BlueStone Jewellery & Lifestyle Ltd. launched its Initial Public Offering (IPO) with a tepid response, achieving a 4% subscription rate on the first day of bidding. The omnichannel jewellery retailer aims to raise over Rs 1,500 crore through this public offering, which is set to run from August 11 to August 13.

IPO Structure and Pricing

The IPO is structured as a combination of fresh issue and offer for sale (OFS):

• Fresh Issue: Rs 820 crore
• Offer for Sale: Rs 720.65 crore
• Price Band: Rs 492 - Rs 517 per share

Anchor Investment

Prior to the IPO launch, BlueStone successfully raised Rs 693 crore from 20 anchor investors, with shares priced at the upper band of Rs 517 each. This pre-IPO placement demonstrates some institutional interest in the company's offering.

Subscription Details

On the first day of the IPO, the subscription details were as follows:

The higher interest from retail investors compared to institutional buyers marks an interesting trend in the initial hours of the offering.

Grey Market Premium

The grey market, often considered an unofficial indicator of investor interest, shows a premium of Rs 9 for BlueStone shares. This suggests a potential listing price of around Rs 526 per share, representing a modest 1.74% premium over the upper price band.

Utilization of Funds

BlueStone plans to utilize the proceeds from the fresh issue for the following purposes:

1. Funding working capital requirements
2. General corporate purposes

As the IPO progresses over the next two days, it remains to be seen how investor sentiment evolves and whether the subscription rates improve across different investor categories.

Investors and market watchers will be closely monitoring the subscription trends in the coming days, as well as any further developments that might influence the IPO's performance.

BlueStone Jewellery and Lifestyle, a prominent online-to-offline jeweller, has announced its ambitious plans for an Initial Public Offering (IPO) worth ₹1,540 crore. This move comes as the company experiences significant revenue growth alongside widening losses, presenting a complex financial picture to potential investors.

IPO Structure and Objectives

The proposed IPO comprises two main components:

• A fresh issue of shares to raise ₹820 crore, earmarked for working capital requirements
• An offer for sale (OFS) amounting to ₹720.60 crore

Post-IPO, the promoter stake in the company is expected to decrease from 18.3% to 16.4%, indicating a slight dilution in ownership.

Financial Performance

BlueStone has demonstrated strong top-line growth:

• Revenue from operations surged by 51.5% annually, reaching ₹1,770.00 crore from ₹770.70 crore
• Average order value saw a 22% annual increase, rising to ₹47,671.26

However, the company's profitability remains a concern:

• Net loss widened to ₹222.00 crore from ₹167.00 crore
• Operating margin declined to 7.2% from 8.3%

Operational Highlights

BlueStone has established a significant presence in the jewellery market:

• Currently operates 275 stores across India
• Maintains manufacturing facilities in Mumbai, Jaipur, and Surat

Cash Flow and Inventory Management

The company faces challenges in cash flow and inventory management:

• Recorded negative operating cash flow of ₹665.80 crore, compared to a positive ₹27.10 crore
• Average inventory surged to ₹13,218.84 crore from ₹2,807.20 crore
• Inventory days jumped to 273 days from 133 days, indicating potential inefficiencies in stock management

Market Valuation

BlueStone's IPO pricing suggests a premium valuation:

• The price-to-sales multiple stands at 4.4
• This compares to a range of 0.9-4.1 for peers including Senco Gold, Thangamayil Jewellery, and PC Jeweller

Investor Considerations

While BlueStone's revenue growth and expanding store network present attractive prospects, potential investors may need to weigh these against the widening losses, declining margins, and inventory management challenges. The success of the IPO may hinge on the company's ability to demonstrate a clear path to profitability and improved operational efficiency.

As the jewellery market continues to evolve, BlueStone's online-to-offline model and its ability to adapt to changing consumer preferences will be crucial factors in its long-term success. Investors will likely scrutinize the company's plans for utilizing the IPO proceeds to address its working capital needs and potentially improve its financial health.