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Hello and welcome to find shots daily in today's episode, we talk about the Caligula's IPO. Skullion Jewelers is one of the biggest jewelry chains in India.


Normally at this point, we would talk a bit about the history of the company. However, as this is a story on the IPO, we will skip that bit and get straight to the point. What's the company's unique value proposition? How is a client different from what? And why can somebody replicate their success? Well, that's a difficult question to answer. But if you ask the company, they'll probably tell you something like this. India is a mishmash of different cultural preferences.


A buyer in Kashmir and a buyer in Karnataka won't seek the same kind of jewellery in the southern states. Consumers are more likely to purchase plain gold jewelry where margins aren't that great. Consumers in the northern and western parts of India are more likely to go for studied jewellery. But a bride in Kerala has more than double the weight of gold compared to a bride in Gujarat. And if you extend that argument a bit, you will see that southern states lap up close to 40 percent of all the gold sold in India.


Eastern states, meanwhile, account for just 15 percent. So there's a lot of intricacies in each micro market. And you can establish a Pan India presence if you are attuned to these subtle differences. So Calyon would argue that there are strong barriers to entry for regional players trying to scale up quickly. You have to understand each market, adopt a different selling strategy, sauce different kinds of products, collaborate with local artisans, purchase enough gold and entice them to work with you.


It's not an easy gig by any stretch of the imagination, but then things get even more complicated. When was trying to expand its footprint in Kerala? It was doing so on the back of an excellent run in Trishaw. So they had every reason to believe that falling into a new city, which is Palakkad, would be a walk in the park and the response was overwhelming. At first, people frequented the store like there was no tomorrow. However, it didn't translate to a meaningful uptick in sales, at which point the company realized they needed to further localize their product offering.


They had to go hyper local, and the argument goes that any player trying to replicate this strategy will have to do the same thing. In fact, if you ask the company, they tell you only two companies have truly managed to carve up an India presence in the organised retail market. Donchak and Calyon Bartunek is a whole different beast compared to Kalayaan.


They have a much more uniform product offering across their stores and their financials are more robust. Gallion, as we already noted, adopts a hyper local strategy, and that means designs in the Bombay showroom will be very different from designs in Bangalore. So Karlgaard would argue that they have a USP and a good one at that. But does it translate to a meaningful financial advantage that we don't know? However, the company does boast 107 showrooms across 21 states in India right now.


In 2013, they also ventured into the Middle East. They have 30 showrooms abroad. All in all, the company rakes in revenues to the tune of 10000 crores as of financial year 2020 and has been doing so rather consistently. Not too shabby for a company that is generally considered a regional player, right. That being said, you can see how revenue growth hasn't been great these past three years. Consistency isn't the name of the game. Exponential growth is, and there's a lot to be desired on this front.


Also, there was a time when Kalayaan lost focus and experimented with the few things that didn't work out. I do it a spate of natural calamities in southern India. And you can see why the company posted a loss during financial year 2019. However, Calyon is still a massive organized player, and their future prospects will ultimately hinge on India's appetite for gold. So the real question ought to be how is the industry shaping up? Well, as we wrote in one of our articles recently, caught with moves like Goudey and Demonetization, people are now forced to transact transparently uncaught.


The unorganised players don't have an advantage like they used to. They are being forced to adapt or shut shop. So clearly the industry favors the likes of Donetsk and Kellyann. But what about the market itself? What's happening there? Well, people buy gold for all sorts of reasons. Some buy it as an accessory. Some buy it because it's a good store of value. More importantly, people buy it when ratings are due. So let's look at the major market, your bridal jewelry since.


It made landfall, people haven't been splurging on Big Bash weddings as much. It's much more low key these days, and this has led some to speculate that demand for bridal jewelry might create over these changing dynamics. However, there's another side to this story. It's quite possible that people might now allocate a higher proportion of their wedding budget elsewhere. Maybe they will consider buying more jewelry, especially since it can also serve as a good investment. So, yes, things could go either way, but that doesn't mean everything is nice and dandy either.


As the company itself noted, good as of the end of fiscal 2020, 2019 and 2018 are revenue from operations in South India, which includes Kerala, Tamil Nadu, Andhra Pradesh, Telangana, Pondicherry and Karnataka represented fifty two point one nine percent, fifty one point seven three percent and fifty seven point nine five percent of our total revenue from operations respectively for such periods. As a result, our business is susceptible to regional conditions in South India and we are vulnerable to economic downturns in the region, unquote.


More importantly, if economic conditions soar across India, the likes of Kalayaan won't be thriving. So yes, as it stands, the company is well placed. But where it goes from here, well, that will depend on the trajectory this nation takes as a whole. Also, the companies asking price for the IPO translates to a bevy of 58 based on the numbers from F.I. 20. And if you are planning to write to us asking for a more elaborate exposition on the matter, we don't have one.


On the flip side, if you have a hard take on the IPO and you want to talk about the company's valuation, we would love to listen to you. So let us know your thoughts by tweeting to us at Redfin's Shots.


Thank you for listening to today's episode. And if you want to share your feedback or suggestions, do drop us an email to hi at the Redfin shots dot until next time.