Kalyan Jewellers surges 12% after 6% equity change hands via block deals

About 6.41 million shares representing 6.2 per cent of total equity of the company changed hands on the NSE via block deals in pre-opening trade, the exchange data shows.

Shares of Kalyan Jewellers India surged 12 per cent to Rs 127.70 on the National Stock Exchange (NSE) in Friday’s intra-day trade after over 6 million equity shares of the company changed hands on the exchange.

About 6.41 million shares representing 6.2 per cent of total equity of Kalyan Jewellers changed hands on the NSE via block deals in pre-opening trade, the exchange data shows. The deal size was Rs 725 crore, data shows. The names of the buyers and sellers were not ascertained immediately.

At 10:09 AM; Kalyan Jewellers quoted 11 per cent higher at Rs 126.45. The stock had hit a record high of Rs 134.20 on December 29, 2022.

Kalyan Jewellers is one the largest jewellery retailers in India with presence also in the Middle East. Kalyan Jewellers offers an array of traditional and contemporary jewellery designs in gold, diamonds and precious stones catering to the distinct needs of the customers. The company has 182 showrooms across India and the Middle East with a retail area exceeding 611,000 sq. ft.

Kalyan Jewellers had recorded consolidated revenue of Rs 14,071 crore in the financial year 2022-23 (FY23) as against Rs 10,818 crore in the previous year, a growth of over 30 per cent. The consolidated profit after tax (PAT) for FY23 was Rs 432 crore, despite a one-time exceptional pre-tax write off of Rs 33 crore relating to the divestment of certain non-core assets. Excluding the write off, Adjusted PAT for the year more than doubled to Rs 457 crore, when compared to the previous financial year.

The company is likely to report similar revenue growth in the medium term, supported by growing demand on the back of festive and wedding seasons. India Ratings and Research (Ind-Ra) believes Kalyan Jewellers' revenue shall grow by over 10 per cent during FY23-FY25, backed by the addition of showrooms under the franchisee model and a continued uptick in demand for retail jewellery.

The franchise model helps Kalyan Jewellers to reduce its overhead cost burden (Rs 5 crore million for furniture and fixtures while Rs 25 crore as working capital facility) for opening new showrooms, though the company has to share its profit with the franchises. Furthermore, the revenue growth will be supported by increasing sector formalisation, the company’s thrust on localisation in marketing and it’s My Kalyan channels.

As per the management, contrary to large format store expansion in the past, the company plans to add mid-size showrooms in the range of 3,000-3,500 square feet. As the expansion of showrooms is being done through the franchise model, the inventory carrying cost will be on the franchisee, leading to optimisation of inventory on the company’s balance sheet. The outcome of the company's strategy related to expansion of stores through the franchise model and optimisation of inventory remains key monitorables, Ind-Ra said in its rationale.