Opal Luxury Time Products ( PVT). Limited
Opal Luxury Time Product Limited Company is a Pune, India based company that has been manufacturing and marketing wall clocks and table clocks for years. It also has major company branches in New York and London though the main office is in Pune. The company sells the clocks under the brand name; OPAL and CALIBER. For many years the companies in the industry have neglected the product category since excessive efforts are given to price. Issues such as price and quality are completely forgotten during the manufacturing stage of the products. The major war price in the industry has resulted to lower quality clicks even for Opal Luxury time Product Company to the extent that clocks are only purchased for one purpose; to show time in the houses, offices and public places. Clocks only function is to show time cost about Rs. 400 meaning that very little effort is given to customer satisfaction (Holden, 1997).
Following the need to gain competitive advantage in the busy industry OPAL Industries were formed through a partnership firm. The partnership brought new ideas on how to improve sells and maintain company growth. Towards the end of 1996 when the partnership was fully launched, the company purposed to make clocks a piece of art and not only devices to show time. They achieved this goal by making high end clocks using different design elements and movements. They also ensured that clocks were used to depict social class and additional elements in a décor. The main focus seized to be market price and continuous comparison to competitor companies but on the design and show of quality. With the new innovation the price of clocks increased to a range of Rs. 1500 to Rs. 15,000. This meant that the company needed to purchase new equipments to better design the clocks resulting to additional equity. Though this state did not last for long the company recorded reduced profit margin. However, in less than three financial years, the company gained competitive advantage since the sales volumes increased, prices stabilized by reliable customers and availability of advanced equipments. After the partnership and improving the main company products Opal and Caliber, the company was well known in homes, corporate offices and leisure zones for providing an excellent work of art though the wall clocks (Alamgir, 2008).
After the 1996 partnership the company continued to achieve great growth and records of high product demand to the extent that there was need for additional financing to cope with the rapid expansion. In the year 2007 the company joined hands with Innovative Venture Limited a company that was looking for companies that had the potential for growth but needed additional funding. With the cooperation of Innovative Venture Limited, the annual turnover rose to Rs. 450 crores which was one of the highest growths recorded in the manufacturing industry. To ensure continuous quality check and customer identification, the two companies decided to focus on a few products namely high end watch and clock stores. Which were both very easy to market using shopper’s shop, Home Town and Reliance Retail. The stability and success of the two companies was marked with the corporate rewards that the company received under their new name Opal Luxury Time Products Private Limited which is the name given after all operations of the company were standardized.
The Opal Luxury Time Products Private Limited is now well established and its brands are well known. The products are sold in areas where the company has opened branches and they mainly include New York, London and spreads out from Jammu in north to Kochi in South and Ahmadabad located in west. The company has continued to grow over the years and the products are said to be “perfect in every small detail”. This means that the products are not only of high quality but quality assurance strategies that involve though product inspection are made by the management team. The company is headed by Mr. Subhash Gujar who is the chief Executive officer, then followed by the different departmental heads that help in achieving the set objectives. The company has been planning and continuously working to achieve full investment and profit maximization though outside funding and temporal partnership.
Opal Luxury Time Products Limited engaged in an IPO in order to raise funds that could be used for investments in tools and equipment, expansion of the manufacturing facility located in Roorkee, and in the indigenization of designs to be used by the company in its expansion, as well as in the purchasing of moulds. The proceeds from the IPO were also intended to be used to enhance the company’s image and brand through the use of rigorous advertising campaigns and other activities that would help in building the brand. One of the ways through which management proposed to sensitive the market regarding its brand was through promotional activities such as event sponsorships, as well as contests for both users and dealers. The main aim for issuing the IPO in summary was therefore, expansion into new markets, through a complete revitalization of its manufacturing and marketing processes.
The company concerned with the issuance of the shares was IDBI Capital Services Limited, while the company concerned with the registration of the shares was Karvy Computer Share Pvt. Ltd. Further, CRISIL assigned the fundamental Grade 4 to the initial public offering further encouragement to the public to participate in the process, indicating superior fundamentals. Perhaps due to the smaller size of the company engaged in the IPO, a huge majority of the underwriters served to not only secure the process, but also inspire investment in the initial public offering. Prior to presiding over the IPO by OPAL, IDBI Capital services had overseen 18 IPOs of which 9 were sadly unsuccessful (BS Reporter n.p).
There is no record of the CEO any director attending investment shows that possibly the company’s engagement in an IPO was essentially internally motivated, and even spurred on by the desire to realize significant growth without necessarily investing money from the company owners., the accompanying naivety is perhaps recognizable in the pricing of the share prior to opening of the IPO as well as after the opening of the initial public offering.
Although the pre-IPO placement price was set at 110, the initial offering was made with the price set at Rs. 130 as of the 25th of March 2013. Seemingly the only history that existed over the setting of the share price was the pre-IPO pricing, which was at 110. The pricing was set mainly on the basis of the number of shares up for trading and the expected proceeds from the IPO. The proposed issue size for the company was Rs 13.00 Crore, with the face value expected to be Rs. 10 per equity share. The approach adopted in order to realize the values mentioned above, was the book building method, with the minimum shares being set at 1000, and multiples of 1000. Other considerations made during the setting of the share price included: the company’s Fiscal average for the previous 3 years at an EPS of 65.99, the company’s net asset value at 60.59 as at 30th September 2012 and 54.31 as at 31st March 2012. These figures indicate a company that is mostly on the rise, as it is quite clear that the Company’s net value keeps on improving implying a company whose fortunes indeed, in line with common assumptions and the belief in the market regarding the potential of the company as well as its future performance. Judging by the value of the shares as well as the number of share limits to be traded (1000) it is plausible to argue that the type of investor targeted with the IPO was definitely not the common citizens, but rather those capable of securing significant amounts of funds. Although the offering was made public, only a select few could have been in a position to truly participate in the Initial Public Offering. An inference that the company was mainly targeting wealthy investors is therefore, an accurate assessment, reinforced by the fact that the company opted to deal in shares in units of 1000, hence no room for middle ground or moderate investment (Davda n.p).
So far, following the initial public offering it is a bit difficult to make concrete conclusions regarding the performance of the IPO, although if judged alongside other IPOs for SMEs, the process can be said to have too expensive an affair to engage in. The offering is unlikely to yield proper returns for the investors, more so considering that the share prices of 130 to 135 are well above the correct valuation of Rs. 110. Further, the numerous number of shares traded, essentially mean that the value of the company may take a while to stabilize and hence lead to significant capital losses for all investors involved.
BS Reporter. Opal Luxury Time Products to launch IPO. Business Standard 24 March 2013. Web.
Davda, Dilip. Opal Luxury Time Products Ltd NSE SME IPO: Avoid. Stock Musings 2013. Web.
Opal Luxury Time Products Pvt. Ltd. Retrieved from www.opalclocks.com
Holden, Stephen. Clockwatchers. The New York Times 1997. Retrieved April 10, 2013.
Alamgir, Jalal. India’s Open-Economy Policy. Routledge, 2008.