Kalyan Jewellers trims IPO size to Rs 1,175 crore

Warburg Pincus-backed Kalyan Jewellers Ltd is all set to hit the primary market with a trimmed initial public offering (IPO).

Money9 reported on February 11 that the IPO will hit the market by mid-March.

According to the revised plan, the primary issue is likely to be Rs 1,175 crore, with a fresh issuance of Rs 800 crore and an offer for sale (OFS) component of Rs 375 crore. Promoters will sell Rs 125 crore worth of shares while the private equity investor, Warburg Pincus will sell Rs 250 crore worth of shares.

The management is expected to unveil the roadmap later today.

Though the Kerala-based jewellery retail chain had received the approval from the Securities and Exchange Board of India (SEBI) on October 15, 2020, the launch of IPO was delayed as the pandemic-induced lockdown disrupted gold sales in India. High gold prices and restrictions by the government on cash sales had also impacted the retail market.

Industry officials however raise concerns over the potential IPO. “The company, like other gold retail chains in the country, suffered a massive jolt in the first two quarters of 2020-21. Though Kalyan has revived sales in the second half of the fiscal to the pre-pandemic levels, it is unlikely to post any substantial numbers for the whole year,” said one official.

In 2019-20, Kalyan reported a meagre profit of Rs 142.27 crore on a massive revenue from operations of Rs 10,181 crore. In the previous fiscal 2018-19, it had reported a loss of Rs 4.86 crore on Rs 9,814 crore revenues. The number of outlets stands at 137 as of today.

Post the pandemic, Kalyan, like most other gold retail giants, faced severe liquidity-related problems. “Some contract manufacturers had cut down their business after the company delayed the payment cycle to them for over a month, after slashing the margin earlier with a promise of quick payment,” an industry official had told Money9.

In February, a senior official from the promoter group had told Money9 that their plan was to hit the IPO market before the fiscal-end.

“After the first two difficult quarters of 2020-21, the third quarter has thrown up positive numbers and we expect a good Q4 too. In the first quarter, almost all our retail outlets were shut, and did only 20% business. In the second quarter, only 80% shops were opened, and we were affected by frequent local lockdowns,” he had said.

The revised plan is a climb-down from the Rs 1,750 crore IPO it had proposed in 2020. As per the draft red-herring prospectus (DRHP), the IPO consisted of a fresh equity issue of Rs 1,000 crore and an offer for sale worth Rs 750 crore. As per the earlier plan, the company promoter TS Kalyanaraman was hoping to offload shares worth up to Rs 250 crore, while Highdell Investment, a Warburg Pincus company, was to sell up to Rs 500 crore worth of shares, through OFS.

Warburg Pincus has collectively invested around Rs 1,700 crore in two tranches in the company. Its initial investment of Rs 1,200 crore in 2014 was the biggest private equity investment ever in the jewellery sector in India, followed by a second smaller round of Rs 500 crore in 2017.

While Kalyanaraman owns 27.41% in the company, the other promoters — his sons TK Seetharam and TK Ramesh — own 22.17% stake each in the retail chain. Warburg Pincus holds around 24% stake in the firm.

The company’s total outstanding debt, including metal gold loans, stood at Rs 3,640.3 crore as on March 31, 2020.

Axis Capital, Citigroup Global Markets India, ICICI Securities and SBI Capital Markets are the global co-ordinators and book running lead managers to the offer.