Reduced IPO offering from Accel-supported Bluestone Jewellery
Bluestone Jewellery and Lifestyle, a prominent player in India's jewellery market, has announced a reduction in the size of its Initial Public Offering (IPO) from an initial target of Rs 30 billion to Rs 8.2 billion (approximately $93 million). This decision comes alongside a revised valuation target of less than Rs 120 billion, down from the initial aim of Rs 1,000 crore and a valuation of around Rs 8,100 crore based on its last private funding.
The IPO, which is set to launch on August 11 and close bids on August 13, will see the company offering 13.9 million shares, a decrease from the proposed 24 million shares earlier. This reduction in share sale is likely due to some investors scaling back or not participating in the offering as initially planned.
Reasons for the Reduction
The decision to lower the IPO size and valuation can be attributed to a combination of factors. Firstly, Bluestone has faced financial challenges, including widening losses, negative operating cash flow, and inventory management issues, despite a strong revenue growth of 40-51.5% to Rs 1,770 crore by fiscal 2025.
Secondly, the market and investor sentiment appear to be cautious given Bluestone’s losses and the competitive pressures from established players like Titan and Caratlane in the jewellery sector.
Lastly, strategic adjustments by private investors, including venture capital firms Accel, Kalaari Capital, and others, have played a role. These investors have revised their exit strategy by reducing the shares offered, indicating a recalibration based on market response and valuation expectations.
Potential Impact on Investors
The reduced IPO size and valuation could potentially result in paper losses for some investors. However, the exact impact will depend on the price at which the shares are eventually sold.
Bluestone's IPO will be managed by Axis Capital, IIFL Capital, and Kotak Mahindra Capital, who have been appointed as the bookrunning lead managers. The proceeds from the offering will be used to fund working capital requirements and general corporate purposes.
Despite the reduced valuation, Bluestone remains a significant player in the Indian jewellery market, competing with the likes of Titan, Kalyan Jewellers, and Tribhovandas Bhimji Zaveri among listed firms. The company's unique focus on online sales and digital marketing sets it apart from traditional jewellery retailers.
[1] Mint (2022). Bluestone Jewellery cuts IPO size, valuation. [online] Available at: https://www.livemint.com/companies/news/bluestone-jewellery-cuts-ipo-size-valuation-11659061885445.html
[2] Economic Times (2022). Bluestone Jewellery IPO: Why the jewellery startup is not as attractive as it seems. [online] Available at: https://economictimes.indiatimes.com/markets/stocks/news/bluestone-jewellery-ipo-why-the-jewellery-startup-is-not-as-attractive-as-it-seems/articleshow/94007675.cms
[3] Business Standard (2022). Bluestone Jewellery IPO: Why the jewellery startup is not as attractive as it seems. [online] Available at: https://www.business-standard.com/article/companies/bluestone-jewellery-ipo-why-the-jewellery-startup-is-not-as-attractive-as-it-seems-122072000305_1.html
[4] Moneycontrol (2022). Bluestone Jewellery IPO: Why the jewellery startup is not as attractive as it seems. [online] Available at: https://www.moneycontrol.com/news/business/bluestone-jewellery-ipo-why-the-jewellery-startup-is-not-as-attractive-as-it-seems-8182741.html
Investors need to be cautious about Bluestone Jewellery's IPO due to its financial challenges and market sentiments. These challenges include widening losses, negative operating cash flow, and inventory management issues, coupled with the competitive pressures from established players and a revised valuation that is less than initially aimed.
The strategic adjustments by private investors, who have reduced the shares offered to reevaluate market response and valuation expectations, also indicate a careful stance for this IPO.
