PC Jewellers

Guys do look at this name.being offered at 7-8 times 2013E earnings. Stands tall on most parameters viz TBZ. I have done some work on the name would mail the same when I reach home.

Hi Guys,

Have got a feedback to consider their numbers with a large pinch of salt. Although, considering the recent jump in TBZ, it might also shoot up.



PS- not going to invest.

I think this could be the next hot stock in an already heated sector.

Listing gains could be there but it seems debt equity is high. (how much is for inventory I have no idea)

Basically I would stick to the dictum of IPO — its probably overpriced and avoid. Plus there would be a rush to apply for IPO and hence allotment also would be tight.

Bhai bahti Ganga me hath dho lo. There is 170 to180 Rs premium on CARE IPO in grey market n 25 Rs in PC jeweller . With SEBI changing rule which ensures firm allotment to all single lot applicants n the higher category applicants get lower allotments retailers shud apply may be for flipping. at times you get big lotteries like Jubilant food, Coal India, etc .this is specially good for using your od LAS Ac for flipping giving boost to your portfolio.I have used it liberally since 2003 n till 2010 the going was good.

Now coming to Tara Jewels IPo getting listed tomorrow. Here worlds biggest jewellery n crystal co Swarovski has taken a 10% stake with 1 year lockin. The promoter mr Seth was co founder of Inter.gold n for a change comes from the family of doctors n enjoys great reputation . The valuations are reasonable as EPS is expected to be around 38 to 40 Rs in March 14 n even current PE is below 10. The company is expanding aggressively in domestic mkt leading to better margins n follows gold lease model.

Should we buy on listing as the listing price is expected to be around 245??? Or in case of IPO investors what strategy to be followed



The minimum lot allotment will also depend on the availability of shares.

The retail portion is 25,19,895 Shares, at 20 shares minimum that can support at most 125,994 individual applicants,after this number is crossed allotment will be done via lottery.

Refer to page 288 and 289 of the Red herring prospectus,for an illustration of how this will work.

The no of retail applicant seldom crosses 1 lacs so sure allotment is ensured for single lot applicant. With GMP at 170 to 180 implies a return of 3600 Rs on 15000 Rs application in 10 days. Just calculate the % age return specially for one with multiple demat accounts.

Hi Vivek…

As we know that the issue is gonna be oversubscribed with immense response,I would like to know if some retail investor subscribes for say 1/2 lots instead of full application for 200000 rs,will he be considered andallot’edat-least one lot or only those who have applied for full application worth of 200000 rs will be alloted first giving pref. and then the he will beconsideredif there is any scope left.

I would be glad to know on this … If all the retail investors who applied for the IPO are considered equally whilst allotting or will there be any preference to those who apply for full application i.e 200000rs. this will help me in deciding for applying to IPO’s like PC and CARE.

Hi Sandeep,

As I understand a 200000 application would either be allotted twice the number of shares as compared to a 100000 application or in case of lottery the 200000 application would have twice the chances of winning.

Allotment process can br found in the prospectus.


andallot’edat-least beconsideredif

As per below content do we need to apply only 15k , if we want to getallottedshares

Earlier, grey market transactions took place for an application of Rs 2 lakh, the maximum limit under the retail segment. However, with the revised minimum IPO application by Sebi, allotment will first be made for the lowest lot size (Rs 15,000 application) and, hence, the grey market has been also following the same lot size for the deals.

Please refer below link for complete details :


MCX IPO had received a total of 433408 applications in the retail category.

There is very high probability that CARE IPO will get more than 125994 applications.


“170 to180 Rs premium on CARE IPO in grey market n 25 Rs in PC jeweller .”

Can you explain how does this grey market thing works? I thought every demat holder need to be KYC complaint then how can grey market work in IPO or in secondary market?

I am thinking grey as (underground/illegal) market.Enlighten us please

Grey market will be not be there every where, it will be there in gujarat,jaipur,bombay and only in few places. grey market is not illegal as i read some where.

Listed at 138 now quoting at 153. Decent profit for retail as they were allotted at 130. I bought in first few minutes of opening today.

PC jewellers note.
Disclaimer: invested have a vested interest take care of your interest
PC is the second largest listed jewellery retailer after Titan with highest margins amongst the jewellery retailers
Owns 30 large format stores >5000 sq ft in north India and plans to add 20 new stores to become a pan India player
Crisil report on PC Jewellers
I am posting a table comparing the 4 listed Jewellers to highlight the standing of PC
Profitability/Ratios (%) PCJ TBZ Thangamayil Gitanjali Titan
EBIT margin (3-yr avg.) 10.1 6.7 8.6 9.0 8.7
PAT margin (3-yr avg.) 7.7 3.0 4.3 5.0 6.1
RoE (3-yr avg.) 54.4 38.1 42.5 35.0 39.0
RoCE (3-yr avg.) 43.1 25.5 32.6 32.0 57.0
No doubt it has the best profitability ratios in the Industry
If you look at the momentum in the financials for the last 5 years it clearly indicates that they are doing something right which provides them edge over other players
Particulars FY08 FY09 FY10 FY11 FY12 H1FY13
Total operating income (Rs mn) 3214 6241 9859 19772 30419 18557
EBITDA margin (%) 6.8 9.6 10.0 9.9 10.9 12.6
Adjusted net profit / (loss) (Rs mn) 130 310 665 1453 2313 1413
Adjusted net margin (%) 4.0 5.0 6.7 7.4 7.6 7.6
RoCE (%) 26.2 30.9 35.3 53.3 40.7 NA
RoE (%) 40.1 55.1 53.1 57.8 52.5 NA
Adjusted EPS (Rs) 5.9 14.0 16.6 32.5 17.3 NA
No. of equity shares (mn) 22.2 22.2 40.2 44.7 134.0 NA
Net worth (Rs mn) 389 727 1778 3254 5560 NA
Debt-equity ratio (x) 1.4 2.9 0.5 0.4 1.0 NA
in the first half of FY13 they did a profit of 140 crores, generally the first half contributes 40% of the profit now assuming that 60% of profit would come in the second half (1.5x of H1) i.e. 270 crore the FY13 profit comes to 350 Crores which says that it is quoting at a P/E of 7.6 times earnings (on current market cap of 2670 crores).
this is a 60% discount to what a smaller player like TBZ is quoting at.
The issue here is that a third of PCJ's revenues comes from less profitable exports segment and that is the reason why markets are a bit confused as to which bucket they should assign it in terms of valuation. Over a course of next few quarters PCJ would fall either in the category of TBZ/Titan (P/E> 20) or that of Gitanjali (P/E of 7).
PCJ is more comparable to a retailer than an exporter. Gitanjali has its own issues in terms of a large part of revenue coming from exports to its less profitable franchisee model
as well as its smaller store format is far inferior to the large format of PCJ, Titan or TBZ.
I think it is just a matter of time before the market recognises its true value and assign it multiple it deserves.
I agree that QonQ delivery would be veryimportantfor the rerating. Looking at the growth momentum of last 5 years and the expansion plans coupled with delivery track record of the current management I think it is very likely thatthe coming4-6 quarters are going to be of more thansatisfactoryperformance.

