Kalyan Jewellers makes weak debut; lists 15% below the issue price

Shares of Kalyan Jewellers India made a weak debut at the bourses, listing at Rs 73.90, 15 per cent below its issue price of Rs 87 per share on the BSE on Friday. Meanwhile, the stock opened at Rs 73.95 on the National Stock Exchange (NSE).

At 10:01 am, Kalyan Jewellers India was trading at Rs 77.10, 11 per cent lower against its issue price. The stock hit a high and low of Rs 77.50 and Rs 73, respectively on the BSE in the intra-day trade. Around 14 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

The initial public offer (IPO) of Kalyan Jewellers had garnered decent subscription on the back of decent interest from retail investors and qualified institutional buyers (QIBs). The issue was subscribed 2.61 times led by retail investors who bid for 2.82 times the shares on offer, while QIBs portion was subscribed 2.76 times, according to exchange data. However, the non-institutional investors’ portion subscribed by 1.91 times, data shows.

One of India’s largest jewellery retailers, Kalyan’s key businesses include design, manufacture, and sale of a variety of gold, studded and other jewellery products for various occasions, including weddings and daily wear.

The company’s performance during the first nine months (April-December) of the current fiscal (9MFY21) was impacted by the Covid-19 pandemic’s outbreak, leading to losses of Rs 80 crore. However, most analysts believe that brand recall and a strong pan-India presence makes Kalyan Jewellers a long-term bet with profitability and balance sheet projected to improve.

"The firm enjoys pan-India presence with 107 showrooms located across 21 states and Union territories and has 30 showrooms located in West Asia as on December 31, 2020. A hyperlocal strategy enables it to cater to a wide range of geographies and customer segments," analysts at the Geojit Financial Services said in an IPO note.

The company is led by a management team with extensive experience in the jewellery and retail industry, and has the backing of private equity player Warburg Pincus. At Rs 87, the pricing is on the higher side, but on a long-term basis, it is available at FY23 estimated price-to-earnings (P/E) of 25x. Given the forecasted improvement in profitability and balance sheet, India’s appetite for gold, strong presence, brand recall and diversified product offering, we assign a “subscribe” rating on a long-term basis, the analysts had said in an IPO note.

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