Kalyan Jewellers India Ltd was incorporated in 1993 and started with a single showroom in Thrissur, Kerala. The company has grown since and is currently one of the largest jewellery companies in India based on revenue as of March 31, 2020. They have expanded their business to become a pan-India jewellery company, with 107 showrooms located across 21 states and union territories in India. They also have an international presence with 30 showrooms located in the Middle East as of December 31, 2020.
Kalyan Jewellers design, manufacture and sell a wide range of gold, studded, and other jewellery products across various price points ranging from jewellery for special occasions, such as weddings, which is their highest-selling product category, to daily-wear jewellery. Currently, company sales of gold jewellery is 75% and studded Jewellery (diamonds and precious stones) contributing to 23% and balance 2% from other jewellery products.
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Promoters & Shareholding:
Mr. T.S. Kalyanaraman, Mr. T. K. Seetharam, and Mr. T. K. Ramesh are the company promoters with a pre-issue shareholding of 67.99%
Public Issue Details:
Offer for sale: Fresh issue ofapprox 91,954,124 Eq Shares of Rs 10, aggregating up to Rs 800 Cr and up to 43,103,448Equity Shares, aggregating up to Rs375 Cr of OFS.
Total IPO Size: Rs1,175Cr
Price band: Rs 86 to Rs 87
Objective: To finance business working capital requirements and meet general corporate purposes.
Bid qty: Minimum of 172 shares (1 lot) for Rs14,964 and maximum of 13 lots.
Offer period: 16th March 2021 –18th March 2021
Date of listing: 26th March 2021
Pros:
- They have a “Hyperlocal strategy”.
- One of India’s largest jewellery companies.
- Strong network distribution with global outreach.
- Experienced and qualified management team.
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Cons:
- The continuing impact of the outbreak of the COVID-19 has had a significant effect on their business.
- The company, Subsidiaries, Promoters, and Directors are involved in certain legal proceedings and potential litigation.
- Highly dependent on gold prices.
- Company revenues are static/ very slow growth.
Subscribe or avoid?
Kalyan Jewellers have a significant presence in India with them being the second-largest PAN India retailer of gold and other fancy jewellery. They have a wide range of products and their “Hyper Local” strategy was implemented to further increase their consumer reach on the local level where they face a lot of competitions from organized and unorganized companies in the Indian jewellery industry.
On the financial side, the company has had static growth and has incurred some losses due to natural calamities. They have reported a net profit of Rs 142.28 Cr, Rs (4.86) Cr, and Rs 140.99 Cr on the FY20, FY19, and FY18 respectively. For nine months from March 2020 to Dec 2020, they have reported a net loss of Rs 79.95 Cr which was mainly due to the lockdown measures. On the upper price band of Rs 87 and EPS of Rs 1.49 for FY20, the P/E ratio works out to be 58x. For the last 3 years average EPS of Rs 0.98, the P/E ratio is 89x. We cannot annualize last 9 months EPS to check P/E, as it incurred losses. Hence, the company asking price of Rs 87 of the upper price band is resulting in the P/E range of 58x to 88x. There is only one listed peer i.e. Titan Company trading at P/E 84x. Hence Kalyan Jewellers share price of Rs 87 is fully priced in. Considering all the above factors and since many strong companies IPOs are lined up in this year and month, we recommend to “AVOID” this IPO