C. Mahendra Infojewels Ltd. (CMIL) is planning to raise capital through an initial public offering (IPO) to repay debt, enhance its working capital and set up gold refinery unit.
CMIL filed its draft prospectus with the capital market regulator Securities and Exchange Board of India (Sebi) this week stating that it will offer 13 million equity shares of INR 10 each through the IPO. The promoters — Shrikant Parikh, Jesinghbhai Parikh, Minal Industries Ltd. and C Mahendra Jewels Private Ltd. — are looking at divesting 34.21 percent stake to investors. Post issue, the company will have 38 million outstanding equity shares.
“We intend to utilize approximately 50.78 percent of the issue proceeds amounting to $14.1 million (INR 710.9 million) towards repaying certain unsecured loans,” CMIL said. The company also plans to use $10.7 million (INR 540 million) for augmenting working capital resources and $711,744 (INR 36 million) for setting up a gold refinery unit, among others.
However, the company didn’t specify the total capital that it plans to raise through the IPO. Its working capital loan stood at $1.3 million (INR 64.2 million) as at February 29, 2012.
CMIL, whose operations include manufacturing and exporting diamond studded jewelry, has two manufacturing units in Mumbai’s SEEPZ SEZ and one in the Surat Special Economic Zone, Sachin.
The company’s primary market is the U.S. and its total sales are confined to not more than 10 clients, which includes Selection Inc. CMIL manufactures jewelry under the brand CM99 and CM199, offering jewelry priced in the range of $99 to $199.
CMIL sold diamond studded jewelry worth $6.7 million (INR 340 million) in the fiscal year ended on March 31. The company posted a net profit $1.8 million (INR 90.4 million) on total income of $29.8 million (INR 1.51 billion). Retail chain stores account for 60 percent of its total sales, while the rest comes through mom and pop stores.
The company plans to manufacture high end jewelry as part of its program to enter the Arabian market and the United Kingdom, and reduce its dependence on the U.S.
CMIL has proposed to list its equity shares on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Corporate Strategic Allianz Ltd. is the book running lead manager to the issue.