Post Issue Analysis – Tribhovandas Bhimji Zaveri (TBZ)

The first IPO of FY13 – that of Tribhovandas Bhimji Zaveri (TBZ) - made a dismal debut on the bourses today, closing lower by more than 7 per cent. TBZ, which tapped the market to raise funds of around Rs 200 crore, received a fair response from the investor community at the time of subscription. The IPO was oversubscribed 1.15 times (QIB 1.29 times, non-institutional 1.91 times and retail individuals 0.68 times). TBZ today got listed on the bourses at a discount of 4.17 per cent and closed the day down by 7.33 per cent at Rs 111.20.     

In our IPO analysis we had given a rating of 47, implying that one could invest with limited exposure. We had expected the counter to witness some listing gains on the back of its sound brand image but this was not to be and hence we would recommend investors to exit the counter. 

TBZ is a 145-plus-year-old jewellery company from Mumbai with 14 showrooms in 10 cities. Of the total revenue, around 72 per cent comes from the selling of gold jewellery, around 25 per cent from diamond-studded jewellery while the balance 3 per cent is derived from the platinum and jadau jewellery. The gross profit margin in the gold segment is around 10.86 per cent while that in case of diamond jewellery is around 36 per cent.

The company has huge expansion plans and wishes to grow three-fold in the next three years. From the existing 14 showrooms the company plans to open 43 new showrooms taking it to a total of 57 showrooms by the end of fiscal 2015. In our IPO analysis we had cautioned investors that the company’s long- term future plans may or may not materialize. This could be one of the reasons why the market has given a thumbs-down to the scrip. The brand at present has more recognition in the western part of the country, especially Mumbai, and it may take time to get good response from other parts of the country. 

Another risk factor could be related to the issue about its name. As per the DRHP, two retiring partners have the right to use the brand name without modification and this has probably had its impact on the company. Further, on the day of listing the counter witnessed heavy selling pressure, evident during the trading hours when once it had buyers for around 4,000 shares while there were sellers wishing to dispose off around 96,000 shares. 

We believe that the volatile market condition and the execution of the company’s plans would see further pressure on the scrip and this could impact the portfolio of the investors. The best strategy would be to exit the counter, even if one has to incur a loss.