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Established in 1993, Kalyan Jewellers is one of India’s largest jewellery companies having ~6% market share in the organised jewellery space. The company designs, manufactures and sells a wide range of jewellery products at varying price points for uses ranging from jewellery for special occasions such as weddings, which is its highest selling product category, to daily-wear jewellery. Over the years, the company has successfully expanded to become a pan-India player with 107 showrooms across 21 states in India and 30 showrooms located in the Middle East. One of the key strengths of the company has been to operate as a hyperlocal jewellery player. It endeavours to cater to 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.

Following hyperlocal strategy to cater to wide range of segments

Jewellery consumption patterns in India are highly localised with customer preferences varying significantly by region. The company strives to appeal to a broad base of customers via a multi-faceted hyperlocal strategy by deploying initiatives such as: a) localisation of product portfolio, b) localisation of brand communication and marketing and c) localisation of showroom experience for customers. Localisation strategy, combined with large scale of operations, allows it to cater to a wide range of customers across geographies, age groups, socio-economic status levels and genders as well as across urban, rural and semi-urban markets.

‘My Kalyan’ another key element of hyper-local strategy

The grassroots ‘My Kalyan’ customer outreach and service centre network is another key element of the hyperlocal strategy, which enables it to be a neighbourhood jeweller and engage door-to-door and other direct marketing efforts within its local communities to promote the brand, showcase product catalogue and help drive traffic to the showrooms nearest to that area. As of December 31, 2020, the company had 766 “My Kalyan” locations and 2,699 dedicated “My Kalyan” employees.

Key risk & concerns

* Inability to maintain brand strength & development of brands

* Inability to maintain & establish arrangements with contract manufacturer and suppliers

Priced at P/E of 63x (post issue) FY20 on upper band

The company has witnessed an improvement in gross margins from 16% in FY18 to 18% in 9MFY21 owing to enhanced share of studded ratio. It has faced headwinds in the past couple of years. For instance, in FY19, revenues were impacted owing to severe floods in south India (~60% of revenues) while revenue in FY20 was adversely impacted in Q4 owing to Covid led lockdowns. As on FY20, it reported revenue and net profit worth | 10101 crore and | 142 crore, respectively. At | 87, the stock is available at 0.9x FY20 market cap/sales and 63.0x FY20 EPS.

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