Deepa Jewellers Limited (Neutral)

Highlights

Deepa Jewellers Limited (DJL) incorporated in 2016, is an organized B2B designer, processor, and supplier of a wide range of hallmarked plain gold and precious stone studded jewellery to jewellery retail chains and standalone stores, instead of directly selling to end customers, with operations concentrated in Southern India.

DJL’s product portfolio comprises 16 products and 110 SKUs, weighting from 2.5 gm to 300 gm, with vaddanam (traditional waist belt symbolizing prosperity) and CNC machine cut bangles (catering bridal and daily wear) as the core offerings with highest-contribution. DJL also plans to add 2 new product categories and 22 additional SKUs by FY27.

DJL operates an in-house team of 15 designers who develop innovative, trend-driven jewellery tailored to customer needs and regional preferences, helping DJL build long-standing relationships across a wide customer network of 373 customers, comprising 47 jewellery retail chains and 326 standalone stores, spanning 13 states and 1 union territory in India.

Out of the total proceeds of Rs. 4,597 mn, Rs. 2,150 mn would go towards funding long-term working capital requirements and remaining Rs. 350 mn would go towards funding company’s general corporate purposes. Additionally, Rs. 2,097 mn going towards promoter selling shareholders of the company. 

Key Highlights

• The Indian B2B gems and jewellery market, valued at Rs. 7.3 trillion in FY26, is projected to grow moderately at 2-3 pct CAGR to Rs. 7.9-8.2 trillion by FY30. The retail gems and jewellery market, valued at Rs. 12.9 trillion in FY26, is projected to grow at 4-5 pct CAGR to Rs. 15.1-15.5 trillion, while the South Indian market, valued at Rs. 5.0 trillion, is set to outpace both, growing at 6-7 pct CAGR to reach Rs. 6.2-6.6 trillion over the same period.

• DJL designs jewellery in-house to match customer needs, market trends, and regional tastes, ensuring a diverse, customized portfolio. Manufacturing is outsourced to 41 karigars who convert supplied raw materials (gold, alloys, and precious stones) into finished, hallmarked, ready-to-sell ornaments against making charges, giving DJL scalability without heavy capital investment while ensuring certified purity.
• Along with processing of gold, DJL also undertakes job work, converting customer-supplied raw materials into finished, ready-to-sell ornaments for a fee. Additionally, it trades in silver ornaments, 18/20 karat gold ornaments, precious stones, and gold bullion on a pure buy-sell basis, without manufacturing involvement.
• DJL proposed to setup in-house manufacturing facility in Hyderabad, expected to be operational before H1FY27, enabling reduced dependence on karigars, improved cost efficiencies & production timelines, standardization and machine-led quality control. It is also expected to enhance security against pilferage, safeguard design confidentiality, and support better scalability during peak demand. Additionally, it will be equipped with machinery to create design variations, allowing portfolio expansion.
• DJL uses a third-party mobile application Deepa Jewellers Limited, to enhance brand visibility and showcase product collections, offering high-resolution jewellery images to remote B2B customers. Customers first view a limited sample set, and upon approval, gain access to the full design catalogue, with the app functioning purely as a design-selection interface, while order acceptance and fulfilment remain with DJL.
• DPL’s key growth strategies include (i) To set up in-house manufacturing facility, (ii) strengthen presence in southern India through new sales offices, (iii) expand  product portfolio by adding new product categories, designs and SKUs, (iv) invest in brand building and marketing initiatives by participating in various trade exhibitions and trade shows, and (v) leverage technology for operational efficiency.
• The sales of the company have grown by 37.13 pct CAGR over FY24-26 and EBITDA/profit has grown 102.16 pct CAGR/107.25 pct CAGR over same year. In FY26 the company reported sales of Rs. 19,267 rose 37.92 pct YoY. EBITDA of the company increased 161.25 pct YoY to Rs. 1,463 mn. In FY26 the company posted profit of Rs. 1,048 mn, up 158.13 pct.

Key Risk

• DJL derives 72.72 pct of its revenue from the sale of vaddanam and CNC machine cut bangles, making it vulnerable to any change in demand for these offerings or shifts in customer preferences.

• DJL’s operations are heavily dependent on third-party karigars, many without formal agreements. Any discontinuation of services, production disruptions, or quality lapses by them could adversely impact DJL’s reputation, business, and financial condition.
• DJL’s practice of accepting returns of unsold jewellery from customers exposes it to several operational, inventory, and financial risks.

Financial Performance

Source: – RHP.

Peer Comparison based on FY26 Financials.

Source: – RHP.

Valuation

Deepa Jewellers Limited (DJL) is an organized B2B designer, processor and supplier of hallmarked gold jewellery, primarily having operations in Telangana, Karnataka, Andhra Pradesh, Tamil Nadu and Kerala. At the upper end of the price band of Rs. 177, the issue is priced at an PE of 16x its FY26 post issue capital. The issue appears to be fully priced.

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