Kalyan Jewellers loses shine, plunges 16% on listing day: what should investors do?

Investors looking for listing gains should exit the stock on March 26 itself, while long-term investors can hold the stock only if they want a better exit it, experts have said.

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Kalyan Jewellers had a disappointing market debut, with the share price falling 16 percent on March 26. The stock listed at Rs 73.9 on the BSE, a 15 percent discount to the issue price, which was expected given the subdued market conditions and expensive valuation of its IPO.

At the time of publishing this copy, it was trading at Rs 75.60, down 13.10 percent, with a volume of 26.21 lakh equity shares on the BSE. It opened at Rs 73.95 on the National Stock Exchange and was trading 13.05 percent lower at Rs 75.65, with a volume of 4.12 crore equity shares.

Experts advised investors, who are looking for listing gains, to exit the stock on March 26 itself and look for better peers in the same sector. Long- term investors can hold it only if they want a better exit it, they said.

“Investors who have subscribed for listing gains should consider selling on the listing day,” Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol.

For those looking long term, considering the company’s pan-India presence, strong distribution network and diversified product offering, they can hold the stock only if they want to but due to its cyclical nature of business and lower margins in comparison to Titan Company, its prospects do not seem very good.

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Prashanth Tapse, AVP Research at Mehta Equities, also recommended that investors book profit on the listing day.

Kalyan Jewellers is one of the largest jewellery company in India, with 107 showrooms located. Gold jewellery contributed nearly 75 percent to its topline in FY20 and the rest was accounted for by studded and other jewellery segments.

Buying or accumulate on listing day?

“We would not suggest further accumulation or fresh buying of these shares as their valuations are already higher in comparison to their listed peers,” Garg said. Titan, which has better prospects, can be looked at, he said.

Those who were planning to buy Kalyan Jewellers shares on the listing day should look at peers for better growth prospects, Tapse said.

“We see high competition from both organised and unorganised players in the Indian jewellery industry as the majority of jewellery industry consists of unorganised players, who have historically dominated a large part of the market, although their share of the market has been falling and is expected to continue to decline,” he said.

Kalyan Jewellers’ Rs 1,175-crore public issue comprised a fresh issue of Rs 800 crore and an offer for sale of Rs 375 crore by existing selling shareholders. The fresh issue proceeds are going to be utilised for working capital requirements.

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