Kalyan Jewellers IPO Review: Avinash Gorakshkar, Director Research at ProfitMart Securities said that Kalyan Jewellers has expanded to become a pan-India jewellery company, with 107 showrooms located across 21 states and union territories in India, and also has an international presence with 30 showrooms located in the Middle East as of December 31, 2020.

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This is a Fresh Issue of Equity Shares aggregating upto Rs 800 cr and Offer for sale of Equity Shares aggregating upto Rs 375 cr aggregating upto Rs 1175 cr. The Issue size is of Rs 1175 cr. Face value of the Kalyan Jewellers India IPO is Rs 10. Employee Reservation is Equity shares aggregating upto Rs 2 cr. The Price band is Rs 86 – Rs 87. The Bid Lot is of 172 Shares and in multiple thereof. The Employee Discount is Rs 8/ per share. Post Issue Implied Market Cap of Kalyan Jewellers India IPO will be Rs 8868 –  Rs 8961 Cr, The Book Running Lead managers are Axis Capital, Citigroup Global, ICICI Securities, SBI Capital Markets and BOB Capital Markets. The Registrar is Link Intime India. The Issue opens today and closes on Thursday,18th March’2021.

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In Fiscal 2020, and in the 9 months ended December 31, 2020, the revenue from operations was Rs 10101 cr and Rs 5517 cr, of which 78.19% and 86.21% was from India and 21.81% and 13.79% was from the Middle East.  Their total showrooms have increased from 77 as of March 31, 2015 to 137 showrooms as of December 31, 2020.

Kalyan Jewellers Financial track record looks unattractive:

Avinash said that FY18 to FY20 Rev CAGR of -2.9% and Net profit CAGR of 0.46% - 9MFY21 EPS -ve, FY20 EPS 0.90 (post issue fully diluted basis).

Kalyan Jewellers High D/E Ratio - CFO & FCF falling:

Avinash said that Gross Block co has helicopters worth Rs 270 crs, One does not know how this is helpful in the jewellery business. A view is that listing gains here also will be minimal and better to Avoid.
Kalyan Jewellers is among the trusted jewellers and has endeavored to establish a strong brand that its customers associate with trust and transparency.
 
Kalyan Jewellers Valuation:
 
At the higher price band of Rs 87 per share, KJL is valued at 51.7X FY23 earnings.
 
Kalyan Jewellers Key risk and concern areas:
 
Inability to succeed in maintaining and developing the brands – Due to the competitive nature of the market in which the company operates, if KJL does not continue to develop its brands and products, the company may fail to attract customers required to continue growing its business.
 
Failure to respond to changes in consumer demands and market trends in a timely manner – The company’s success depends on its ability to identify, originate and define product and market trends as well as to anticipate, gauge and react to rapidly changing consumer demands in a timely manner. The business may suffer if changes in consumer demands and market trends are not addressed in a timely manner.