Rajesh Exports – a Golden Acquisition

  • CMP: Rs. 720
  • Date: 18th Feb 2016
  • Industry – Gold & Jewellery
  • Large Cap – 21,300 cr mkt cap
  • Advice:  Buy Rajesh Exports with a 2 year perspective 


  • Overview: Rajesh Exports is an integrated gold firm into refining, jewellery manufacture and retail.
  • It had revenues of Rs 50,462 crore and net profits of Rs 655 cr. in FY15.
  • The Revenues, EBITDA and Profits are up by 26.5%, 31.8% and 39.9% CAGR over 6 years.
  • Key strengths are: large scale operations in gold refining (in India & Switzerland) and jewellery design and mfg. (India). The management appears experienced, capable and shareholder friendly.
  1. Why Buy Now: A recent acquisition of Swiss gold refiner Valcambi will allow the firm to scale up to a globally significant size.
  2. The possible synergies with Valcambi include lowering of costs, Europe market access and cooperation on technology and R&D.
  3. Growth plans include retail expansion (will improve margins) and Australia mining investments (will tie up ore requirements).
  4. Even though the share price has appreciated well this year, there is still a good upside visible.

Here is a note on Rajesh Exports Ltd. (REX).

Rajesh Exports – Description and Profile

  • REX is a Bangalore based integrated gold and jewellery firm. Started in 1989, it has a presence across the value chain of gold from mining to retail.
  • REX had revenues of Rs 50,462 crore and net profits of Rs 655 cr. in FY15. About 90% of revenues are in foreign exchange. It has 358 permanent employees (FY15).
  • REX became the largest refiner of gold globally with the acquisition of Swiss firm Valcambi in July 2015. It now processes 35% of global gold, and with the Uttarakhand refinery can refine 2400 tons p.a. of metals.
  • REX has gold jewellery mfg. facilities at Bangalore, Cochin and Dubai with a capacity of 350 tons.
  • It has R&D facilities in Switzerland & India for innovative jewellery design and a large jewellery database with 29,000 designs. REX exports gold jewellery mainly to USA, UK, Singapore and UAE.
  • REX has set up 83 retail showrooms under the brand SHUBH Jewelers since 2010. This jewellery brand is known for quality, designs and value for money. It contributes about 9% of profits with a margin of 7-8%.
  • The Leadership-Promoter team is Rajesh Mehta (Chairman), Prashant Mehta (MD) and Vijendra Rao (CFO).
  • Shareholding % is: Promoter 53.9, DII 2.5, FII 16.8, Individual 2.6, Corporate 1.0 and Other 23.2

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Valcambi Acquisition and Synergies

  • REX through its Singapore subsidiary acquired Valcambi in an all cash deal for $400 m (then Rs 2,560 cr) in July 2015. Valcambi is debt-free with cash surplus of $150 m.
  • Reports so far indicate a smooth transition and integration of Valcambi and REX. The Valcambi management is committed to stay back after acquisition for 5 years.
  • Valcambi has the capacity to refine 1,600 tons gold and 400 tons of other precious metals like silver.
  • Back end strengths of Valcambi combined with front end strengths of REX provide good synergies.
    • REX can adopt technologies from Valcambi to upgrade and accredit the refining facility in India.
    • REX plans to market designer jewellery in Europe and North America with Valcambi, which has an extensive marketing network in Europe and America.
    • Valcambi was already one of the larger suppliers of gold to REX pre-merger. Other potential gains include sharing gold sourcing synergies, optimizing labour and shared support services.

Value Chain of Gold

The range of REX business activities are explained in Fig 1.

Business Mix and Gold Value Chain, JainMatrix Investments

Fig 1 – Business Mix and Gold Value Chain, Source, Company documents

  • The REX group with this acquisition now straddles across the Gold value chain. The strengths are Refining, Jewellery Manufacturing and Wholesale. The weaker spots needing investment are Mining and Retail.
  • REX group installed capacities and current usage:

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Here is the entire investment report on Rajesh Exports.

JainMatrix Investments_Rajesh Exports_Feb2016

Feel free to click the PDF document and read /download the document.


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This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. JM has no known financial interests in Rajesh Exports Ltd or any related firm. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain has applied for certification under SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com .


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