Warburg Pincus buys minority stake in Kalyan Jewellers for Rs 1,200 crore

Written by fe Bureau | Mumbai/Kochi | Updated: Oct 21 2014, 07:53am hrs
Private equity major Warburg Pincus has picked up a minority stake in Kalyan Jewellers for Rs 1,200 crore, the biggest-ever PE investment in Indias jewellery manufacturing and distribution industry.

The investment will be utilised to scale up Kalyans manufacturing capabilities and expand its distribution reach over the next two years. Kalyan Jewellers, which has 61 exclusive outlets (including six in the UAE), plans to open 28 new outlets in the next six months.

TS Kalyanaraman, chairman and MD of Kalyan Jewellers, believes these 28 new stores would increase its distribution reach by 40% and contribute significantly to revenues.

We are expecting to clock Rs 10,000 crore in revenues this fiscal and Rs 25,000 crore in the next three years. This investment of Rs 1,200 crore along with internal acrruals and a bit of borrowing from banks would be sufficient to fund growth for the next couple of years,said Kalyanaraman.

Kalyan also plans to rapidly scale up presence in the Middle East and South Asia by foraying into new countries like Kuwait, Qatar, Singapore and Malaysia.

For Warburg Pincus, this would its third new investment since May 2014. It had bought 32.3% in Lauras Lab for $150 million in May 2014, followed by putting $30 million (along with Tiger Global and Canaan Partners) in online portal CarTrade.com last week.

Though the firm has not officially disclosed the acquired stake, Warburg, through its affiliate Highdell Investment, had last week received approval from the Competition commission of India to pick up to 24% of equity share capital on a fully diluted basis.

Further, as per the SHA, Highdell would also acquire certain affirmative and veto rights on certain key business decisions, the CCI had noted in its order dated October 13, 2014 while approving the deal.

S Subramanian, managing director at Axis Capital which acted as financial adviser to Kalyan believes the investment by Warburg reinforces the trust in the Kalyan Brand name and will act as a fillip for the entire industry.

Currently, organised jewellery retailers in India (national and regional) command around 20% share of the Rs 250,000 crore domestic gems and jewellery market, according to global consulting firm AT Kearny. Further, rating firm ICRA expects the domestic gold jewellery industry to record robust growth of near 15% over the medium to long term, aided by the growing penetration of the organised sector.