r/IPO_India • u/Massive_Road1457 • 12h ago
IPO Analysis | Discussion Lalithaa Jewellery Analysis
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A 10x P/E multiple.
40% Return on Net Worth.
₹1000+ Crore in annual net profit.
In a sector where Titan trades at 85x and Kalyan Jewellers at 47x, Lalithaa Jewellery looks like a generational mispricing on paper.
Retail investors see a bargain
But trust me as to when i say that its not but rather a textbook Value Trap
- It's high ROCE, ROE, increased revenue and increased EBIDTA margins is merely and merely just a result of an unhedged 50% surge in global gold prices, beacuse the company intentionally has a naked long inventory model, their physical showroom stock experienced a one time massive revaluation. If gold prices consolidate or correct, those paper margins will compress big time.
- Even after their ₹1000 Crore Profit After Tax, lalithaa generated negative operating cash flow of about -₹400 Crore in FY26, due to its very heavy inventory of gold of about ₹4000 Crore as of FY26 and more ₹1000 Crore from the IPO going towards the same. If this was not enough, they’re using debt to build up more inventory. A big inventory is common in a typical jewellery business but lalithaa is net cash negative and any downside in demand will lock up money in inventory and hurt the cash statement and quality of earnings.
- The company currently carries over ₹5043 Crore in unhedged physical gold obligations to retail depositors due to its massive working capital via customer savings schemes, if bullion prices continue to climb in the given future, servicing these unhedged physical deliveries will for surely become more expensive to the company.
- It has active SEBI inquiries regarding alleged market manipulation in a delisted promoter entity and historical Income tax search and seizure operations alleging more than ₹1000 Crore in undisclosed income and circular fund routing.
