Kalyan Jewellers, one of the leading jewellery brands from South India, is hitting the capital market with its initial public offering (IPO) to raise around Rs. 1,175 crore. The share sale by the Warburg Pincus-backed company will be the first by a pure play jewellery retailer since the IPO of PC Jeweller in 2012.
A price band of Rs. 86-87 per share has been set for the offer, which includes a fresh share issue of Rs. 800 crore and an offer for sale from existing investors, aggregating up to Rs. 375 crore. Through the offer for sale, promoter T.S. Kalyanaraman, who is the chairman and managing director, aims to sell shares amounting up to Rs. 125 crore and Highdell Investment, an investment arm of Warburg Pincus, is looking to offload shares worth Rs. 250 crore.
The share sale will open from March 16 and close on March 18.
The promoters and promoter group held close to 68 per cent per cent stake in Kalyan Jewellers and post issue too the promoters will continue to hold a majority stake in the company, Ramesh Kalyanaraman, executive director of Kalyan Jewellers, told THE WEEK.
The company aims to utilise the funds raised through the public issue for funding working capital requirements and general corporate purposes.
Kalyan Jewellers currently has 137 showrooms. Of these, 107 showrooms are spread across 21 states in India and 30 are in West Asian countries. Its biggest competitor in the country is Tata's-owned jewellery chain Tanishq, apart from several strong regional players in various states. Kalyanaraman said while the company will continue to expand further, the focus will be on penetrating deeper and growing in existing markets.
“The new showrooms will be in existing locations we are already in because we have already created the infrastructure and branding. We are there in almost all the important states in the country. The expansion will be predominantly in India. It will be leveraging what we have created till today,” he said.
In the year ended March 2020, Kalyan Jewellers reported a net profit of Rs. 142.28 crore on revenue of Rs. 10,100 crore. Of the total revenue, a little over 78 per cent came from Indian operations and the rest from West Asia.
A chunk of the company’s revenue is driven by its unique 'My Kalyan' locations. Currently 'My Kalyan' is present in 766 locations, mainly in rural areas and in the periphery of Kalyan Jewellers outlets, and plays a big role in generating footfalls at the jewellery showrooms.
“This is a hub and spoke model. There is no revenue happening at My Kalyan locations, which are near main Kalyan Jewellers showrooms. It acts as a marketing office where the 'My Kalyan' team ties up with the local marriage-related ecosystem like halls, caterers, event managers etc. and they take the database from them, meet the customers at their homes and convert them to Kalyan Jewellers,” said Kalyanaraman.
'My Kalyan' has contributed to about 21 per cent of Kalyan Jewellers revenue, he added.
COVID-19 and the subsequent nationwide lockdown last year had a huge impact on the jewellery industry too. However, things seem to have turned around for the industry from the December quarter.
“Showrooms started opening in the second quarter and we were fully open in the third quarter. The report is that in Q3, the organised industry has grown over last year by around 15 per cent and (grew) in January and February as well,” said Kalyanaraman.
He attributed to the growth in the organised jewellery industry to a huge shift from the unorganised sector to the organised players, especially post the pandemic.
“Also, as the wedding-related expenses have come down because the number of attendees have come down, there is an increase in ticket size of jewellery,” Kalyanaraman added.
Axis Capital, Citigroup Global Markets India, ICICI Securities and SBI Capital Markets are the global co-ordinators and book running lead managers to the Kalyan Jewellers IPO.
As the Indian economy has begun to recover from the pandemic, Indian companies have rushed to raise money from the capital markets. So far, in the current financial year, there have been 21 initial public offerings, most of them coming in the second half of the year. Several of these companies that went public saw strong subscriber interest and listed with huge gains. Indigo Paints, for instance, listed on the bourses on February at a 75 per cent premium. In October 2020, Chemcon Specialty Chemicals listed at 115 per cent premium. Shares of Happiest Minds Technologies also doubled on listing day.
The IPO of Easy Trip Planners, which closed on Wednesday, was subscribed over 159 times.
This year is also expected to see a flurry of public issues, with companies such as Life Insurance Corporation of India, Macrotech Developers (Lodha Group), Anupam Rasayan among others set to go public. Several technology startups are also expected to launch their IPOs in the next 12-15 months.
