Kalyan Jewellers shares tank 11% amid block deal

Shares of Kalyan Jewellers, which runs a chain of jewellery showrooms across India and the Middle East, tumbled 11% in early trade on Tuesday amid block deals. A total of 4.5 crore shares, or 4.4% equity, changed hands over the counter on the BSE and the NSE in the first hour of trade so far, while the market capitalisation slipped to ₹11,272 crore.

While the buyers and sellers were not known immediately, reports suggest that Warburg Pincus, one of the key investors in the company, was planning to sell a 2.5% equity stake in the company through a block deal. The foreign private equity firm would offload shares through Highdell Investments, a subsidiary of the company, at a floor price of ₹110 apiece, a discount of 7.4% to Monday’s closing price.

At the end of the December quarter of the current fiscal, Warburg Pincus, through its subsidiary Highdell, owned 26.36% stake in Kalyan Jewellers, making it the largest public shareholder in the company.

On Tuesday, Kalyan Jewellers shares opened 57% lower at ₹112 against the previous closing price of ₹118.75 on the BSE. During the session so far, the stock jewellery stock declined as much as 11% to hit a low of ₹105.65 with 65 lakh shares changing hands over the counter on the BSE.

The share price of the Kerala-based jewellery firm has risen 85% in a year, while it gained 15% in the past six months. In the calendar year 2023, the stock has fallen nearly 13%, while it lost nearly 4% in a month. In the last one week, the counter has seen a drop of over 8%. The stock hit a 52-week high of ₹134.20 on December 29, 2022, and a 52-week low of ₹55.20 on May 11, 2022, indicating that at the current level, the stock is trading 115% above its 52-week low and 11.5% below its 52-week high.

Last week, India Ratings and Research (Ind-Ra) revised Kalyan Jewellers’ outlook to positive from stable, while affirming the long-term issuer rating at ‘IND A’.  The outlook was revised citing improvement in the company’s consolidated operating performance during nine months of the current fiscal and the firm’s plans to expand its presence across India through the franchisee model. The franchisee model is likely to reduce the company’s capital requirements in the medium term, thereby improving its credit metrics, says Ind-Ra.

Kalyan Jewellers’ standalone revenue grew sharply by 23.6% year-on-year to ₹9,056 crore in FY22 due to low base effect and a continued recovery in business. The revenue grew by 10%-12% on a quarter-on-quarter basis during 9MFY23. The EBITDA margins were modest at 7.6% in FY22 (FY21: 8.5%, FY20: 8.1%) due to increase in advertisement expense.

Kalyan is among India’s top five retail gold jewellery companies, accounting for about 6% of the total organised market share as per the company. KJIL has 138 showrooms across 21 Indian states and union territories. Also, the group has 31 showrooms across four countries in the Middle East. KJIL has a total showroom space of over 0.5 million square feet.