every year.
Then came across this article (black money: Taxman may use black money act to trace closed foreign accounts - The Economic Times) from Nov 2021 wherein the promoters of the company are alleged to have deposited unaccounted money in British Virgin Islands to the tune of 1,000 crores.
Giving this idea a pass. Do let know if im missing something here.
Discl: not invested. I am not a sebi registered analyst and this is not a buy / sell reco.(post deleted by author)
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Personally, I am very bullish on this company, especially after reading the uncommonprofits post. As of a few minutes ago, I have made a purchase, and below is a summary of my reasons:
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Solid cash position, with the latest cash equivalents and investments figure of ₹246.2 cr as on H1FY22.
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Very low debt position.
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Company is keen on continuing to employ buybacks and dividends to increase shareholder value.
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Over the last 5-6 years, the company has moved from relying on wholesalers to directly connecting with retailers.
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The migration to online businesses (both B2B - JewelFleet, and fulfilling online orders for their B2C clients) is a huge win for reducing working capital requirements.
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The growth in the appeal of lab grown diamonds will help immensely with margin expansion.
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Reasonable MC/Sales multiple (3.63) and P/E multiple (21.25) given the various strengths of the company.
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Favourable adjusted ROCE metric (removing cash from capital employed) of 45.6% in FY21, a big jump from 23.1% in FY20.
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Bottom line growth is much faster than top line growth, at least over the last 3 years.
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US consumption recovery play.
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Export oriented company – expecting further support to exporters in the upcoming Budget.
That being said, I do need to have a look at the employee expenses bit that has been called out. Regarding the EV being lower than cash on its books in 3 of the 9 years before 2021… I find that all the more odd. I haven’t been active in the Indian markets before 2021, so I can’t comment much, except that maybe with less retail participation in the markets pre-Covid and the dearth of coverage of smaller-cap stocks, perhaps this company got overlooked?
I have also added whatever information I compiled on this company in the document attached to this message.
2022-01 Goldiam International.pdf (1.2 MB)
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One more trigger on cards.
Board meeting on 8th Feb to consider for sub-division/split of Company’s Equity share having face
value of Rs. 10/- each.
Note : I have invested recently
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Hey Naman,
You’ve highlighted some good points but having delved deeper in the case sharing my information on the same:
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While the alleged amount is 1000cr - this the total credits in the 3 bank accounts held by the promoter and associated company. Thats how tax authorities threaten in general. The operations here were majorly borrowing of funds from UBS and investing in some products by UBS itself - basically arbitrage. Tax authorities have treated all credits in the account including the loan proceeds (over 3-4 years) as income while they haven’t deducted the loans returned back including interest to compute the income. From the net amount there were some proceeds to the tune of 20-30 cr remitted to Goldiam and subsidiary - taxes on which were paid in the same year - so . The actual unaccounted income is to the tune of 1mn USD. This income was already declared to tax authorities in 2013 and the same case has been reopened in 2015/16 under a different law. While the case is yet to be settled - i think max damage (including penalty and interest for all these years) can happen to the tune of 30-40cr. But that doesn’t change the fact that this was wrong. But in my opinion the group has become far more transparent and clean over the last decade.
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On the employee expenses front - the company follows the same thing as Savji Dholakia of Hari Krishna Exports - They gift vehicles or other asset each year to their employees. So you can capture that in the gross block.
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Since the company handles the drop-shipments of major retailers (including Walmart, JC Penny) in US alot of revenue will always be booked under Goldiam USA. Also they had a subsidiary (Diagold) which dealt in domestic market and to take benefits of SEZ a separate subsidiary had to be formed (Goldiam Jewellery) hence the complex holding structure. However, the presence of Pankaj Ghadiali as independent director (also chair audit committee at Balkrishna Industries) provides comfort on this front.
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Good for LGD which has higher margins, new capex will kick in from April.
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The Q4 results seems good considering the inflationary scenario. The business is cyclical so should not be looked into qoq perspective. The capex has been announced further showing management’s aggression. On the contrary stock price has declined and stock has been in consolidation for sometime now. Any thoughts ?
Seems to be some discrepancy in the LGD Market size. As per investor presentation the LGD market size is estimated to become $29 billion by 2025. Surely the market size can not increase by 15x in 3 years. My sense is current market size would be much higher than $1-2 billion.
Some notes from Q4 concall:
Concall notes Q4 FY22
Guidance of 5-10% increase in revenues this fiscal. This will be a consolidation year coming on the back of a bumper FY’22.
Capex of 10 crore will start commercialising from Q1, further capex of 10-40 crores in next two years.
Lab grown diamonds and jewellery to be 25% of overall revenues by FY’23 and more than 50% in next three years.
Already dealing with five largest retailers in USA.just got empanelled for lab grown diamonds and jewellery with world’s largest jewellery retailer. All these five customers have potential to buy anywhere between $5 million and $50 million worth of LGDJ individually from Goldiam.
There may be another listed player in India who trades in lab grown diamonds but Goldiam is the only listed player in the country and maybe the only one in the world to grow LGD, cut it and make jewellery out of it with a full 100% backward integration.
Disclosure: Not invested.
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Was there impact due to sanctions on russian diamonds ? Any other disruptions in their sales and future sales prospect due to the russian sanctions which were mentioned in the concall ?