PN Gadgil Jewellers Targets Margin Expansion With New Stores After IPO

PN Gadgil Jewellers Ltd. is hopeful of a modest boost in its profit margins as it plans to open 12 new stores in Maharashtra with proceeds from the initial public offering. The company expects an expansion in the margins although new stores may take some time to break even.

"We are hopeful that at least we will be able to continue with the same margins and not see a dip even though we expand because Maharashtra is somewhere we are known, and the risk is very low for us," Managing Director Saurabh Gadgil told NDTV Profit on Tuesday. "That's where we feel that the margins we had last year will be maintained. The push would be to inch a little upwards."

The Pune-based firm made a stellar debut at the bourses, listing at a 74% premium over its IPO pricing. The stocks listed at Rs 834 apiece on the BSE against the IPO price of Rs 480 per share. The company had said in its red herring prospectus that it would increase its stores in Maharashtra and repay some of its debts.

PNGJL will open franchise stores in an asset-light model in the Tier 3 and Tier 4 towns of Maharashtra. "These towns have a limited upside in terms of sales. So, the strategy right now is that the company-owned stores will be in the bigger metros, Tier 1 and Tier 2 cities," Gadgil said.

The top executive said that moving ahead, the company's diamond business would help boost the margins. "Today, diamonds are 10% of our entire revenue. As we move ahead, that's a category which will further help us improve margins and help us to establish a more diverse mix. That is where the company is heading for," he said.

The IPO of PNGJL, which was open for subscription between Sept. 10 and Sept. 12, was subscribed 59.41 times, led by a strong demand from qualified institutional buyers. The offer comprised a fresh issue of 1.77 crore shares worth Rs 850 crore and an offer for sale of 52 lakh shares, aggregating to Rs 250 crore.