Kalyan Jewellers shares make weak stock market debut; list at 15% discount over IPO price

Kalyan Jewellers India shares made a weak debut on the stock exchanges on Friday. Kalyan Jewellers stock began trading at Rs 73.90 per share, down Rs 13.10 or 15.06 per cent from the IPO price of Rs 87 per share. In the gold and diamond jewellery market, Kalyan Jewellers competes with Titan Company, Tribhovandas Bhimji Zaveri (TBZ), Malabar, Joyalukkas, PC Jeweller and Senco Gold, among others. On listing, Kalyan Jewellers India had a market capitalization of Rs 7,612.09 crore. The Rs 1,175-crore IPO of Kalyan Jewellers India was subscribed over 2.5 times by investors. Upon successful listing, Kalyan Jewellers India became the fourteenth stock to debut, along with Suryoday Small Finance Bank in 2021.

Check prices: Kalyan Jewellers India

Kalyan is backed by private equity major Warburg Pincus, which has a 24 per cent stake through its investment arm Mauritius-based Highdell Investment. Warburg Pincus had invested in two tranches, with the first investment of Rs 1,200 crore in 2014 and the second tranche of Rs 500 crore in 2017. At the end of June 2020, the company had 107 showrooms across 21 states and Union Territories in India, and 30 showrooms in the Middle East. Kalyan Jewellers designs, manufactures, and sells a wide range of gold, studded and other jewellery products.

Four out of six research and brokerage firms had given a ‘subscribe’ rating to the Kalyan Jewellers India issue. In the last few years Kalyan Jewellers India Ltd has aggressively expanded its store, going ahead Geojit Financial Services expects revenue and profitability to pick-up led by high contribution from new stores. The Kerala-headquartered company is led by a management team with extensive experience in the jewellery and retail industry. The analysts noted key risks to the issue which include rich valuation versus peers, which may bear on short term performance, the volatility in gold prices, seasonality of business and impact of government policies, and high competition from both organized and unorganized players.

Those at ICICI direct Research pointed out that Kalyan Jewellers had witnessed an improvement in gross margins from 16 per cent in FY18 to 18 per cent in 9MFY21 owing to an enhanced share of studded ratio. It has faced headwinds in the past couple of years. For instance, in FY19, revenues were impacted owing to severe floods in south India (~60% of revenues) while revenue in FY20 was adversely impacted in Q4 owing to Covid led lockdowns.