The initial public offering (IPO) of Kalyan Jewellers opened for subscription on Tuesday at a price band of Rs 86-87 per share. The Warburg Pincus-backed jeweller aims to raise as much as Rs 1,175 crore from the IPO.

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The IPO consists of a fresh issue of Rs 800 crore and an offer for sale of Rs 375 crore by promoters and existing shareholders. The last day for subscribing to the issue is March 18. The OFS comprises selling shares worth up to Rs 125 crore by promoter TS Kalyanaraman, and Rs 250 crore by Highdell Investment, belonging to the Warburg Pincus group.

Kalyanaraman and Warburg hold 24.5 percent and 32 percent stake in the company, respectively.

The company has already raised Rs 351.89 crore from 15 anchor investors at the upper price band of Rs 87 per equity share ahead of the issue.

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Kalyan Jewellers is one of the largest jewellery companies in India based on revenue as of March 31, 2020.

The company was incorporated in 1993 and started its jewellery business 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 has an international presence with 30 showrooms located in the Middle East as of December 31, 2020.

Going forward, Angel Broking believes that Kalyan Jewellers would perform better on the back of a strong brand and number of stores in India and internationally. Thus, it recommended a 'subscribe' rating on the issue.

“Given forecasted improvement in profitability & balance sheet, India’s appetite for gold, strong pan India presence, brand recall and diversified product offering, we assign a ‘subscribe’ rating on a long-term basis,” Geojit Financial Services said.

Marwadi Shares and Finance also assigned a ‘subscribe’ rating to the issue as it believes that 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 brokerage is of the view that the IPO is reasonably priced as compared to the peers and the long-term prospects of the company look promising.

In the 9 months ended December 31, 2020, the revenue from operations was Rs 5,516.70 crore, of which 86.21 percent was from India and 13.79 percent was from the Middle East.

The reported PAT was flat during FY18-20 in FY20. Kalyan Jewellers reported a positive cash flow from operating activities during FY18-20, with an average operating cash flow of around Rs 583.8 crore.

However, Choice Broking said that the reported short financial performance of Kalyan Jewellers was not encouraging and was characterized by a de-growth in topline, but with stable profitability margins.

The brokerage house assigned an ‘Avoid’ rating to the issue as according to it, the company at a higher price band, is demanding a TTM P/S valuation of 1.2x, which is at a significant premium to the peer average of 0.4x (excluding Titan Company).

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