Kalyan Jewellers IPO in progress: Should you subscribe to the share sale?

Kalyan Jewellers opened its initial public offer (IPO) today. The three-day public issue will close on March 18 . On March 15, Kalyan Jewellers raised Rs 351.89 crore from anchor investors. Total 4.04 crore shares at Rs 87 per share were allocated to 15 anchor investors. The allocation was done at the higher end of the IPO price band. The IPO has a price band of Rs 86 to Rs 87 per equity share. The issue comprises equity shares aggregating up to Rs 1,175 crore, including fresh equity aggregating up to Rs 800 crore and an offer for sale (OFS) worth Rs 375 crore.

Kalyan Jewellers' promoter TS Kalyanaraman will offload equity shares aggregating up to Rs 1,25 crore and Highdell Investment Ltd, an affiliate of Warburg Pincus, would sell up to Rs 250 crore worth of shares through the OFS route.

Half of the issue is reserved for qualified institutional buyers, 35 per cent for retail investors and 15 per cent for non-institutional bidders. The offer also includes a reservation aggregating up to Rs 2 crore for subscription by eligible employees.

Bids can be made for a minimum of 172 equity shares and in multiples of 172 equity shares thereafter. The company proposes to utilise the funds towards funding working capital requirements of the company and general corporate purposes.

Kalyan Jewellers IPO: As good as gold

Axis Capital Limited, Citigroup Global Markets India Private Limited, ICICI Securities Limited and SBI Capital Markets Limited are the global co-ordinators and book running lead managers to the IPO offer. BOB Capital Markets is the book running lead manager to the IPO offer.

IPO to reduce Warburg Pincus stake in Kalyan from 32% to 24%

Amarjeet Maurya - AVP - Mid Caps, Angel Broking is positive on the IPO. "Ahead of IPO opening Kalyan Jewellers (KJIL) got good response from anchor investors which were around Rs352cr (30% of IPO issue size). The investors are Government of Singapore, Sundaram Mutual Fund, BNP Paribas, HDFC Life Insurance Company etc. We have a subscribe rating on IPO. In terms of valuations, the pre-issue TTM EV/Sales works out to 1.4 (at the upper end of the issue price band), which is low compared to Titan Company (trading at 7.7x). However, Titan company has a better financial track record compared to KJIL. Going forward, we believe that KJIL would perform better on the back of a strong brand and number of stores in India & internationally," Maurya said.

However, Choice Broking in a report recommended avoiding the share sale.

"At higher price band of Rs. 87, the company is  demanding a TTM P/S valuation of 1.2x, which is  at a significant premium to the  peer  average  of  0.4x  (excluding Titan  Company  Ltd.).  Thus  considering the  above  observations  we assign  an  "AVOID" rating for the issue," the brokergae said.

Brokerage Geojit has assigned a subscribe call to the issue.

"At the upper price band of Rs 87, the pricing is on the higher side, but on a long-term basis, Kalyan jewellers is available at one-year forward estimated P/E of 25x (on FY23E basis). Given forecasted improvement in profitability and balance sheet, India's appetite for gold, strong pan India presence, brand recall and diversified product offering, we assign a "Subscribe" rating on a long-term basis," the brokerage said in a report.