On the third and final day of the bidding process, the Kalyan Jewellers initial public offering (IPO) has been subscribed 1.42 times. Analysts have had mixed reactions to the IPO, with some advising investors to avoid it and others giving it a ‘Subscribe’ recommendation. Kalyan Jewellers’ shares have been selling at a low premium even in the unlisted market. Kalyan Jewellers hopes to collect Rs 1,175 crore through the offering. The IPO market is buzzing with a slew of new offerings, with several more on the way this year.
Retail investors oversubscribe, grey market premium tepid
Just institutional investors and the firm’s workers have completely subscribed to their portions of the problem so far. Retail investors have put bids for 2.12 times the amount of quota allotted to them. Non-Institutional Investors (NII) have bid for 93 percent of the portion reserved for them, while Eligible Institutional Buyers (QIB) have bid for 65 percent of their portion. The company’s employees have bid for 1.9 times their share. So far, bids exceeding 1.42 times the issue size have been submitted.
In the grey market, Kalyan Jewellers shares continue to command a moderate premium. “At the moment, the stock is trading at a premium of Rs 8 to 10 per share,” said Narottam Dharawat, founder of Dharawat Securities. When the issue first opened for subscription, Kalyan Jewellers’ shares were trading at a premium of only Rs 5 per share.
Analysts also expressed concerns about the company’s valuations. Between the financial year 2018 and the previous fiscal year, Kalyan Jewellers’ revenue CAGR was -2.9 percent. The three-year EBITDA growth CAGR was 1.9 percent, which was lower than listed peers Titan and Tribhovandas Bhimji Zaveri. “At the higher price band of Rs. 87, the firm is seeking a TTM P/S valuation of 1.2x, which is significantly higher than the peer average of 0.4x,” Choice Broking analysts wrote in a note, assigning the stock a ‘Avoid’ ranking.
Despite concerns about growth and top-line consolidation, Angel Broking analysts have given the IPO a ‘subscribe’ ranking. In a paper, Angel Broking said, “We believe that KJIL will perform better going forward on the back of a strong brand and number of stores in India and internationally.”
