To sell its corporate aircraft; group in talks with 50 prospective franchisees
By CL Jose
KOCHI/November 11-2022: As part of the strategy to convert Kalyan Jewellers group into an asset-light debt-light business entity, the company has chalked out plans to sell its non-core movable and immovable assets.
Talking to analysts, Ramesh Kalyanaraman, executive director of the jewellery major, said the company has already signed up with a reputed agency to sell its corporate aircraft.
The group also has a parcel of land that has been placed with the financiers as collateral for its cash credit.
It’s reliably learnt that Kalyan owns two airplanes and a helicopter as part of its corporate aircraft fleet though a confirmation on this is yet to be received. Selling the aircraft fleet could fetch a few hundred crores of rupees, acording to analysts.
The group is aiming to settle most of its debt, if not all, within three years and release the collaterals, which would in turn help the group to bargain-hunt fresh debt, if needed, at better terms with regard to amount of collateral and interest rates.
“As of now, we are required to offer up to 35 per cent of the debt as collaterals; once the current debt is settled, we hope we can negotiate leaner collateral terms for fresh debt with the bankers,” Kalyanaraman said.
He said the group’s international bond issue ambitions are still alive though the process may have to wait until the market turns favourable for its take off.
While the Kalyan debt book has Rs1,200 crore cash credit, the gold metal loans (GML) are estimated at around Rs1,800 crore.
Franchised branch model
The group’s franchised branch model expansion is forging ahead in the right direction and the right pace, as Ramesh Kalyanaraman claims.
The group is in advanced discussions with 50 odd entities that are keen to enter the Kalyan model franchised branch business.
Kalyanaraman said the five franchisee branches that are already operational have gained good traction and this has resulted in the company signing 6 letters of intent (LoI) for opening five new franchisee branches in India and one in the Middle East.
Going forward, the Middle East business expansion will predominantly be modelled on franchised branches, which will help the company unlock substantial funds.
Kalyan follows franchisee owned company operated (FOCO) model whereby the franchisee owns the business while the company operates it.
This means that the franchisee investor gives a one-time lump sum payment based on which they establish the business.
Here, the franchiser (Kalyan) handles all the legalities and paperwork based on the money given by the franchisee.
This also helps the group release fresh funds that can be invested in the expansion of business or for settling debt thereby adding value for the shareholders who have entered the Kalyan group business bandwagon through the initial public offering (IPO) in March 2021.
