Lalithaa Jewellery IPO: Margin, cash flow risks linger; bid or avoid?

Lalithaa Jewellery IPO review, latest GMP: Lalithaa Jewellery Mart shares currently trade at ₹239 in the unlisted market, indicating a grey market premium (GMP) of ₹38, or 19 per cent.

Lalithaa Jewellery Mart IPO review, latest GMP: Jewellery retailer Lalithaa Jewellery Mart Ltd's ₹1,700 crore IPO will open for subscription on August 17 and conclude on August 19.

 

The company has fixed a price band for the issue at ₹190-201 per share. At the upper end of the price band, the company eyes a valuation of around ₹11,250 crore.

 

Lalithaa Jewellery Mart IPO comprises a fresh issue of shares worth up to ₹1,200 crore and an Offer For Sale (OFS) of shares worth up to ₹500 crore.

 

Brokerages have shared a mixed view on the Lalithaa Jewellery Mart IPO, with Swastika Investmart recommending a ‘Subscribe’ rating, while SBI Securities has assigned a ‘Neutral’ rating.

 

 

Lalithaa Jewellery Mart IPO review by Swastika 

 

Swastika said that Lalithaa is priced at a 75 per cent discount on a P/E basis compared to national organised peers like Kalyan Jewellers and Titan. While its net margins (4.04 per cent) are slimmer due to its value-pricing stance, its return ratios (ROE > 41 per cent) significantly outperform peer group averages.

 

Due to heavy inventory stocking requirements for store expansion, operating cash flow turned negative at ₹397.7 crore in FY26. 

 

Past tax issues are largely resolved, but the ₹1,066 crore GST dispute and promoter-related matters remain key risks.

 

"Apply with moderate conviction, suitable for listing gains and long-term investors who are comfortable with the associated risks," Swastika said.   

 

Lalithaa Jewellery Mart IPO review by SBI Securities 

 

SBI Securities said that the company has delivered a CAGR of 22 per cent/ 60 per cent/ 68 per cent in its revenue/ Ebitda/ PAT during the FY24-FY26 period, with a FY26 Ebitda margin of 6.5 per cent, expanding 240 bps Y-o-Y.

 

At the upper price band, Lalithaa Jewellery Mart is valued at an FY26 P/E multiple of 11.1x, which is at par with industry peers. 

 

The brokerage said that its strong growth over the past two years can be attributed to a sharp rise in gold prices, especially since the company does not have any hedging policy, leading to the entire benefit of the gold price rise flowing into the margins. Hence, margins of the company may moderate once the gold price stabilises. 

 

"We assign a Neutral rating to the issue and would like to track the performance of the company for a few quarters post-listing," the brokerage said. 

 

Lalithaa Jewellery Mart IPO GMP today 

 

Lalithaa Jewellery Mart shares are commanding a decent premium in the grey market. According to websites tracking grey market activity, its shares are currently trading at ₹239, indicating a grey market premium (GMP) of ₹38, or 19 per cent.

 

The company has said that proceeds from the fresh issue will be used to open 10 new branches to increase penetration across southern markets, while a portion will be utilised for general corporate purposes. 

 

Incorporated in 1985, Lalithaa Jewellery Mart is a jewellery retailer, primarily catering to the South Indian jewellery market. The company operates 61 stores across 51 cities in the states of Tamil Nadu, Andhra Pradesh, Telangana, Karnataka and Puducherry.

 

The equity shares of Lalithaa Jewellery Mart are proposed to be listed on both the BSE and NSE on August 24. 

Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.