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CRISIL assigns IPO grade 3/5 to Tribhovandas Bhimji Zaveri Limited

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MUMBAI : Equities research and ratings agency, CRISIL Research today assigned a CRISIL IPO grade of "3/5" to the proposed initial public offer (IPO) of Tribhovandas Bhimji Zaveri Limited (TBZ). The grade indicates that the fundamentals of the IPO are average relative to other listed equity securities in India.

However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy, sell or hold the graded instrument, or a comment on the graded instrument's future market price or its suitability for a particular investor.

The assigned grade reflects TBZ’s century-old presence in the retail jewellery business, which has helped create a strong brand recall. It factors in the resilience of demand for Indian Gold jewellery in the face of rising gold prices and increasing acceptance of diamond jewellery in India. Compared to other players, TBZ’s revenue mix is skewed towards higher-margin diamond jewellery. The grade has also taken into account the expected increase in organised retail penetration in jewellery vis-à-vis the single-store format, which will benefit established players like TBZ. The company has steadily expanded from one store to 14 stores in the past decade.

The grade is restrained by intense competition in the jewellery retailing market, which is poised to see planned expansions by regional/traditional players. TBZ plans to expand from 14 to 23 stores in the next one year at a pace faster than before, which could throw up significant challenges even though its execution strategies are in place. The grade is also constrained by the pressure on profitability the company could face due to higher marketing expenses incurred while opening new stores.

Also, with the brand “Tribhovandas Bhimji Zaveri” being used by other family members, there is risk of brand dilution if any of them underperforms on quality.

TBZ’s revenue increased at a three-year CAGR of 43% to Rs 8.8 bn in FY10, largely driven by branch additions and steady ncrease in Gold prices. A higher proportion of diamond-studded jewellery has supported the EBITDA margin in a competitive market. EBITDA increased at a CAGR of 31% during FY07-10. PAT increased at a three-year CAGR of 31% to Rs 169 mn in FY10.

Source :- Commodity Online
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Posted by Prashant Gandhi on 13 July, 2011 12:39:47 PM IST #