Kalyan Jewellers IPO review (May apply)

Review By Dilip Davda on March 11, 2021

•    KJIL the second mega player in the retail jewellery showrooms business.
•    It suffered a setback for FY19 following natural calamities in southern regions.
•    Due to pandemic, it also suffered set back for FY21-9M and marked losses.
•    The issue is having negative P/E considering the latest negative performance.
•    Risk savvy, cash surplus investors may consider investment at their own risks.

Kalyan Jewellers India Ltd. (KJIL) is one of the largest jewellery companies in India based on revenue as of March 31, 2020, according to the Technopak Report. It has since expanded to become a pan-India jewellery company, with 107 showrooms located across 21 states and union territories in India, and also have an international presence with 30 showrooms located in the Middle East as of December 31, 2020. All of its showrooms are operated and managed by themselves.

KJIL intends to continue to open additional showrooms as it expects significant opportunity for further penetration in existing markets as well as in new markets, primarily in India. The company also sells jewellery through our online platform at www.candere.com.

KJIL designs, manufactures and sells 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 our highest-selling product category, to daily-wear jewellery.

The company's domestic showrooms covered a total aggregate area of 465235 sq. ft. and Middle East showrooms covered a total aggregate area of 38056 sq. ft. For the FY18 to FY20 and 9 months period ended on December 31, 2020, the company's advertisement spending was in the range of 2.07% to 3.04%.

To part finance its need for working capital (Rs. 600 cr.) and general corpus funds, KJIL is coming out with its maiden combo IPO of fresh equity issue worth Rs. 800 cr. and an offer for sale (OFS) of Rs. 375 cr. taking the total issue size to Rs. 1175 cr. It has fixed a price band of Rs. 86 - Rs. 87 per share for shares having a face value of Rs. 10 per share. The company will be issuing 91954124 as fresh equity shares and 43103448 shares as OFS (total 135057572 shares). The Minimum application is to be made for 172 shares and in multiples thereon, thereafter.  The issue opens for subscription on March 16, 2021, and will close on March 18, 2021. The issue constitutes 13.11% of the post issue paid-up capital of the company. The company has reserved shares worth Rs. 2 cr. For eligible employees and offering a discount of Rs. 8 per share to them. From the residual portion, the allocation of IPO quota is 50% for QIBs, 15% for HNIs and 35% for Retail investors.

Having issued initial equity at par, KJIL issued further equity in the price range of Rs. 50.58 to Rs. 100 per share (FV of Rs. 10 per share) between March 2011 and March 2021. It has also issued bonus shares in the ratio of 9 for 1 in October 2014. The average cost of acquisition of shares by the promoters and selling shareholders is Rs. NIL, Rs. 0.04, Rs. 0.31 and Rs. 56.61 per share.

KJIL's current paid-up equity capital of Rs. 938.10 cr. will stand enhanced to Rs. 1030.05 cr. Based on the upper price band of the issue, the company is looking for a market cap of Rs. 8961.46 cr.

Book Running Lead Managers (BRLMs) for this issue are Axis Capital Ltd., Citigroup Global Markets India Pvt. Ltd., ICICI Securities Ltd., SBI Capital Markets Ltd., and BoB Capital Markets Ltd. While Link Intime India Pvt. Ltd., is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.

On the financial performance front, for the last three fiscals, KJIL has (on a consolidated basis) posted total income/net profits (loss) of Rs. 10580.02 cr. / Rs. 141.00 cr. (FY18), Rs. 9814.03 cr. / Rs. - (4.86) cr. (FY19) and Rs. 10181.02 cr. / Rs. 142.28 cr. (FY20). For the first nine months of FY21 ended on December 31, 2020, it has incurred a loss of Rs. - (79.95) cr. on a turnover of Rs. 5549.80 cr. Thus, based on 9M-FY21, the issue is having negative P/E.

For the last three fiscals, KJIL has (on a consolidated basis) posted an average EPS of Rs. 0.98 and an average RoNW of 4.46%. The issue is priced at a P/BV of 3.97 based on its NAV of Rs. 21.94 per share as of December 31, 2020, and at a P/BV of 3.14 based on post issue NAV of Rs. 27.75 (at the upper price band).

Based on FY20 earnings the issue is priced at a P/E of 63.04 (based on fully diluted equity post issue). But considering its negative earnings for FY21-9M, it is at a negative P/E.

As per offer documents, KJIL has shown Titan Company Ltd. as its listed peer. It is currently trading at a P/E of around 172.88. (as of March 10, 2021). However, it is not truly comparable on an apple-to-apple basis. There is a big difference between this No. 1 (Titan) and No.2 (Kalyan) players on the financial parameters i.e., total turnover, RoNW, NAV etc.

The company has paid a dividend for the last four fiscals including the ongoing one. For FY18 it paid 55% on pre-bonus equity. After that, it paid a dividend on ex-bonus equity at 10% for FY19 and FY20 and 15% for FY21. The company has paid a dividend of 0.001% of CCPS for all these years. However, the company is confident of maintaining a prudent dividend policy going forward.

The five Book Running Lead Managers associated with the offer have handled 32 public issues in the past three financial years out of which 11issues closed below the offer price on the listing date.

Conclusion / Investment Strategy

KJIL is the second-largest PAN India retailer of gold and other fancy jewellery. It has shown static financial performance for FY18 and FY20, whereas it suffered a minor setback for FY19 due to the flood situation in southern regions, its prime locations. It has suffered a setback for FY21-9M following pandemic and incurred losses. Thus, the offer price is at a negative P/E based on the latest financial data. There is a big difference in financial parameters between the two mega players in the field. As the pricing of the issue is having a negative P/E based on the latest workings, cash surplus, risk savvy investors may consider investment at their own risks.

Review By Dilip Davda on March 11, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

Kalyan Jewellers IPO FAQs

  1. 1. Why Kalyan Jewellers IPO?

    The initial public offer (IPO) of Kalyan Jewellers India Limited offers an early investment opportunity in Kalyan Jewellers India Limited. A stock market investor can buy Kalyan Jewellers IPO shares by applying in IPO before Kalyan Jewellers India Limited shares get listed at the stock exchanges. An investor could invest in Kalyan Jewellers IPO for short term listing gain or a long term.

  2. 2. How is Kalyan Jewellers IPO?

    Read the Kalyan Jewellers IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Kalyan Jewellers IPO what should investors do?

    Kalyan Jewellers IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Kalyan Jewellers IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Kalyan Jewellers IPO good?

    Our recommendation for Kalyan Jewellers IPO is to subscribe for long term.

  5. 5. Is Kalyan Jewellers IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Kalyan Jewellers IPO.

  6. 6. When will Kalyan Jewellers IPO allotment status?

    The Kalyan Jewellers IPO allotment status will be available on or around March 23, 2021. The allotted shares will be credited in demat account by March 25, 2021. Visit Kalyan Jewellers IPO allotment status to check.

  7. 7. When will Kalyan Jewellers IPO list?

    The Kalyan Jewellers IPO will list on Friday, March 26, 2021, at BSE, NSE.