Senco Gold makes strong debut; lists at 36% premium over issue price

Shares of Senco Gold listed at Rs 431, a 36 per cent premium over its issue price of Rs 317 on the BSE.

Jewellery retailer Senco Gold made a strong stock market debut, with its shares listed at Rs 431, a 36 per cent premium over its issue price of Rs 317 per share on the BSE on Friday. On the National Stock Exchange (NSE), the stock started trade at Rs 430.

Post listing, the stock hit high of Rs 444, up 40 per cent against its issue price on the BSE and NSE. At 10:04 AM; the stock quoted at Rs 419, up 32 per cent on the BSE. A combined 6.4 million equity shares had changed hands on the NSE and BSE.

The strong listing was in line with the expectations. Senco Gold is a pan-India jewelry retailer with a strong brand presence. The company has been growing steadily in recent years and is well-positioned to benefit from the growing demand for gold jewelry in India.

"We are not recommending any fresh buying at this level. However, existing investors can hold the shares for the long term with a stop loss at Rs 387, as the company has good growth prospects", said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

Meanwhile, Senco Gold’s Rs 405-crore initial public offering (IPO) saw a strong response, with issue got subscription of 77 times. The institutional investor portion of the issue was subscribed 191 times and the retail category saw 16 times more than the demand for the shares on offer. The two sub-categories for high net worth individuals (HNI) too saw huge 68 times oversubscription.

Senco Gold - run by fourth-generation entrepreneurs - is the largest organised jewellery retail player in the eastern region of India in terms of number of stores. It operated 75 company showrooms and 61 franchisee showrooms as of March 2023.  

It primarily deals in gold and diamond jewelry along with jewelry made of silver, platinum, precious and semi-precious stones, and other metals. Besides this, it offers costume jewelry, gold, and silver coins, and utensils made of silver in its other offerings.

Senco Gold has delivered 24 per cent revenue growth over FY21-23 with margin improvement from 6.6 per cent in FY21 to 7.8 per cent in FY23. Although, company’s decent performance in terms of profitability amongst its peers, it has observed challenges generating positive operating cash flow during the last 2 years.

Further, debt to equity ratio at 1.2x as on March 2023 may lead to further contraction in company’s profitability. However, the IPO is issued at 15.5x PE valuation based on its FY23 EPS which is at discount relative to average PE valuation of its peers, analyst at Nirmal Bang Securities said in IPO note.

Improving economic growth, rising urbanisation, increasing disposable income levels, and mandatory hallmarking are positive for the organized players. A strong brand name and a legacy of over five decades, strong company-operated showrooms, and an established asset-light ‘franchise’ model are expected to benefit Senco Gold, according to analyst at Geojit Financial Services.