P. N. Gadgil & Sons to invest Rs. 256 cr for 15 new stores
To expand retail footprint by increasing store count to 29 by FY2019 and 40 by FY2020.
P. N. Gadgil & Sons Limited (the “Company”), which is the second largest in terms of store count in Maharashtra (Source: CRISIL Report) intends to use around Rs. 256 crore of the Net Proceeds from the IPO sized Rs. 500 crore to finance establishment of proposed 15 new stores at 15 locations in Maharashtra and/ or adjoining states.
Its store network has also increased from two stores as on April 1, 2012 to 25 stores as on March 31, 2018. It further intends to expand footprint by increasing its store count to 29 by end of FY2019 and 40 by end of FY2020. All of its stores are operated and managed by the Company.
The Company intends to open large format stores (average of 6,000 sq. ft. of built up area) at 2 locations at capital expenditure (capex) of Rs. 5.3 crore per store and 9 small format stores (average of 1,600 sq. ft. of built up area) at a capex of Rs. 1.12 crore per store. It intends to open medium format stores (average of 2,850 sq. ft. of built up area) in Pune suburbs and Badlapur/ Dombivali at a capex of Rs. 1.81 crore per store and small format stores in Shirdi and Phaltan at a capex of Rs. 1.12 crore per store.
The Company also intends to use Rs. 112 crore for repayment/ prepayment of certain indebtedness and the rest for general corporate purposes. As on March 31, 2018, the total inventory held by us across the Company’s 25 existing stores was Rs. 381.999 crore which averages to approximately Rs. 15.28 crore per store. It is proposing to set up 15 new stores, and assuming a similar average of inventory requirement, we estimate that the total cost of finished products required for setting up proposed new stores will be Rs. 229.2 crore.
The legacy of the “P. N. Gadgil” brand traces back over six generations with the family of the Promoter-Chairman Mr. Govind Gadgil dating back to the year 1832. The Company’s stores are divided into three formats, primarily on account of the size of the store, namely 11 ‘large format stores’ (above 3,500 sq. ft. of built up area), six ‘medium-format stores’ (above 2,200 sq. ft. of built area up to 3,500 sq. ft. of built up area) and eight ‘small-format stores’ (above 1,000 sq. ft. of built up area up to 2,200 sq. ft. of built up area). As of March 31, 2018, it had 23 stores in Maharashtra and one store in Gujarat and Karnataka each, with an aggregate built-up area of 100,213 sq. ft.
For efficient management and operations, the Company had divided its stores into three separate zones as per the zonal model, namely Pune-zone, Nashik-zone and Solapur-zone. It also sells products through the online platform at www.onlinepng.com. Between Fiscal 2014 and Fiscal 2018, the Company’s total revenue grew at a CAGR of 12.20% from Rs. 1159.19 crore for Fiscal 2014 to Rs. 1,836.752 crore for Fiscal 2018. EBITDA grew at a CAGR of 18.76% from Rs. 57.238 crore for Fiscal 2014 to Rs. 113.87 crore for Fiscal 2018 and the PAT grew at a CAGR of 24.84% from Rs. 23.697 crore for Fiscal 2014 to Rs. 57.558 crore for Fiscal 2018. The Company has implemented quality control practices across the value chain to ensure that it sells hallmarked gold jewellery up to 22 karats in line with the quality and purity metrics prescribed by BIS.
All diamond jewellery that it sells is certified by IGI and loose diamonds that it sells are certified by GIA. Further, various quality control practices are followed during the designing and manufacturing of the jewellery. It has introduced a range of jewellery collections which are designed to cater to specific customer preferences such as ‘Light Weight Beauty’ which is the jewellery in value market segment, ‘Love again and again’ diamond jewellery, ‘Saptapadi Bridal’ jewellery and ‘Lantern Collection’ which is the temple jewellery collection.
The Book Running Lead Managers (“BRLMs”) are HDFC Bank Limited and YES Securities (India) Limited. The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on BSE and NSE.