Warburg-backed Kalyan Jewellers IPO Loses Shine, Sees Tepid Demand

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Kalyan Jewellers India Ltd’s initial public offering was oversubscribed by just 1.28 times on Thursday, a sign of tepid interest among investors unimpressed by the jeweller’s recent financial results and spooked by a drop in gold demand.

The numbers compare unfavourably to other listings this year, including for paint maker Indigo Paints Ltd, which was 50 times oversubscribed, and engineering firm MTAR Technologies Ltd, oversubscribed more than 100 times.

Kalyan’s offering of 95.71 million shares – worth 8.33 billion rupees at the upper end of the company’s IPO price range of 86-87 rupees per share – had drawn bids by 1130 GMT on Thursday worth 10.66 billion rupees ($146.6 million).

The jeweller, backed by U.S. private equity firm Warburg Pincus, said last week it aimed to raise 11.75 billion rupees through the IPO. It plans to use 6 billion rupees of that to fund working capital requirements.

The Kerala-headquartered company is among the biggest players in the country’s gold and diamond jewellery market, competing with Titan Company Ltd, Tribhovandas Bhimji Zaveri Ltd and others.

“If you consider (Kalyan’s) last two years’ financials… the numbers are not as impressive if compared to Titan,” said Amarjeet Maurya, associate vice president for mid caps at Angel Broking Ltd in Mumbai. “Considering this, the market is not giving as much value.”

Kalyan posted revenue from operations of 101.01 billion rupees for the year to March 2020, up 3.4% from the previous year, its prospectus filing showed. For the same period, Titan’s jewellery segment posted a 5.7% sales rise to 173.2 billion rupees.

However, Maurya still recommends investors subscribe to the IPO, citing Kalyan’s strong brand and widespread presence across the country.

Kalyan currently holds about a 6% share of India’s gem and jewellery market, which is estimated to reach 6.99 trillion rupees by 2025, according to the India Brand Equity Foundation. Lockdowns slashed India’s gold demand by 35% in 2020.

The portion of shares offered for small-ticket retail investors, worth 4.15 billion rupees, was 1.47 times oversubscribed.