Kalyan Jewellers makes a lacklustre debut, listing at 15% discount to issue price

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Kalyan Jewellers makes a lacklustre debut, listing at 15% discount to issue price
Kalyan Jewellers made a tepid debut on the stock exchanges todayBCCL
  • Kalyan Jewellers made its debut on the National Stock Exchange (NSE) at ₹73.95.
  • This is a 15% discount to the issue price of ₹87 per share.
  • Analysts expect that most of the investors, who were allotted shares, are likely to sell on listing.
Kalyan Jewellers, one of India’s leading jewellery brands, listed on the stock exchanges today at ₹73.95 — a 15% drop from its initial public offering (IPO) price of ₹87 per share.

One of the factors that may have contributed to Kalyan’s discount to issue price is aggressive pricing. The company’s financials have been struggling for the past two financial years and jewellery is a sector that currently finds itself out of favour. The ₹1175 crore IPO saw muted interest only getting subscribed to 2.61 times.

This doesn’t bode well for the company that regards Titan Company’s Tanishq as its key competitor in the market. Analysts expect that most of the investors, who were allotted shares, are likely to sell on listing.

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What has investors worried about Kalyan Jewellers?

Kalyan Jewellers has a huge presence in India’s southern states. Overall, it has over 100 showrooms in 21 states and union territories across the country. Outside India, Kalyan has a foothold in the Middle East with 30 showrooms.

But its financials, of late, were not so impressive. It suffered setbacks in 2019 following cyclones and floods in southern states. And, when the pandemic hit, the company was unable to register positive cash inflows for nine months ending December 2020.

While industry reports suggest that there may be an uptake in jewellery buying as shoppers redirect their funds from big, lavish venues to jewellery — there is still considerable uncertainty around the demand for gold as India sees a second wave of COVID-19 spreading across the country.
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Moreover, the executive director of Kalyan Jewellers — Ramesh Kalyanaraman — does not believe going digital will help the company. “I don’t see online replacing offline ever in our sector,” he told Business Insider in an interview.

Unlike Kalyan, Titan took up digital solutions to boost demand during the pandemic as customers looked for contactless ways to buy jewellery.

Nonetheless, Kalyan’s hyperlocal strategy has, so far, worked in its favour. Before the IPO opened up to the public, the Warburg Pincus-backed jewellery bigwig raised nearly ₹352 crore from 15 anchor investors including the Government of Singapore, Monetary Authority of Singapore, HDFC Life Insurance and BNP Paribas Arbitrage.
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The funds will be used for Kalyan’s working capital requirements and general corporate purpose.

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