Published on 13/03/2021 4:01:19 PM | Source: Accord Fintech

Kalyan Jewellers India coming with an IPO to raise Rs 1189 crore

Posted in IPO Analysis| #IPO

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Kalyan Jewellers India

  • Kalyan Jewellers India is coming out with a 100% book building; initial public offering (IPO) of 13,66,27,906 shares of Rs 10 each in a price band Rs 86-87 per equity share.

  • Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.

  • The issue will open for subscription on March 16, 2021 and will close on March 18, 2021.

  • The shares will be listed on BSE as well as NSE.

  • The face value of the share is Rs 10 and is priced 8.60 times of its face value on the lower side and 8.70 times on the higher side.

  • Book running lead managers to the issue are Axis Capital, Citigroup Global Markets India, ICICI Securities, SBI Capital Markets and BOB Capital Markets.

  • Compliance Officer for the issue is Jishnu R.G.

Profile of the company

The company is one of the largest jewellery companies in India. It was established by its founder and one of its Promoters, T.S. Kalyanaraman, who has over 45 years of retail experience, of which over 25 years is in the jewellery industry. It started its jewellery business in 1993 with a single showroom in Thrissur, Kerala. It has since expanded to become a pan-India jewellery company, with 107 showrooms located across 21 states and union territories in India, and also have an international presence with 30 showrooms located in the Middle East as of December 31, 2020. All of its showrooms are operated and managed by it. The company design, manufacture and sell a wide range of gold, studded and other jewellery products across various price points ranging from jewellery for special occasions, such as weddings, which is its highest-selling product category, to daily-wear jewellery.

The company endeavour to cater to its customers’ unique preferences, which often vary significantly by geography and micro market, through its local market expertise and region-specific marketing strategy and advertising campaigns. The company’s grassroots ‘My Kalyan’ customer outreach and service centre network is another key element of its hyperlocal strategy which enables it to be a neighbourhood jeweller and is focused on marketing and customer engagement across urban, semi-urban and rural areas in India. The company is led by a management team with extensive experience in the jewellery and retail industries and with a proven track record of performance.

Proceed is being used for:

  • Funding working capital requirements of the company.

  • General corporate purposes.

Industry overview

The Indian jewellery retail sector’s size in Fiscal 2020 was approximately $64 billion. The sector’s organized retail share stood at approximately 32%, comprised of national and regional players, while the rest of jewellery retail continues to be dominated by the unorganised segment, comprised of over 500,000 local goldsmiths and jewellers. Indian consumers’ jewellery consumption is influenced by multiple factors such as region, income, cultural notions and generally vastly differs across states. Southern states make up 40% of the Indian gold jewellery market while the Eastern states account for 15%. Gross weight of gold worn by a bride in Kerala is more than double the weight of gold worn by a bride in Gujarat signifying that cultural factors scores over per capital income when it comes to regional skews observed in jewellery purchase in India. Customer service expectation also varies from one region to other. Wedding jewellery demand in particular is influenced by local traditions and designs. While the gross weight of an average wedding jewellery purchase is 200 gm in Uttar Pradesh, it is 350 gm in Kerala.

The Indian jewellery market is strongly skewed towards fine jewellery that is signified by an ornamental look, embellishments, and higher weight, among others. This is a direct outcome of the fact that 90% of the jewellery sold in India caters to wedding-related wear and daily wear and only 10% was meant for fashion wear (that signifies light weight). In a market like the United States, such a market composition is usually found to be opposite. However, these sub-segments within jewellery such as light weight gold, silver and studded jewellery have been registering a consistent growth over the last 10 years and now contribute almost 10% to the total fine jewellery segment. While jewellery in India has had a strong association with social occasions and traditions, the growth of this segment signifies a gap that existed in the space of contemporary design sensibility and affordable price points. Through this segment, businesses are targeting younger women with a modern outlook, often residing in urban centres. Businesses have started to address this demand by spinning new lines of products either as separate brands or collections.

Pros and strengths

Established brand built on core values of trust and transparency: The company has endeavoured to establish a strong brand in the Indian jewellery market that its customers associate with trust and transparency. The company was among the pioneers in the Indian jewellery market in (a) educating consumers about the aforementioned industry issues; (b) instituting the highest quality standards for its jewellery, and (c) introducing complete price transparency with its products. Through the following initiatives, coupled with concurrent customer education and awareness campaigns, particularly through its ‘My Kalyan’ network, it has helped strengthen its brand by building customer trust and promoting transparency. Its marketing strategy focuses on maintaining consistency in its brand messaging across all of its communication channels and markets in which it operates. Its training program for all of its showroom staff and ‘My Kalyan’ personnel is designed to ensure customers receive a uniform experience of its brand that demonstrates a strong commitment to trust and transparency. Its reputation and brand image built on trust and transparency are critical to the success of its business and it continue to focus on operational and marketing efforts based on these principles.

One of India’s largest jewellery companies with pan-India presence: The company is one of the largest jewellery companies in India. It has a pan-India presence with 107 showrooms located across 21 states and union territories in India and also have 30 showrooms located in the Middle East. While the company started its operations in Kerala, over time it has been able to successfully expand to become a pan-India jewellery company. In addition, the company has a relatively diversified presence across larger and smaller cities, semi-urban and rural regions.

Extensive grassroots ‘My Kalyan’ network with strong distribution capabilities: The company’s grassroots ‘My Kalyan’ customer outreach network is a key element of its hyperlocal strategy enabling company to be a neighbourhood jeweller and is focused on marketing and customer engagement across urban, semi-urban and rural areas in India. The company’s network of ‘My Kalyan’ centres provides company with a marketing tool to help address the latent demand that exists in some of these markets.

