Listing gains fizzle out as Suryoday, Kalyan Jewellers make tepid debut
Shares of Suryoday Small Finance Bank ended at 277.80, 8.9% lower from its issue price of 30526-03-2021
26-03-2021
Kalyan Jewellers falls 13% on listing
Analyst says that the poor listing even after the overwhelming response was due to increased volatility in local markets.Kalyan Jewellers raised 800 crore by selling new shares for working capital requirements26-03-2021
Kalyan Jewellers India Ltd - 543278 - Listing of equity shares of Kalyan Jewellers India Ltd
Trading Members of the Exchange are hereby informed that effective from March 26, 2021, the equity shares of Kalyan Jewellers India Ltd (Scrip Code: 543278) are listed and admitted to dealings on the Exchange in the list of 'B' Group Securities. For further details please refer to the notice no 20210325-26 dated March 25, 2021.26-03-2021
Subscribe to Kalyan Jewellers: Hem Securities
Hem Securities has come out with its report on Kalyan Jewellers. The research firm has recommended to ''Subscribe'' the ipo in its research report as on March 16, 2021.18-03-2021
Kalyan Jewellers IPO might find it tough sailing in volatile markets
Analysing a prospective IPO in an overheated primary and secondary market can be tricky. No matter what the thesis behind whether to invest or not to invest, a company going public has two main criteria for evaluation—is there a possibility to earn listing gains? Does the company’s future growth prospects make the price the investor currently pays to own the stock competitive?. Take Kalyan Jewellers India, for example. The company’s business was already shaky after revenues from its foray into the Middle East didn’t pay rich dividends, leading to losses for the April-December 2020 period. Despite this, the company is richly valued at 50 times its FY20 earnings. The pandemic dealt a body blow to the jewellery business. Shut stores meant that revenues weren’t coming in. But this wasn’t such a bad thing for KJ. The run up in the price of gold helped Kalyan Jewellers rake in inventory gains (this wasn’t quantified), which lent support to the company’s business. Organised players make up around 32% of India’s $64 billion jewellery industry. And this share will only increase. But the lockdowns hit both unorganised and organised players. The contraction in business to organised players however, wasn’t as harsh. So, will Kalyan Jewellers be another IPO that sails through the current enigma that is the Indian stock market, despite the weaknesses in its fundamentals? If the tepid grey market demand for Kalyan Jewellers’ shares is an indicator, then not really. Let’s see if the company’s business makes it interesting for investors to look at investing—either for listing gains, or for the long-term. A mildly expensive IPO The IPO is priced at Rs 86-87, valuing Kalyan Jewellers at around 50 times its FY20 earnings. As mentioned before, the company made a loss in the nine months ended December 2020. Its listed peer Titan is currently trading at a twelve-month trailing PE ratio of 176. This does make Kalyan Jewellers look cheap, even though KJ has a market share of 5% compared to Titan’s 10% of the jewellery market. The issue contains an offer for sale of up to Rs 375 crore and a fresh issue of shares worth up to Rs 800 crore. The proceeds of the fresh issue will be used for working capital and general corporate purposes. The promoter’s shareholding after the IPO will be 60.5%, while the public, including an arm of Warburg Pincus, will hold 39.5%. Warburg Pincus will hold 24% in the company post the IPO, down from 32%. Pandemic hugely impacted profitability The jewellery business was considerably hit by the lockdowns. Kalyan Jewellers' revenues took a nearly 31% hit in the nine months ended December 2020. The company plunged into losses of Rs 80 crore in the period, while it reported a Rs 95 crore profit during the nine months ended December 2019. There has been a slow rise in revenues from the rest of India. For a company based in South India to achieve this means that its strategy is not totally off the mark. South India is predominantly a gold jewellery market, Kalyan Jewellers bread and butter so to speak. But studded jewellery earn higher margins. And North India is where the studded jewellery demand lies. But the company’s foray into the Middle East has not gone according to plan. Its revenues have remained flat in the three years ending FY20. In the nine months ended December 2020, revenues from the Middle East have more than halved, with the company also shutting some stores. Kalyan Jewellers primarily serves the Indian diaspora in the Middle East. To illustrate that the company’s plans haven’t come to fruition, one can look at how much cash it has generated over the past few years. Although the company isn’t burning through cash to run its operations, since it reported positive operating cash flows from FY18-20, it has been on a downward trajectory, falling from Rs 1,043 crore in FY18 to Rs 320 crore in FY20. For the nine months ended the company saw negative operating cash flows of Rs 228 crore, and also negative free cash flows. Of course, this is down to the pandemic, but not all of it. The company’s business was also impacted in FY19 due to flooding in South India. Then Q4 was affected by the lockdowns. The company is looking to increase the share of studded jewellery in its revenue mix. The rise of share of the studded jewellery business has led its operating margins to rise to 18% for the nine months ended December 2020. At the end of FY20, its operating margins were 16%. Even then, if we look at the company’s return on equity compared to Titan, it pales in comparison. Titan’s RoE is so high compared to Kalyan Jewellers, it wouldn’t be surprising if investors wondered whether they should just invest in the leading organised jewellery player in India, rather than Kalyan Jewellers. It’s not that the jewellery business isn’t a good bet in general. But the Kalyan Jewellers offer seems to be using the elevated levels of the markets to raise much needed funds, and also offer a partial exit to a PE investor (Warburd Pincus). The fact that the company has cut the IPO size to around Rs 1,200 crore from Rs 1,500 crore last year means that it has enough funds. For investors looking to make some money on the listing, here is a note of caution. In the middle of the second day of bidding, the issue still did not get bids for all of the 13.5 crore shares on offer. This has not been the case for other IPOs that either opened or closed during this week. Will Kalyan Jewellers listing gains be affected by the fact that it is in a crowded IPO week? Only time will tell, but long-term investors would also want to be convinced about the company’s prospects after it exits the pandemic. The double-digit growth in revenues projected for the jewellery sector in FY22 might be promising, but it remains to be seen whether Kalyan Jewellers can capitalise on that opportunity.17-03-2021
Subscribe to Kalyan Jewellers India: KR Choksey
KR Choksey has come out with its report on Kalyan Jewellers India. The research firm has recommended to ''Subscribe'' the ipo in its research report as on March 16, 2021.16-03-2021