Jewellers plan IPOs, eye pvt equity

As the Rs 70,000-crore jewellery industry gets organised, Indian companies are looking at raising funds through the equity route to fuel their national and international expansion plans.

Recently, Nalanda Capital picked up 14.9 per cent stake in Vaibhav Gems for $35 million, while Renaissance Jewellery plans to enter the capital market with an initial public offering (IPO). IPOs of few more jewellery manufacturers are in the pipeline, which includes Shree Ganesh Jewellery.

A merchant banker associated with one such company said, "In the coming months, you will see more and more jewellery companies opting for funds from the organised financial sector. They will include private equity investments, IPOs or other instruments."

The potential in the domestic market and opportunities overseas is prompting jewellery firms to tap the available liquidity for growth.

Neelesh Hundekari of A T Kearney said, "Some of the progressive companies have identified that they will have to incorporate transparency to go public to mobilise funds for growth."

He said private equity players are also optimistic about the jewellery sector since its a high growth industry which offers decent valuations.

Renaissance Jewellery, India's leading studded jewellery exporter, plans to go public for funds it needs to set up a subsidiary in the US, one of the world's largest jewellery markets and expand manufacturing facilities in Bhavnagar and Mumbai.

Sumit Shah, managing director, Renaissance Jewellery said, "The company already supplies major retailers like Wal-Mart and Zales. But we intend to tap the independent and mid-size jewellers, which comprise about 57 per cent of the US market."

While Vaibhav Gems, which is already listed, has launched shopping channels in the UK, Germany and the US. It also operates about 19 retail stores in the Caribbeans and Mexico.

Gitanjali Gems, which entered the capital market in March 2006, proposed to utilise the funds for expanding manufacturing capacity and retail operations and invest in acquisitions. Since then, Gitanjali has bought Samuels, a leading US-based retail chain and is reportedly close to making its second acquisition in the country.

Meanwhile, Kolkata-based Shree Ganesh Jewellery also plans to enter the capital markets with an offering to raise Rs 200-210 crore. US-based private equity fund New Vernon and Indian Equity Partners have also expressed interest in the Rs 750 crore exporter of handmade and studded gold jewellery.

"Private equity players are likely to latch on to export-oriented companies, which generally also have significant presence in the domestic market," A T Kearney's Hundekari added.

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FUNDING GROWTH

Jewellery firms are looking to raise funds through the equity route to fuel national and international expansion plans

market with an initial public offering

2006, is utilising the funds for increasing capacity and funding acquisitions

PE players are eyeing export-oriented companies, which usually have significant domestic presence, says consultancy firm A T Kearney