Robust and effective internal control processes: The company has established a robust set of operational and control processes to manage its business operations and to support its future growth at both the showroom and corporate level. Given the high value nature of its jewellery, its inventory management and internal audit procedures are critical to the success of its business. The company closely track its inventory starting from the initial procurement of raw materials to its ultimate sale in its showrooms, including by barcoding each piece of finished goods inventory and conducting daily counts at its showrooms. These measures are coupled with an integrated enterprise resource planning, or ERP, system. Its ERP system is designed to permit its management to manage all aspects of its operations, including procurement of raw materials and semi-finished products, inventory management, sales and finance from a centralised platform. The company’s systems allow its local and regional management to analyse inventory status and product sales across all its showrooms and report performance in real time, which can then be reviewed by its senior management team, allowing them to provide necessary course corrections and strategic guidance.

Risks and concerns

Significant working capital requirements: The company’s business requires a substantial amount of working capital, primarily to finance its inventory, including the purchase of raw materials. Moreover, the company may need working capital for the expansion of its business. A large part of this working capital is funded by bank loans or metal gold loans. Its working capital loans on a consolidated basis as of December 31, 2020 were Rs 34,389.91 million, which are repayable on demand. It also intends to use Rs 6,000 million from the Net Proceeds towards funding its working capital requirements. A portion of the gold used in its jewellery is procured through metal gold loans, whereby bullion is loaned to company at a specified interest rate and which its governed by specific conditions of the Ministry of Commerce and Industry, Government of India (GoI) and applicable RBI regulations. There can be no assurance that the company will be able to secure adequate financing in the future on commercially acceptable terms, or at all, including in the event its lenders call in loans repayable on demand or if there is a change in applicable regulations.

Dependent on success and visibility of showrooms: The company endeavour to open showrooms in optimal locations and generally consider a relevant location’s demographics, spending capacity, economic conditions, cost-benefit analysis and proximity to its competitors’ showrooms. Sales at company’s showrooms are derived, in part, from the volume of customer visits in the relevant locations. Showroom locations may become unsuitable, and its sales volume and customer traffic generally may be slowed, by, among other things: economic downturns in a particular area; competition from nearby jewellery companies; changing consumer demographics in a particular market; changing lifestyle choices of consumers in a particular market; government imposed lockdowns due to pandemics, such as COVID-19; and the popularity of other businesses located near its showrooms.

Strength of brands is crucial to success: The company consider its ‘Kalyan Jewellers’ brand and other sub-brands to be very important for its business. Its business and results of operations are influenced by the strength of its brands, including the level of consumer recognition and perception of its brands. The strength of its brands depends on factors such as its growth, its product designs, the materials used to make its products, the quality of its products, the distinct character and presentation of its products as well as the presentation and layout of its showrooms. Public communication activities such as advertising, public relations and marketing as well as the general perception of its business also impact its brands. Failure to manage any of the above factors or failure of its promotion and other activities to differentiate and further strengthen its brands could adversely affect the value and perception of its brands and its ability to maintain existing customers and attract new customers, and, as a result, have a material adverse effect on its business, results of operations and financial condition.

Face competition: The markets in which the company operate are competitive. Its competitors include both organised pan-India jewellers as well as unorganised local players in the various markets in which it operates. Some of company’s competitors have achieved significant recognition for their brand names or have considerable financial, distribution, marketing, bargaining power with suppliers and other resources. Industry consolidation, either by virtue of mergers and acquisitions or by a shift in market power among competitors, may accentuate these trends. In addition, some of its competitors in smaller local markets have advantages of having strong reputations and established trust with customers in their local markets, which could be difficult for company to challenge or replicate in a sustained manner in the future.


Kalyan Jewellers is one of India's largest Jewellery companies. The key business activities of the company is to design, manufacture, and sell a variety of gold, studded and other jewellery products for various occasions i.e. wedding, festivals, etc. Initially, the company was started with a single showroom in Kerala, and over the years, it has expanded its presence with 107 showrooms located across 21 states and union territories in India. The company engages local artisans to manufacture jewellery (based on its specifications) that is suited to local tastes in the markets in which it operates and hence endeavour to curate a localised product mix and store experience within each of its showrooms to suit its customers’ preferences in the immediate micro market. The company’s grassroots ‘My Kalyan’ customer outreach and service centre network is another key element of its hyperlocal strategy which enables company to be a neighbourhood jeweller and is focused on marketing and customer engagement across urban, semi-urban and rural areas in India. On the concern side, the company’s business is subject to government regulations and it requires certain statutory and regulatory approvals, licences, registrations and permissions for operating its business, some of which may have expired and for which it may have either made or are in the process of making applications for obtaining their renewal. Its business is dependent on the trust its customers have in its brand and the quality of its products. Any negative publicity regarding it, its brand, its products or the jewellery industry generally could adversely affect its reputation and its results of operations.

The issue has been offered in a price band of Rs 86-87 per equity share. The aggregate size of the offer is around Rs 1174.99 crore to Rs 1188.66 crore based on lower and upper price band respectively. On performance front, the company’s total income increased by 3.74% to Rs 101,810.16 million for Fiscal 2020 from Rs 98,140.29 million for Fiscal 2019. Its profit for Fiscal 2020 increased to Rs 1,422.75 million from a loss of Rs 48.64 million for Fiscal 2019. The company intends to set up Candere kiosks in shopping malls, as well as at some of its showrooms in order to offer its customers the option to purchase products offline and also offer them the opportunity to tangibly experience its products offered online. It intends to continue to increase its focus on studded jewellery going forward as these products have widened the consumer base to which it caters and also typically have a higher gross margin profile than its gold jewellery. The company intends to continue leveraging its extensive ‘My Kalyan’ network of 766 centres across India to deepen customer engagement and actively bolster its efforts to acquire a larger customer base in the markets in which it operates.