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The Rs 1175-crore Kalyan Jewellers initial public offer (IPO) opened for subscription on Tuesday, March 16 and will close on March 18. The company on Monday raised Rs 352 crore from anchor investors ahead of its initial share-sale.

The anchor investors include the Government of Singapore, Monetary Authority of Singapore, HDFC Life Insurance Co Ltd, and BNP Paribas Arbitrage. The issue comprises issuance of fresh equity aggregating up to Rs 800 crore and an offer for sale (OFS) worth Rs 375 crore.

Kalyan Jewellers’ promoter T S Kalyanaraman will offload shares worth up to Rs 125 crore, while Highdell Investment, an affiliate of Warburg Pincus, would sell up to Rs 250 crore worth of shares through the OFS route. The company has fixed a price band of Rs 86-87 a share for the public issue.

Proceeds from the fresh issue of shares would be utilised for working capital requirements and general corporate purpose. At the end of June 2020, the company had 107 showrooms across 21 states and Union Territories in India, and 30 showrooms in the Middle East.

Analysts on Dalal Street have mixed view on the IPO. Here’s what they have to say:

Geojit Financial Services: Subscribe
At the upper price band of Rs 87, the pricing is on the higher side, but on a long-term basis, Kalyan jewellers is available at 1 year forward estimated P/E of 25x (on FY23E basis). Given forecasted improvement in profitability and balance sheet, India’s appetite for gold, strong pan India presence, brand recall and diversified product offering, Geojit assigns a “Subscribe” rating on a long-term basis.

Angel Broking: Subscribe
In terms of valuations, the pre-issue TTM EV/Sales works out to 1.5 (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 Kalyan Jewellers. Going forward, Angel Broking believes that the would perform better on the back of a strong brand and number of stores in India and internationally. Thus, the brokerage recommends a subscribe rating on the issue.

Choice Broking: Avoid
At a higher price band of Rs 87, the company is demanding a TTM P/S valuation of 1.2 times, which is at a significant premium to the peer average of 0.4x (excluding Titan Company).

Marwadi Shares and Finance: Subscribe
Considering FY20 adjusted EPS of 1.38 on a post-issue basis, the company is going to list at a P/E of 62.99 times with the market cap of Rs 8961.5 crore while its peer Titan is at a P/E of 84.23x.
We recommend to ‘Subscribe’ this issue as the company has established brand value with a strong distribution network and pan India presence with a wide range of product offerings for a diverse set of customers. The IPO is reasonably priced as compared to the peers and long-term prospects of the company looks promising.