One of India’s largest jewellery dealers, Kalyan Jewellers, made its debut on the market today with the launch of its ₹1,175 crore initial public offering (IPO). The company, backed by Warburg Pincus — the leading global private equity firm — is now open for public subscription as the IPO bonanza rolled out on India’s bourses. Kalyan plans to use the fresh cash infusion to meet its working capital requirements and for other corporate purposes.
Interestingly, the company has already raised ₹351.89 crore from 15 anchor investors at the upper price band of ₹87 per share. The Government of Singapore and Monetary Authority of Singapore are among the key investors in the anchor book.
However, market observers and analysts, who don’t look on Kalyan as a short-term bet, feel that for investors to experience returns, they would have to lock in money for the longer term despite the fact that the brand has a strong all-India brand presence. Analysts feel it would take time for the jeweller’s balance sheets to improve in order for investors to make mid to long-term gains.
Meanwhile, in the nine months from March to December 2020, Kalyan has experienced negative cash flows on the back of people’s fears about leaving their homes in view of the pandemic. However, market reports indicate that jewellery buying is now recovery as people shift from large weddings to smaller ones and tapping jewellers such as Kalyan.
Besides, demand for gold in India, which is the biggest market for the yellow metal in the world, can only increase. “Given the forecast 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,” said Geojit Financial Services in a report.
Kalyan Jewellers is the dominant player in South India with more than half its revenue coming in from the region. The jeweller has over 100 showrooms across 21 states in the country while it has 30 showrooms in the Middle East.