Ethics issue in

capitalism and
market system
Submitted by :
Prashant Maharshi
ISBE/PGP/SS/2011-13

What is capitalism?
Capitalism also called free market economy, dominant in the Western
world since the breakup of feudalism, in which most of the means
of production are privately owned and production is guided and
income distributed largely through the operation of markets.
Capitalism can be defined as an economic system in which the
major portion of production and distribution is in private hands,
operating under what is termed a profit or market system.

Why IPO is done?

Although rooted in antiquity,capitalism is primarily European in
itscapitalism is primarily European in itsorigins; it evolved
through a numberorigins; it evolved through a numberof
stages, reaching its zenith in theof stages, reaching its zenith in
the19th century. From Europe, and19th century. From Europe,
andespecially from England, capitalismespecially from England,
capitalismspread throughout the world, largelyspread
throughout the world, largelyunchallenged as the
dominantunchallenged as the dominanteconomic and social
system untileconomic and social system untilWorld War I (19141918) ushered inWorld War I (1914-1918) ushered inmodern
communism (or Marxism) asmodern communism (or Marxism)
asa vigorous and hostile competinga vigorous and hostile
competingsystem.system.

Principle of capitalism
Private Ownership
No legal limit on the accumulation the Property
Free Market No government intervention in the economy
The Profit motive

Features of IPO
Company nominates lead merchant banker(s)
Disclose of securities to be issued & price band for
bidding
Appointment of syndicate members
Bidding process
Process normally remains for 5 days
Bids have to be entered within the specified price band
On the closure of the process, the book runners
evaluates the price levels
At last the book runners & the issuer decides the final
price
Allocation of securities is made to the successful bidders
Rest get refund orders.

TRIBHOVANDAS
BHIMJI ZAVERI
IPO

About the Company

The 148 year old company, Tribhovandas Bhimji
Zaveri, Mumbais local jeweller, plans to raise
around Rs. 200 crore through 16.7 million shares.
The company is in the retail jewellery business
with 14 showrooms across 5 states mainly in
western and central India.
Around 72% revenue comes from gold jewellery
and 25% from diamonds

About IPO
Offer Date

24 26 April

Price Band

Rs. 120 126 per Share

Minimum Application

45 Shares

Reserved for QIB

50%

Reserved for Non Institutional Bidders

15%

Reserved for retail

35%

Total Amount to be raised

Rs. 200 Crore

Total No. Of Share on sale

16.7 million

Got BID for

1.62 crore shares

Subscribed by

1.15 times

Plans
To finance establishment of new showrooms
To expand this to around 57 showrooms, adding 43
new ones in India by 2015
To use about Rs. 20 Crore to open 9 new large format
showrooms by the end of fiscal 2013.
To finance working capital requirements
The remaining amount would be used for general
corporate purpose

Financial Information
In Rs. Crore

FY 10

FY 11

9 Months FY 12

Net Sales

885

1194

1117

% Change

32.3

34.9

NA

Operation Profit

47

87

102

% Change

11

37.2

NA

Net Profit

17

40.4

50.5

% Change

63.5

137.6

NA

Competitors / Peers
Tanishq
Rajesh Exports
Gitanjali Gems
Shri Ganesh Jewellery
Suraj Diamond

Share holding pattern

post IPO
%

11%

Promoter holding
FII
DII
Others

3%

12%

74%

Day 1 trading
Listing Day Trading Information

122

120

BSE

NSE

118
116

114

Issue Price:

Rs. 120.00 Rs. 120.00

Open:

Rs. 115.00 Rs. 115.05

Low:

Rs. 110.00 Rs. 110.50

High:

Rs. 119.80 Rs. 120.00

Last Trade:

Rs. 111.20

Rs. 111.00

Volume:

1,157,892

1,253,983

BSE

112

NSE

110

108

106

104
Open

High

Low

Close

No. of times issue is subscribed

Subscribed by

1.16

1.29

0.68
1.91

Qualified Institutional
Buyers
Non Institutional
Investors
Retail Investors
Anchor Investors

Strength of TBZ
Strong and trusted Brand Name
Focus to develop new design and products by
understanding customer requirement with constant
interaction
The company has substantial experience in expanding
operations and managing the launch of new
showrooms.
The company has its own manufacturing facilities in
Kandivali with a carpet area of 5,755 sq. ft.

Weakness of TBZ
Inventory risk and gold price fluctuation is also high
Working capital situation of the company is not good
Financial performance of the company is also not
encouraging
Peers are doing good in compare to TBZ

Opportunities for TBZ

Branded retail chains are expanding their presence by
creating growth opportunities in jewellery market
The Indian gold jewellery sector accounted for 61%
total domestic gold demand in 2011
It is expected that domestic industry to grow at a CAGR
of 10% 12% up to 2015 because of:
Higher disposable income
Rising young population with the urge to spend
Higher no. of women investing her saving in
gold/diamond jewellery
Conscious marketing efforts by companies
Steady rise in gold prices across the global market.

Threats of TBZ
There is intense competition in the jewellery retailing
market
Branded players are also willing to expand
Devaluation of gold may affect the business
The company has not registered its jewellery designs so
it could be duplicated by competitors
The new tax policy where the customer has to give his/
her PAN number on purchase made above `5 lakh is
likely to hinder the business.

Future Strategy of TBZ

The company is planning to add 43 showrooms by end
of fiscal year 2014
It is building additional facility at Kandivali
carpet area of Approx. 17739 sq. ft.

with a

Increasing marketing activities to increase footfalls and

sales at showrooms.
Focusing to increase its diamond studded jewellery
sales which will improve its overall profit margin.

Conclusion
IPO of TBZ got moderate response because:
The Shares are offered quite expensive in compare to its
peers
As it intend to utilize 70% of its raised funds for working
capital needs , this may affect the performance of the
company.
The opening of new stores will mount pressure on
profitability due to time taken for break-even of new stores,
higher marketing expenses and working capital requirement
Even though the gross margin inthe gold segment is
around 10.86 %, while that in the case of diamondjewellery
is around 36 %, company intent to invest in gold business.

THANK YOU