Kalyan Jewellers IPO opens on March 16; Should you invest?
The Rs 1,175-crore share sale is a combination of fresh issue and offer for sale at Rs 86-87 per share
Established in 1993, Kalyan Jewellers is one of India’s largest jewellery companies having a nearly 6 per cent market share in the organised jewellery space. The IPO opens on March 16 and closes on March 18. The company is established by founder and one of the promoters, T.S. Kalyanaraman. The company started their jewellery business with a single showroom in Thrissur, Kerala. Here are more details.
Issue Opens – 16-03-2021
Issue Closes – 18-03-2021
Issue Size – Nearly Rs 1,175 crore
Price Band – Rs 86 to Rs 87
Number of shares – Nearly 13.51 crore
Market Lot – 172 shares
Minimum IPO investment – Rs 14,792
Face Value – Rs 10
Axis Capital, Citigroup Global Markets India, ICICI Securities and SBI Capital Markets are the global co-ordinators and book running lead managers, while BOB Capital Markets is the book running lead manager to the issue.
About Kalyan Jewellers
Kalyan Jewellers designs, manufactures and sells a wide range of jewellery products at varying price points for uses ranging from jewellery for special occasions such as weddings, which is its highest selling product category, to daily-wear jewellery.
Over the years, the company has successfully expanded to become a pan-India player with 107 showrooms across 21 states in India and 30 showrooms located in the Middle East.
One of the key strengths of the company has been to operate as a hyperlocal jewellery player. It endeavours to cater to customers’ unique preferences, which often vary significantly by geography and micro market, through its local market expertise and region-specific marketing strategy and advertising campaigns.
The company also sells jewellery through its online platform candere.com.
Purpose of IPO
The offer comprises a Fresh Issue (Rs 800 crore) and Offer for Sale (Rs 375 crore). The proceeds from the offer for sale will go to the selling shareholders, while the amount received from the sale of fresh issue will be utilized for funding working capital requirements of the company and general corporate purposes.
Promoter, TS Kalyanaraman will sell shares worth Rs 125 crore, and investor, Highdell Investment will offload Rs 250 crore worth of shares via offer for sale. Highdell Investment Ltd belongs to the Warburg Pincus group.
|Open date||Mar. 16|
|Close date||Mar. 18|
|Allotment date||Mar. 23|
|Listing date||Mar. 26|
|IPO size||₹1175 crore approx.|
|IPO band||₹86-87 per share|
|Bid lot||172 shares|
Key risk & concerns
* Inability to maintain brand strength & development of brands
* Inability to maintain & establish arrangements with contract manufacturer and suppliers
* Adverse legislative view on its gold schemes may affect business prospects
There are players that are focused on one region, such as Thangamayil, and Khazana in South India, PC Chandra in East India and PN Gadgil in West India, among others.
Few multi-regional players such as TBZ, Malabar, Joyalukkas, PC Jeweller and Senco Gold are largely focused on certain regions but have expanded and opened stores in other regions, although to a limited degree.
Only a handful, such as Titan and Kalyan have established true pan-India businesses with a diversified footprint across the country.
Valuation & financials
The company has witnessed an improvement in gross margins from 16% in FY18 to 18% in 9MFY21 owing to enhanced share of studded ratio. Kalyan has faced headwinds in the past couple of years. For instance, in FY19, revenues were impacted owing to severe floods in south India (about 60 per cent of revenues). Revenue in FY20 was adversely impacted in Q4 owing to Covid led lockdowns.
“As on FY20, Kalyan Jewellers reported revenue and net profit worth Rs 10,101 crore and Rs 142 crore, respectively. At the upper IPO price band of Rs 87, the stock is available at 0.9 times FY20 market cap/sales and 63 times FY20 Price to Earnings (PE multiple),” according to ICICIdirect.
“At the upper price band of Rs.87, the pricing is on the higher side, but on a long-term basis, Kalyan Jewellers stock is available at 1 year forward estimated P/E of 25 times (on FY23E basis). Given forecasted improvement in profitability & balance sheet, India’s appetite for gold, strong pan India presence, brand recall and diversified product offering, we assign a “Subscribe” rating on a long-term basis,” according to Geojit.