Kalyan Jewelers eyes the biggest IPO in the sector

India’s Kalyan Jewelers plans to raise as much as $235 million as it pins its hope for the long-term allure of gold to dominate the corona virus-induced dip in the country.

The South Asian country is the second-largest consumer market for the precious metal in the world.

Flotation is the method of turning a private company into a public entity by issuing shares available for purchase to the public. This allows businesses to receive funding externally, rather than using retained earnings to finance new or expanded ventures.

The decision to launch the largest initial share sale among Indian jewelers comes at a time when gold stocks are receiving a highly positive response from investors as they step towards the safe haven amidst the pandemic.

The Warburg Pincus-backed firm plans to raise around $0.23 billion, of which $0.13 billion will be through a fresh issue of shares and $0.10 billion from the sale of equity from current investors, it said in a draft prospectus.

Warburg Pincus is a US based private equity company focused on growth investing.

Though spending on gold will be subdued due to the pandemic this year, its long-term appeal remains intact as cultural norms dictate widespread use of the metal during Indian weddings and as an investment choice, Kalyan said.

Approximately 10 million weddings are held each year in India, creating demand for as much as 400 tons of gold and the country’s young age profile will sustain growth, it said.

On the demand side, the desire of the consumers for a safer shopping experience with more space, well-trained store personnel, will benefit jewelers like Kalyan, says experts.

Launched by TS Kalyanaraman in 1993, the jeweler had a $1.37 billion turnover in the financial year which ended on March 31, it said. Kalyan has 107 Indian outlets, and 30 Middle East showrooms.

Organized jewelers have a 32 percent share of the $64 billion jewelry retail market in India, while the rest are made up of standalone, smaller outlets.