Palm Jewels Limited

Started in 2005, Palm Jewels Limited is based in Ahmedabad - Gujarat and engaged in the wholesale business of gold jewellery. The company sells gold based chains, bracelets, and necklaces. It outsources the manufacturing of the jewellery through job workers based in Ahmedabad and Mumbai. The major raw material used for making the products is gold & silver. Gold bars and other necessary material are provided to the job workers who are based either in Ahmedabad and Mumbai. The finished jewellery is sold by the company's marketing and sales team directly to other jewellery stores. The jewellery is widely sold throughout Gujarat only through B2B marketing and/ or Direct/Outbound marketing strategy. Some of the major customers include M/s. Zaverat, Mehta Ornaments Private Limited, Shah Chinubhai Ramniklal Co., and Shubhlaxmi Jewellers, etc. Company currently has 11 employees on its payroll. As per financial performance, PJL has posted total revenue/net profits of Rs. 1.19 cr. / Rs. 0.001 cr. (FY13), Rs. 0.42 cr. / Rs. 0.002 cr. (FY14), Rs. 0.98 cr. / Rs. - (0.004) cr. (FY15), Rs. 1.57 cr. / Rs. 0.005 cr. (FY16) and Rs. 5.52 cr. / Rs. 0.02 cr. (FY17). Surprisingly for first 11 months ended on 28.02.18 it has earned net profit of Rs. 0.44 cr. on a turnover of Rs. 19.75 cr. For last three fiscals it has posted an average EPS of Rs. 0.28 and an average RoNW of 2.63%. Issue is priced at a P/BV of 1.58 on the basis of post issue NAV of Rs. 19.02. If we annualise latest superb earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 46 against industry average of 41. On the basis of its FY 17 earnings, asking price is at a P/E of around 1438. As per offer documents it is showing PC Jewellers, Renaissance Jewellery and Uday Jewellers as its listed peers that are currently trading at a P/Es of around 18, 9 and 35 respectively (as on 23.05.18). So this issue looks very highly priced. On BRLM's front, for First Overseas Capital Limited, this is 18th IPO in last four fiscals. Out of last 10 listings, 8 issues opened at discount to offer price, 2 with a premium ranging from 1.67% to 9.5% on the day of listing. As of now from last 10 listings, 3 are trading above issue price and remain at par or below issue price. And some of them are trading at very low price. Thus it has poor track record. Latest listing of UH Zaveri was at a whooping discount of 29%. As per financials, company's performance is not good, RoNW is 2.63% for last three fiscals and issue is very highly priced as per latest earnings. Earnings for FY18 are very high, which generates doubts. BRLM's performance is also poor. So, We give AVOID rating to this SME IPO as per the current market condition.

• 1 Mr. Rohit D. Shah
• 2 Mrs. Chetna R. Shah