Kalyan Jewellers IPO closes today; issue subscribed 1.42 times, grey market premium remains tepid

Kalyan Jewellers initial public offering (IPO) has been subscribed 1.42 times so far on the third and final day of the bidding process. The IPO has elicited mixed reactions from analysts with some asking investors to avoid the issue while others pinning a ‘Subscribe’ rating on the same. Even in the unlisted space, shares of Kalyan Jewellers have been trading with a tepid premium. Through the issue, Kalyan Jewellers is looking to raise Rs 1,175 crore. The IPO street is abuzz with multiple issues and many more expected ahead this year.

Retail investors oversubscribe, grey market premium tepid

So far only retail investors and the employees of the firm have fully subscribed to their portion of the issue. Retail investors have bid for 2.12 times the quota reserved for them. Qualified Institutional Buyers (QIB) have bid for 65% of their portion and Non-Institutional Investors (NII) have subscribed 93% of the portion reserved for them. Employees of the company have bid for 1.9 times their portion. Overall the issue has so far garnered bids for 1.42 the issue size. 

Kalyan Jewellers shares continue to command a tepid premium in the grey market. “Currently the stock is trading at a premium of Rs 8 to 10 per share,” Narottam Dharawat, founder, Dharawat Securities told Financial Express Online. Earlier when the issue opened for subscription shares of Kalyan Jewellers were trading at a premium of just Rs 5 apiece. 

Financials worry some

Concerns have been voiced about the valuations of the company by analysts. The revenue CAGR of Kalyan Jewellers between the financial year 2018 and the previous fiscal year has been -2.9%. Compared to listed peers like Titan and Tribhovandas Bhimji Zaveri, the 3-year EBITDA growth CAGR has been 1.9% — lower than peers. “At the higher price band of Rs. 87, the company is demanding a TTM P/S valuation of 1.2x, which is at a significant premium to the peer average of 0.4x,” said analysts at Choice Broking in a report while pinning an ‘Avoid’ rating on the issue.

Although growth concerns remain with consolidation in top-line, analysts at Angel Broking still have a ‘subscribe’ rating on the IPO. “Going forward, we believe that KJIL would perform better on the back of a strong brand and number of stores in India & internationally,” Angel Broking said in a report.