Vaibhav Jewellers: Market Entry Strategy on October 3rd and Gray Market Prices
Vaibhav Jewellers
The stock market listing of Manoj Vaibhav Gems ‘N’ Jewelers is highly anticipated to take place on October 3, 2023.
However, market analysts are predicting that the company’s initial trading days may be somewhat lackluster.
This subdued market entry could be attributed to the fact that the company’s initial public offering (IPO) did not receive the level of enthusiasm and response that was initially expected.
Let’s delve deeper into the details surrounding this IPO and the factors influencing its reception in the market.
The IPO subscription window for Manoj Vaibhav Gems ‘N’ Jewelers was open from September 22 to September 26, 2023.
During this period, the company managed to achieve an overall subscription rate of 2.25 times. While this figure is certainly respectable, it fell short of the lofty expectations that had been set. To gain a better understanding of this subscription rate, it’s essential to break it down by investor category.
High net worth individuals (HNIs) showed substantial interest in the IPO, with the reserved portion for them being oversubscribed at an impressive rate of 5.18 times.
This signifies that affluent individual investors were eager to secure a stake in the company. On the other hand, the reserved portion for qualified institutional buyers (QIBs) was subscribed at a more modest rate of 1.06 times, indicating that institutional interest, while present, wasn’t as fervent as expected.
Retail investors, a crucial segment for any IPO, subscribed to the offering at a rate of 1.66 times, demonstrating a healthy level of retail participation.
The IPO was offered at a price band of Rs 204 to Rs 215 per share, with fresh equity shares worth Rs 210 crore being made available.
Additionally, there was an offer-for-sale (OFS) of 28 lakh shares worth Rs 60.2 crore from the promoter, Grandhi Bharat Mallika Ratna Kumari (HUF). In total, the company successfully raised Rs 270.20 crore from the public issue.
Despite the IPO’s robust subscription rates among HNIs and retail investors, the subdued market sentiment ahead of the listing date has raised concerns among market analysts.
Research Analyst Dhruv Mudarddi at StoxBox and Aastha Jain, Senior Research Analyst at Hem Securities, both share the opinion that Vaibhav Jewelers’ debut on the stock market may lack significant initial momentum.
Their cautious outlook may be influenced by factors such as market volatility, overall economic conditions, and the perceived valuation of the company.
Turning our attention to the gray market, where unofficial trading of IPO shares takes place, Vaibhav James ‘N’ Jewelers is currently commanding a premium of 3-5 per cent.
This suggests that there is still some investor interest and optimism surrounding the company’s stock, despite the reservations expressed by some market experts.
Vaibhav Jewelers primarily operates in the states of Andhra Pradesh and Telangana, boasting a network of 13 showrooms spread across 8 towns and 2 cities, including two franchised showrooms.
Notably, the company is entirely owned by its promoters, which could be seen as both a strength and a potential limitation.
The funds raised from the issuance of fresh equity shares in the IPO are earmarked for specific purposes. First and foremost, a significant portion of these funds will be allocated to setting up 8 new showrooms, as outlined in the company’s expansion plans for FY 2023-24 and FY 2024-25.
This strategic move indicates that Vaibhav Jewelers is keen on capitalizing on growth opportunities in the retail sector by expanding its physical presence.
Beyond showroom expansion, any remaining funds from the IPO will be directed towards general corporate purposes.
This flexibility in fund utilization could encompass a wide range of activities, from marketing initiatives to debt reduction or working capital requirements.
It’s worth noting that Vaibhav Jewelers has chosen to list in the new timeline of T+3 (referring to the issue closing date plus three working days).
This new timeline was introduced by the Securities and Exchange Board of India (SEBI) and came into effect on September 1, 2023.
It allows companies launching IPOs from that date onward to select either the T+3 timeline or the previous T+6 timeline for their market listing.
This decision to list under the T+3 timeline demonstrates Vaibhav Jewelers’ adaptability and desire to align with the latest regulatory changes.
It’s important to note that this change is a significant departure from the previous IPO listing norms in India. Before this, IPOs followed a T+6 timeline, meaning that they would list on the stock exchange six working days after the closure of the subscription period.
However, as of December 1, 2023, listing under the T+3 timeline will become mandatory for IPOs.
Vaibhav Jewelers joins the ranks of several other companies that have already opted for the T+3 timeline, such as Ratanveer Precision Engineering, Jagal Prepaid Ocean Services, Samhi Hotels, Sai Silks Kala Mandir, and Signature Global.
This transition reflects SEBI’s commitment to streamlining and modernizing India’s IPO listing process, potentially leading to greater liquidity and efficiency in the market.
In summary, while the market entry of Manoj Vaibhav Gems ‘N’ Jewelers on October 3, 2023, is anticipated with caution by some analysts, the company has successfully completed its IPO with reasonable subscription rates.
The gray market’s premium suggests that there is still investor interest in the stock. The company’s plans to use the IPO funds for showroom expansion indicate a growth-oriented strategy, and its willingness to embrace the new T+3 timeline demonstrates adaptability to regulatory changes.
Investors and market watchers will closely observe the company’s performance in the stock market in the days following its listing, as it could provide valuable insights into the jewelry sector’s current dynamics and investor sentiment.
