Backed by Warburg Pincus, Kerala based retail jeweller Kalyan Jewellers is scheduled to launch its Rs. 1,175 crore IPO on March 16. The 3-day offer will conclude on March 18. Price band of the issue has been fixed at Rs. 86-87 per share. Here is a complete low down on the issue, before you consider it for investment:
1. Issue details:
The Rs. 1175 crore issue comprises fresh equity issuance worth up to Rs. 800 crore and an offer for sale (OFS) totaling to Rs. 375 crore. In the OFS, promoter TS Kalyanaraman of the company will offload shares worth Rs. 125 crores and another Rs. 250 crore worth of shares will be up for sale by investor Highdell Investment, an affiliate of Warburg Pincus.
The bidding for anchor investors will open on 15 March, Kalyan Jewellers announced.
Of the total issue size, half has been reserved for QIBs, 35% for retail investors and 15% for non-institutional players, said the company.
Minimum order quantity- 172 shares
Axis Capital, Citigroup Global Markets India, ICICI Securities and SBI Capital Markets are the global coordinators and book running lead managers.
2. Issue objectives:
Proceeds from the fresh issue of shares would be utilised for working capital requirements and general corporate purpose, the company said.
3. Comparison with listed peers:
In the offer documents, the company has shown Titan as its listed peer. It is currently trading at a P/E of around 172.88. (as of March 10, 2021). Nonetheless, the two companies differ hugely on the different financial parameters i.e., total turnover, RoNW, NAV etc.
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," said Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd.
For the quarter ending December of FY21, the company posted total revenue of Rs. 55497 millions and profit percentage dropped 1.4 percent. Its EPS for FY2020 is Rs 1.49 and last 3 years average EPS is Rs 0.98.
6. Should you subscribe to Kalyan Jewellers IPO?
"Kalyan Jewellers (KJIL) is one of India's largest Jewellery companies." Going forward, we believe that Kalyan Jewellers would perform better on the back of a strong brand and number of stores in India & abroad. Thus, we recommend a subscribe rating on the issue," added Maurya of Angel Broking.
Nonetheless other experts recommend avoiding the issue of Kalyan Jewellers considering losses in the nine month to FY21 and static financial performance in FY18 and FY20. Also, it faced a blow in FY19 owing to flood situation in Southern India, its prime business locations. And as considering the latest financial data, the offer price is at a negative P/E, investors should consider investment in the issue at their own risk.