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With Wednesday’s drop, Kalyan Jewellers’ share price has declined 32% in the last nine trading sessions, in which, it has ended in the red in eight of them.
Interestingly, Wednesday’s low for Kalyan Jewellers was ₹522. That is below the level at which the promoter TS Kalyanaraman acquired 2.36% stake from Warburg Pincus in August last year. That stake, worth ₹1,300 crore then, was acquired at a price of ₹535 per share.
With the stock having declined back to the price at which promoters acquired that additional stake, the street would be keen to know whether the promoters have any intention of increasing their stake further in the company, to assuage the fears of investors, particularly the smaller ones, whose number has grown 50% over the last 12 months.
Kalyan Jewellers currently has 5.6 lakh retail investors, or those with authorised share capital of up to ₹2 lakh, from the 3.64 lakh figure at the end of December 2023.
It must be noted that the management is currently in the silent period ahead of its quarterly results on January 30 and there cannot be any action on this front until then.
The other question, is with regard to promoter pledges. When the company released its shareholding pattern for the quarter that ended in September, 20% of the promoter shareholding appeared as pledged. Promoters, after the Warburg buy, hold 62% stake in the company, of which 20% is pledged. That figure has remained constant at the end of the December quarter as well.
The question that the street would want an answer to, is whether the promoters have set any timeline to release the pledges, what was the rationale behind the pledge and to whom is the stake pledged to?
Lastly, the Mutual Funds holding stake in Kalyan Jewellers has remained constant at 11.75% in December. However, Motilal Oswal, through its various schemes increased its stake during the October-December period as well. The MOSL Midcap Fund now has a 6.3% stake in the company. The fund though, cannot increase its stake any further as its holding is now 10% of its Assets Under Management (AUM).
Motilal Oswal, the brokerage firm, also has a “buy” recommendation on Kalyan Jewellers with a price target of ₹875, which is among the highest on the street for the stock.
The question is whether these funds will look to buy this dip in the stock or will they chose to pare down their stake?
Apart from Motilal Oswal, Sundaram MF and Franklin MF have stake in excess of 1% in the company.
In an interaction with CNBC-TV18 last week, the management of Kalyan Jewellers highlighted that as a management, their focus will be on the business, executing their expansion plans and once they do so, the street would appreciate the stock as it has done so in the past.
Post this correction, shares of Kalyan Jewellers are now trading at a financial year 2026 price-to-earnings multiple of 52 times, compared to a 60.5 times multiple for peer Titan.
The stock has been on a downward spiral despite a strong business update for the December quarter. The jewellery firm reported a consolidated revenue growth of 39% for the December quarter. For the India business, Kalyan’s revenue grew 41% from last year, led by very strong festive and wedding demand across both gold and studded categories. The quarter also recorded healthy same-store-sales-growth of nearly 24%.
Shares of Kalyan Jewellers ended 7.8% lower on Wednesday at ₹550.
