The IPO comes at a time when the industry is expected to see consolidation in the backdrop of the Covid-19 pandemic.
According to a report by Technopak, in the wake of the Covid-19 crisis, the demand for 2020-2021 is projected to drop by 30 per cent and thereafter estimated to bounce back and grow at an accelerated CAGR of 19 per cent for the next four years.
Within the jewellery retail industry, the organised segment is expected to de-grow by 20 per cent to 25 per cent whereas the unorganised segment is expected to de-grow at 30 per cent to 35 per cent in 2020-21.
Larger players in the organised space will consolidate the market share away from the unorganised segment because of weak balance sheets of the smaller players and their inability to sustain during the lockdowns which severely constricts their ability to maintain their operations.
Tanishq, part of Titan Company and Kalyan are the two national players with about 3.9 per cent and 1.8 per cent market share respectively in the organised jewellery retail segment.
While the management was not available for comment, Kalyan's DRHP stated that customers have started returning to showrooms and revenues were broadly in line with pre-Covid-19 levels over the resilience of wedding-related jewellery, which is the company's highest-selling product category.
Jewellery has a dual purpose of both consumption and investment, is seen as a store of value and a safe haven asset class, and is less likely to be impacted due to Covid-19 as compared with other product categories.
On the challenges, the impact of the pandemic will be disproportionately higher for some of its competitors, particularly the smaller jewellers and those operating in the unorganised market. The company expects this will provide them with a competitive advantage in the long-term.
Kalyan's journey can be described in three phases. Establishment phase (1993 – 2003), where it focused on building its brand and business on the core principles of trust and transparency, as well as on attracting a loyal base of customers.
The growth phase (2004 – 2011) was expanding the showroom network across various southern states. During the third phase, started in 2012, Kalyan invested significantly in marketing and branding and expanded across India, backing it with robust systems and processes, with a professionalised management team and board of directors.
Kalyan reported a profit of Rs 142.23 crore in 2019-20 as against a loss of Rs 4.8 crore, a year ago. Total income rose to Rs 10,181 crore in 2019-20 from Rs 9,814 crore, an increase of around three per cent. Around 78.19 per cent of its revenue comes from India and the balance from other countries mainly the Middle East.
In recent years, Kalyan business has experienced significant growth with the number of showrooms increasing to 137 from 77.