What does Goldiam International do?
Goldiam International is a small-cap company with a market capitalisation of Rs 1800 crore of wich the free float is Rs 595 crore.
It is engaged in the export of fine natural diamond studded jewellery, lab-grown diamonds, and lab-grown diamond studded jewellery. The company has three manufacturing plants in SEEPZ (SEZ in Andheri, Mumbai).
The company was founded by the Late Mr Manhar Bhansali and is currently managed by his Son Mr Rashesh Bhansali (Chairman), and his grandson Mr Anmol Bhansali (Whole Time Director). Mr Rashesh Bhansali has been involved in the family business for the last 28 years and has vast experience in the field of Diamonds and Jewellery. Mr Anmol Bhansali is a Wharton School (University of Pennsylvania) graduate and has also acquired GEM130 and GEM230 certifications, constituting two-thirds of the ‘Diamonds and Diamond Grading’ course, from the Gemology Institute of America 2017. He has been in the business for the last six years.
What is the company’s business model?
Goldiam International has a niche business model in jewellery; it is an OEM to renowned global retailers. It manufactures the latest trend, high-value diamond-studded jewellery (engagement and anniversary rings, wedding bands, bridal sets, fashion pendants, necklaces, earnings) in various designs and types and sells to leading global retailers, with a chain of stores as well as jewellery wholesalers, who, in turn, sell to smaller retailers.
The company manufactures jewellery in-house and is among the few players with a patent for the laboratory-manufacturing process of diamonds.
The Investors’ presentation offers valuable information about the salient points about the Company and its financials.
“Strong Balance Sheet: A Balance of Efficiency, Effectiveness and Controls
• Committed to wealth-creation for all its stakeholders.
• Over the last five years, the Company has delivered an average dividend pay-out of 53.8% of Standalone PAT.
ROBUST RETURN RATIOS
• Improving and growing profitability.
• Cash Adjusted ROCE* – 10.6% in FY18 to 60.4% in FY22
• ROE* – 5.7% in FY18 to 21% in FY22
DEBT FREE COMPANY
• With our prudent and conservative approach towards financial engineering, we have
remained debt-free despite challenging market.
• As on H1FY23, our consolidated cash & cash equivalents along with investments are Rs 1,740 mn.
• Consistent profit growth of 30.2% CAGR over the FY17-FY22.”
As of 31st December 2022, the promoters hold 66.39% while the public holds 33.61%.
Amongst the public, Mukul Mahavir Agrawal holds 30,00,000 constituting 2.75% of the equity. Ramesh Damani holds 17,17,340 shares constituting 1.58% of the equity. Ashish Kacholia holds 11,02,527 shares constituting 1.01% of the equity.
No Mutual Funds or FIIs are holding the stock.
Equitymaster has issued a video research report in which the fundamentals of the Company are well explained. It is stated “Forget Titan and Focus on this Smallcap Jewellery Stock. A 30% fall from the peak, offers a good opportunity to BUY this niche diamond exporting company. While USA is in recession, is it time to focus on this USA focussed Jewellery stock which has corrected 30% from the peak.”
Monarch Networth Capital has issued a research report dated 2nd November 2022 in which the fundamentals of the Company are explained. It is stated as follows:
“We present an investment idea on Goldiam International Limited, a thinly researched stock with a fair value of Rs.185. Fortified by more than three decades of experience, the company is a leading supplier of exquisitely designed and luxurious diamond jewellery. The company has become the manufacturer of choice for many leading global branded retailers, departmental stores and wholesalers across America. Goldiam’s fortune changed when it became one of the first movers to grow and distribute lab-grown diamonds (LGD), which today contributes close to 20% of its overall topline. LGD has immense potential as we move towards an alternative to natural diamonds“.
The Valuation & Risks are summed up as follows:
“Goldiam has a presence both in natural and lab-based diamonds, catering to the US, the most prominent jewellery market in the world. The company’s innovative strategy to focus on direct retail and e-commerce platforms has paid rich dividends with robust growth in its margin profile. Its decision to move towards lab-based diamonds early has made it one of the most preferred vendors to US retailers. We expect the company to post revenue growth of 12% CAGR over FY22-25E to Rs.9,775mn, with lab-based diamonds to grow at 42% and natural diamonds at 2% over the same period. EBITDA over the same period is expected to grow at 25% CAGR to Rs.2,525mn, while OPM is expected to improve by 690bps to 25.8%. PAT is expected to grow at 25% CAGR to Rs. 2,065mn. We currently value the stock at 11x Sept 24 EPS of Rs.16 to arrive at our fair value target of Rs.185, a potential upside of 48% from current levels.”
Karunya Rao of Moneycontrol.com has also explained the merits of the Company in a systematic manner.