Why Kalyan Jewellers Share Price is Rising

After many months of lull, the bulls finally came back to Indian share markets in the run up to the first quarter results of financial year 2024 (Q1FY24).

Once FIIs started coming back to India in May 2023, and corporate earnings shot up like never before, investor enthusiasm saw a new high.

Indian benchmark index Sensex scaled a record high yesterday and it took a little over four months for the index to achieve that new feat once again.

Investors who had shunned stocks during the mini breakdown in March 2023 worrying about recession and inflation, are coming back to the markets in droves.

There have been many outliers in the current rally. There's Mazagon Dock, the defence shipbuilding company that soared over 65% within a month. There's IDFC First Bank, that has been on a roll ever since it reported record high earnings.

New age stocks like Paytm and Zomato are also coming of age, spearheading the rally in tech stocks.

Olectra Greentech, HDFC AMC, and many more. There are many such well established companies that can be added to the list.

In this article, we'll discuss about another such outlier, an established name in the jewellery market, Kalyan Jewellers.

Shares of the company have rallied over 20% in a month. In the past year, Kalyan Jewellers has rallied 125%.

Let's take a look at the factors driving this growth and what lies ahead.

Why Kalyan Jewellers share is rising

# Large block deal

Last week on Friday, Highdell Investment, owned by private equity firm Warburg Pincus, sold partial stake in Kalyan Jewellers through open market transactions.

Data available on the exchanges show that Warburg Pincus offloaded 64 million (m) shares or 6.22% stake in the company at a price of Rs 113 apiece. It netted around Rs 7.2 billion (bn) from the sale.

This was the second instance where the PE firm in a year, sold stake in Kalyan Jewellers. The previous one took place in March 2023 where it offloaded 2.26% stake. Warburg had invested Rs 12 bn in the jewellery firm in 2014 and 2017.

While we don't know for sure why the recent big block deal caused its stock price to rise, here are a few general assumptions.

When a large number of shares are bought in a block deal, it can signal to investors there is increased demand for the stock. So increased demand could be one factor.

Then there's sentiment. A block deal can also be seen as a vote of confidence in the company. If a large institutional investor is buying a large number of shares, it suggests that they believe the company is undervalued.

The buyers this time were reputed domestic investors BNP Paribas Arbitrage Fund, Franklin Templeton MF, and a foreign investor Nomura.

#2 Strong performance in FY23

For the financial year ended March 2023, Kalyan Jewellers reported revenue of Rs 140 bn, which is 30% higher compared to last year. The net profit nearly doubled to Rs 4.3 bn.

Now if you look at the numbers of Kalyan Jewellers, you might wonder that it barely even makes profit. Nut two or three good wedding seasons can change the fortunes for this stock.

As part of its expansion plans, the company launched 15 franchised showrooms in India and plans to launch around 30 more in the first half of FY24.

In its latest concall, the company said that it's expanding through franchisee models in South India, Candere, and the Middle East, with separate teams handling each region.

The company has started to diversify in to the high margin studded and diamond jewellery business. Over the long run, this could build a deep presence for Kalyan in non-South markets, which display higher demand for studded jewellery.

Non-South markets contribute to 35% of the company's India business and Kalyan aims to take it to 50% in the next two years.

The best part? It has a massive capex lined up that shows the company is not all talk. It plans to invest Rs 900 m in maintenance capex and some more for adding new stores.

All this while the company has reduced debt this year and plans to reduce around Rs 4 bn more this year.

How Kalyan Jewellers share price has performed recently

In the past one month, Share price of Kalyan Jewellers has gained 20%. In the past one year, shares are up around 125%.

And on a YTD basis, Kalyan Jewellers is up around 5%.

It touched a 52-week high of Rs 137 recently while it has a 52-week low of Rs 56 touched in June last year.

Have a look at the table below that compares Kalyan Jewellers with its peers.

Comparative Analysis

Company	Kalyan Jewellers	PC Jewellers	Titan	Rajesh Exports	Asian Star
ROE (%)	11.9	-9.7	27.6	8.5	7.4
ROCE (%)	24.0	-1.0	40.1	8.9	6.5
Latest EPS (Rs)	4.2	-4.4	36.6	48.5	51.6
TTM PE (x)	30.6	-	81.1	11.5	13.9
TTM Price to book (x)	3.6	0.3	22.3	1.1	0.8
Dividend yield (%)	0.4	0.0	0.3	0.2	0.2
Industry PE	55.8
Industry PB	7.7

Data Source: Ace Equity

About Kalyan Jewellers

Kalyan Jewellers is one of the largest jewellery companies in India.

Having ventured into jewellery retailing in 1993 in Thrissur, Kerala, the company has since expanded to become a pan-India jewellery company.

KJIL designs, manufactures, and sells a wide range of gold, studded, and other jewellery products across various price points ranging from jewellery for special occasions, such as weddings, which is its highest-selling product category, to daily-wear jewellery.

To know more, check out Kalyan Jewellers financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...