_Excel _,

The story looks interesting.

Here are a few points that I have to add.

1)They have good presence in Northern andCentral India. However the place where gold is sold most i.e. South of india they have minimal presence. This also provides a huge opportunity to tap into.

  1. Their stress on Diamond over Gold because of better margins may not cut much ice down south coz unlike North/Central India people prefer gold over diamond. This strategy has to change here.

  2. The design has to be diverse andmore revelvent to the places where they are opening up stores. This is very important. Also matters such wastage charges %, making charges % matters a lot here. Hence they have to come up with an appropriate strategy.

By and large I agree that this is a good place to park your money in.

Soumya, The north market is large enough. I think in south and east the would concentrate on north India diaspora the same way TBZ targeted marwari diaspora in kolkatta. Besides that there is room for all organized players as they are acquiring market share from unorganized players. PCJ has the largest stores and hence widest variety amongst the organized players. This is their strength considering that a customer would like to see all soughts of designs before taking a call.

Valid point regarding assigning PE multiples. Domestic retailers will enjoy greater valuation than wholesale exporters.

Currently for PCJ the export sales % reduced from 45% in 09 to 33% in 10 and was 34% in 2011. Management claims that this % will further reduce. However I am doubtful since they are commissioning a 34000 sq ft manufacturing plant in Noida (which will be approx. 40% of their capacity area wise) for domestic and exports. On the other hand they are expanding their retail presence as well. Hence export % is likely to remain same.

Further almost 80% of their exports are to one or two related parties and receivables from them are 225 days of export sales (272 in 2010 and 205 in 2009) indicating money is tied up there. There is no information on who these parties are and why receivables are so high consistently. The only information in the RHP was that they are distributors in Hong Kong and Singapore who in turn sell the jewellery onwards. Exactly similar case exists with Shree Ganesh (Dubai receivables). This affects cashflows which have historically been erratic, though positive in H1-FY13.

Secondly, because of operations in SEZs they pay less taxes. In 1st year entire export income is exempt from tax, and the % reduces YOY till I think after 4 or 5 years they have to pay full tax. I did some rough calculations by which their tax rate on local sales works out to about 20% in 2011 and 17% in 2010. This appears low. This is another grey area since this would have a bearing on estimates of PAT for even next year. For eg both Titan and TBZ are 30% tax paying cos (I think even Thangamayil) whereas Shree Ganesh and Gitanjali are not.

I was invested in Gitanjali and always wondered inspite of the good news announcements, seemingly large brands, advertisements, why is the company languishing at low valuations. Some elements of the above and management doubts are contributors I think. And immediately after IPO opening, DRI raid on PCJ does not give comfort. Their tax calculations (income, sales, excise etc) could always be open to such questioning.

Given all of the above, it is difficult to imagine what sort of multiples would PCJ deserve.

1 Like

Vinay, I think the management understands the issue and I read somewhere that going forward they are going to concentrate on retail. I won’t be surprised if they hiveoff the export business. I think comparing PCJ to gitanjali is not right. The receivables in their retail business is almost zero. Whereas gitanjali’s retail business cannot Survive without credit as they have a franchise model. Again I would like to highlight the store size would turn a gamechanger for PCJ as when you go and buy a 1 lac worth Jewellery you expect to see 10-15 different designs before taking a call. I think it is very likely that gitanjali’s sis and kiosk models could fall flat over 3-5 years.


I talked about South coz of two things.

  1. Managment’s stress in certain interviews that they want to open up multiple outlets in South and West.

  2. South and West India counts for 67% of the total gold sold in India and out of the 67% most of the sales are from South.

Also, opening up large stores brings along with it larger capex and thus larger investment. Thus along with higher margins the business should generate higher volumes as well to generate profits. I thought it would be difficult to generate volumes just by concentrating on a particular region of people leaving out the larger chuck who actually account for buying 2/3rd of gold in India.

Soumya, It would be foolish for them to open stores in smaller southern cities before being present in smaller northern cities. It would work fine if they open a store in say larger southern cities Hyderabad or Bangalore where you have a large north Indian diaspora. the pie is so big that it would take them years to be properly represented in the northern region. as of now more than half of their sales comes from NCR. there are multiple towns with a population of more than 1 million in north where they are currently not present. even small towns with population or 200K or 100K have tens of crores worth of Jewellery sales every year. I would be happy if they remain a strong regional player.