Shares of Kalyan Jewellers India are continuing under pressure, with the company's stock prices trading lower for the eighth straight day, falling 27 per cent during the period. On Wednesday so far, the stock of the jewellery company has declined 3.4 per cent to Rs 576.55 on the BSE in intra-day trades. It had hit a record high of Rs 794.60 on January 2, 2025.
The market value of Kalyan Jewellers has more than doubled in the previous two calendar years. In the calendar year 2024 (CY24), it soared 116 per cent, while, in CY23, it had zoomed 180 per cent. In comparison, the BSE Sensex had gained 20 per cent in CY23 and 9 per cent in CY24.
Meanwhile, the market price of Kalyan Jewellers had jumped nine-fold, or 813 per cent, against its issue price of Rs 87 per share. The company made its stock market debut on March 26, 2021. The stock had hit a record low of Rs 55.20 on May 11, 2022.
According to the shareholding pattern data for the December 2024 quarter disclosed by Kalyan Jewellers, foreign portfolio investors (FPIs) reduced their stake in the company by nearly 1 percentage point to 15.75 per cent. FPIs held 16.37 per cent holding at the end of September quarter, data showed. Meanwhile, resident individual shareholders' stake in the company increased from 6.08 per cent to 6.47 per cent, data from the exchanges showed.
Headquartered in Thrissur in the state of Kerala, Kalyan Jewellers is one the largest jewellery retailers in India with a presence in the Middle East. Kalyan offers an array of traditional and contemporary jewellery designs in gold, diamonds and precious stones catering to the distinct needs of customers. Kalyan Jewellers has 303 showrooms, spread across India and the Middle East, with a retail area exceeding 836,000 sq. ft.
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Meanwhile, Kalyan Jewellers' consolidated operating income rose by 32 per cent on a year-on-year (YoY) basis in the first half of the financial year 2024-25 (H1FY25), following a strong 30 per cent and 32 per cent growth in FY2023 and FY2024, respectively. The growth has been supported by various factors, including healthy same store sales growth, conversion of unorganised to organised trade, better realisations, rising share of studded jewellery sales and store expansions in the non-South markets through the franchisee route.
According to ICRA, in H1FY25, the company’s operating margin declined to 6.1 per cent from 7.2 per cent in H1FY24, partially owing to a one-time loss of around Rs 69 crore booked in Q2FY25 on account of a reduction in the customs duty on gold imports by 9 per cent. The company is likely to book a similar loss of Rs 50-60 crore in Q3FY25 as well. The overall impact of the customs duty cut on Kalyan Jewellers' operating margin in FY2025 is estimated at approximately 50 basis points. The company hedges its entire gold inventory through gold metal loans, gold-on-lease and derivative routes, which mitigate its exposure to adverse fluctuation in gold prices, the rating agency noted.
The jewellery retail business is highly fragmented and is exposed to intense competition from organised and unorganised players. These limit the retailers’ pricing flexibility to an extent, although it is mitigated by an established brand and differentiated products offered by large, organised players like Kalyan Jewellers. Besides, its earnings are susceptible to the volatility in gold prices, ICRA said.
That apart, the domestic jewellery sector continues to remain exposed to regulatory risks, which could have an adverse impact on the business. Restrictions on bullion imports, mandatory PAN disclosure on transactions above a threshold limit, imposition of GST and demonetisation are some regulatory developments that have impacted demand and supply in the past. Revenues and cash flows of the jewellery players are also exposed to seasonality in demand, based on the numbers of auspicious days, festivals, crop harvest, etc., it added.