Initial Public Offerings (IPOs) offer jewellery firms a chance to raise capital and enhance visibility. A mainboard IPO, listed and traded on NSE/BSE platforms, is a common route for established companies. Firms opting for this must meet SEBI’s eligibility norms, including net tangible assets of at least Rs.3 crore in each of the preceding three years, an average operating profit of Rs.15 crore over three of the last five years, and a public issue size not exceeding five times their pre-issue net worth. Smaller firms can consider SME IPOs with lower financial thresholds. These options offer flexibility based on a firm’s scale and ambitions.

But navigating IPOs is not just about meeting requirements. Geetanjali Kedia, Senior Research Analyst at S P Tulsian Investment Advisory Services, talks about her recommendations for jewellery firms considering this transformative step.

Indian Jeweller (IJ): What are the primary eligibility criteria for jewellery firms looking to go public?

Geetanjali Kedia (GK): Besides the eligibility criteria required by SEBI (can be detailed by a merchant banker), a topline of at least ?400 crore per annum is advisable for a mainboard IPO to justify costs, and ensure post-listing liquidity in the script. 

IJ: How important is a robust business model and consistent profitability in preparing for an IPO?

GK: Both these factors are vital. Financial and operational data from the past three to four years must be reported in the IPO documents. A strong business model and profitability track record contribute to better value discovery during the IPO process.

IJ: Please list the preparatory phases for a jewellery firm launching an IPO.

GK: The IPO preparation-to-launch process typically takes 15–18 months, depending on the size of operations, state of financial systems, management bandwidth, and leadership capability. Documentation for the draft red herring prospectus and filing with the regulator can be time-consuming.

IJ: Why might a mid-sized or large jewellery firm consider going public?

GK: Beyond raising capital, listing provides benefits such as higher consumer and brand awareness, liquidity for promoters, potential exit opportunities for financial investors, ease of future fundraising, and improved working capital funding.

IJ: How important is branding and public perception in the context of an IPO for a jewellery firm?

GK: Branding significantly impacts the perception of an IPO among potential investors. B2C jewellery firms, which have a strong brand, and which clock higher margins, have seen better market reception, compared to their B2B counterparts. However, financial parameters and IPO pricing ultimately determine the success of an IPO.

IJ: What are the advantages of going public? 

GK: The benefits include higher consumer and brand awareness, liquidity for promoters, potential exits for financial investors, ease of raising capital in the future, and improved working capital funding.

IJ: What challenges do jewellery firms face while going for an IPO, and after filing it? 

GK: The challenges include ensuring consistent growth in operations, and maintaining standards of corporate governance. Family-run businesses may also face increased scrutiny regarding related party transactions, though operational responsibilities can still rest with family members.

IJ: How should jewellery firms build and maintain investor confidence before and after the IPO?

GK: Companies must focus on key parameters such as increasing the share of studded jewellery in total revenue, improving inventory turnover ratio, implementing consistent hedging policies, adding new stores for growth, and upholding strong corporate governance practices.

IJ: How do lock-in periods and shareholding patterns influence investor decisions in jewellery IPOs?

GK: These are similar to companies in other sectors/industries, and do not have specific nuances unique to jewellery.

IJ: Are there any global insights or case studies Indian jewellery firms can learn from?

GK: Listed Indian firms like Titan, Kalyan Jewellers, Senco Gold, Vaibhav Global, and Thangamayil offer useful benchmarks. Domestic-focused firms are more influenced by local growth rates and gold prices, while export-oriented businesses must consider global market conditions.

IJ: What is the future of jewellery IPOs in India?

GK: As the organized jewellery retail market expands, branded chains are being increasingly preferred by consumers over unorganized retailers. Profitable and growing jewellers are likely to be well-received by the stock markets.