RENAISSANCE JEWELLERY: Still Shining Bright

Considering Renaissance Jewellery’s steady growth prospects, investors with a 12-month horizon can remain invested in the scrip

COMPANY: RENAISSANCE JEWELLERY

OFFER PRICE: Rs 150

LISTING PRICE: Rs 190

CURRENT PRICE: Rs 164.55

CURRENT P/E: 10.5

MUMBAI-BASED jewellery manufacturer, Renaissance Jewellery, had issued 53.24 lakh equity shares and 26.6 lakh warrants through an IPO in November ’07 to raise Rs 80 crore. The scrip was listed on the stock exchanges on December 12, ’07 at Rs 190 — a 27% increase over the offer price and closed at Rs 165. The warrants issued by the company were separately listed, which closed at Rs 24.5.
The company plans to use the IPO proceeds to expand its production facilities in SEEPZ and Bhavnagar. The company is also setting up a subsidiary in the US to market its products to medium and smallsized retailers.
Despite the US economy facing risks of a recession, weakening of the dollar and gold prices ruling around historic highs, Renaissance continues with its US-centric approach. Sumit Shah, the company’s managing director, is determined to prevail over these challenges. “The environment is challenging, but we view it as the best time to consolidate our position in the world’s largest consumer country for studded jewellery,” he says. The share of non-US sales, which stood at just 5% last year, are expected to rise above 15% during FY08.
However, the management is taking steps to de-risk the business model. “We have recently entered the bridal jewellery business, the demand for which is relatively inelastic. Similarly, we are also increasing our non-US revenues,” says Mr Shah. The company, which derived around 9% of its sales from bridal jewellery, expects this share to go up to 15% in FY08. The management hopes to maintain over 25% annual profit growth rate for FY08 and FY09.The warrants issued by the company will be convertible at Rs 187.5 into equity shares between April and June ’09. The company expects to collect Rs 50 crore from full exercise of the warrants. According to Mr Shah, “There will be three main avenues for deployment of these funds, viz our retail business in India, the US business and the non-US business. We may float another subsidiary in some non-US markets such as Europe, Middle East or South-East Asia, depending on the growth prospects.”Considering the company’s steady growth prospects, investors with a 12-month horizon are advised to remain invested in the scrip.