Shringar House of Mangalsutra Ltd. (Neutral)

Highlights

Shringar House of Mangalsutra Limited (SHML), incorporated on 2009 and engaged in the business of designing, manufacturing, and marketing, a varied range of mangalsutra studded with diverse range of stones including but not limited to American diamond, cubic zirconia, pearl, mother of pearl, and semi-precious stones, in 18k and 22k purity of gold, to its business-to-business (B2B) clients.

SHML sell products to a diverse range of clients including corporate clients, wholesale jewellers, and retailers across the country, more particularly in 24 states and 4 union territories. In addition to serving domestic clients, SHM has also expanded its reach to international clients in United Kingdom, New Zealand, UAE, USA and Republic of Fiji.

Some of the marquee domestic and international corporate clients include Malabar Gold Limited, Titan Company Limited, GRT Jewellers India Private Limited, Reliance Retail Limited, Novel Jewels Limited (Aditya Birla Group), Joyalukkas India Limited, P N Gadgil Jewellers Limited, As of FY25 SHML served 34 Corporate Clients, 1,089 wholesalers and 81 retailers.

Out of the total proceeds of Rs. 4,009 mn, ~Rs. 2,800 mn would go towards funding working capital requirement of the company and ~Rs 1,209 mn would go towards general corporate purpose.

Key Highlights

• In CY23, the Indian mangalsutra market reached Rs. 178 bn showing a YoY growth of ~16 pct. In CY24 the Indian mangalsutra market is expected to grow by 8 pct y-o-y to Rs. 192 bn. The market is expected to grow at a CAGR of 5.8 pct in the next 10 years to Rs 303 bn in CY32.
• SHML’s design and manufacturing process combines traditional methods and innovative techniques. Its manufacturing facility supported by company’s in-house team of 22 designers and 166 In-house karigars enables them to craft unique pieces that often feature detailed designs reflecting authenticity and uniqueness.
• SHML has a manufacturing facility with capacity to process ~2,500 kg gold p.a. of which company’s actual capacity utilization is around 70 pct for last three fiscal, but in peek months company’s capacity utilization shoots up between ~97 to 100 pct of its total capacity.
• The company also manufacture and supply Mangalsutras on a job-work basis to its corporate clients. For the FY25 they processed a total of 1,320.72 kgs of bullion into Mangalsutras, generating revenue of Rs.264.83 mn.
• They have a team of 166 In-house Karigars and they also collaborate with a network of third-party Karigars to meet the growing market demand for their products that enable to expand and diversify their designs.
• SHML’s key strategies include (i) Establish a supply chain network to reach untapped geographical regions (ii) Grow relationships with the existing clients and participate in their future expansions (iii) Continue to invest in marketing and brand building initiatives (iv) Augment fund-based capacities in order to scale up business operations (v) Continuing focus on reducing operating costs and improving operational efficiency.
• The sales/EBITDA/ profit of the company have grown 22.7 pct CAGR/56.3 pct CAGR/61.8 pct CAGR over FY23-25. In FY25 sales of the company stood at Rs. 14,298 mn, rose 29.8 pct YoY. EBITDA of the company increased 86.2 pct YoY to Rs. 923 mn while margins expanded 200 bps YoY to 6.5 pct. Profit came at Rs. 611 mn, grew 96.5 pct YoY.

Key Risk

• The receivables of the company growing faster than sales where sales have grown 22.7 pct CAGR and receivables rose 36.7 pct CAGR over FY23-FY25 indicating aggressive revenue recognition.
• Despite showing profits the company is not able to convert profit into cash due to this CFO of the company is negative.
• The sales of the dependent on single product i.e. Mangalsutra where other players have diversified portfolio. In absence of other products company might miss other opportunities in jewellery.

Financial Performance

Peers Comparison based on FY25 Financials

Valuation

Shringar House of Mangalsutra Limited, specialize in designing, manufacturing, and marketing, a varied range of mangalsutra studded with diverse range of stones including but not limited to, American diamond, cubic zirconia, pearl, mother of pearl, and semi-precious stones, in 18k and 22k purity of gold, With a focus on excellence and innovation. At the upper end of the price of Rs. 165, the issue quotes PE of 26.04x on FY25 annualized earnings. The issue looks fully priced.

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