Kalyan Jewellers Initial Public Offering (IPO) opens for subscription today with the organization hunting to raise Rs 1,175 crore via the public concern. However, shares of Kalyan Jewellers in the grey markets have been trading flat, hinting at diminishing interest from investors. The IPO of Kalyan Jewellers follows the likes of Anupam Rasayan, Laxmi Organic Industries, and Craftsman Automation, which attracted investors into their public challenges this week. Ahead of the IPO, Kalyan Jewellers has managed to raise Rs 352 crore from anchor investors.
Kalyan Jewellers IPO is a mix of fresh concern and an provide for sale (OFS) by current shareholders. Through the IPO, promoters will trim their stake to 60.53% from the present 67.99% although public shareholding in the organization will raise to 39.47% from 32.01%. The cost band for the IPO has been set at Rs 86-87 per share and investors can bid for the concern in a lot of 115 shares. Investors will will need to shell out Rs 14,964 for one lot. Half of the concern is reserved for certified institutional purchasers (QIB) although 15% is for NIIs and 35% for retail investors. Employees of Kalyan Jewellers can also subscribe to the concern with a discount of Rs 8 per share.
Grey industry premium declines
In the grey industry, shares of Kalyan Jewellers have provided up their gains and are now trading flat. “Kalyan Jewellers is trading at Rs 5 premium in the grey market, which is not significant,” Dinesh Gupta, Partner, UnlistedZone told TheSpuzz Online. He added that such a premium could turn unfavorable quickly. “Earlier, Kalyan Jewellers shares were quoting a slightly higher premium but now the shares are almost flat,” he mentioned.
Are valuations also higher?
Over the economic year 2018 to the prior fiscal year, Kalyan Jewellers has reported a income CAGR of -2.9% and a net profit CAGR of .46%. When compared with listed peers, Kalyan Jewellers 3-year EBITDA development CAGR has been 1.9% which is drastically reduced than peers like Titan and Tribhovandas Bhimji Zaveri. The typical net profit margin is also reduced when compared to peers. Dismal margins, higher D/E ratio, and falling CFO and FCF warrant a “clear avoid” rating for Kalyan Jewellers IPO by Aditya Kondawar, Founder and COO, JST Investments, told TheSpuzz Online. He added that the concern is priced at a higher ratio of 96.7x P/E.
Similarly, analysts at Choice Broking mentioned that the organization is demanding a TTM P/S valuation of 1.2x, which is at a considerable premium to the peer typical of .4x. “Thus considering the above observations we assign an “AVOID” rating for the concern,” they mentioned. Subdued macroeconomic atmosphere, Continued losses in the Middle East operations, Slower expansion in the showroom network, Unfavorable forex movements, and intense competitors have been listed as some of the dangers aligned with Kalyan Jewellers.
Could be a lengthy-term bet
While Geojit Financial Services acknowledge that Kalyan Jewellers IPO is priced on the greater side, but nevertheless advise investors to “Subscribe”. “Given the forecasted improvement in profitability & balance sheet, India’s appetite for gold, strong pan India presence, brand recall and diversified product offering, we assign a “Subscribe” rating on a lengthy-term basis,” they mentioned.
(The stock suggestions in this story are by the respective investigation and brokerage firms. TheSpuzz Online does not bear any duty for their investment guidance. Please seek the advice of your investment advisor prior to investing.)