BlueStone IPO: A Tale of Two Fortunes for Investors

The recent Initial Public Offering (IPO) of BlueStone, the online-first omni-channel jewellery retailer, has unfolded a dramatic narrative of contrasting fortunes for its investors. While the company celebrated its public debut, the outcome has cast a long shadow over some of its most prominent late-stage backers, leaving them to contend with significant paper losses, even as early investors toasted to handsome exits.

At the heart of this divergence are the vastly different entry valuations.

Giants like Prosus (formerly Naspers) and Peak XV Partners (formerly Sequoia Capital India) had poured capital into BlueStone at valuations far exceeding its IPO price. Prosus, through its unit MIH TC Holdings (BVI) Ltd, invested a substantial Rs 307 crore in March 2022, valuing BlueStone at a hefty Rs 6,242 crore.

Just months prior, in November 2021, Peak XV Partners had injected Rs 275 crore at a valuation of approximately Rs 3,500 crore. Fast forward to the IPO, and BlueStone's market capitalization settled at a modest Rs 2,059 crore.

This drastic re-rating means that Prosus is currently staring at a staggering paper loss of nearly 67% on its investment, while Peak XV Partners is facing a 41% decline.

For these marquee investors, who typically eye substantial returns, the BlueStone IPO stands as a stark reminder of the volatile nature of late-stage venture investing, especially when market sentiments shift.

In sharp contrast, the early bird caught the fattest worm. Venture capital firms like Accel and Kalaari Capital, who bet on BlueStone in its nascent stages, have reaped substantial rewards.

Accel, which first invested in 2012, reportedly made an impressive 11.5x return on its stake. Kalaari Capital, an investor since 2014, also saw robust returns, achieving around 4x on its investment. These early backers strategically sold parts or all of their holdings through secondary transactions leading up to the IPO, or during the offering itself, securing their profits well before the public listing’s valuation reset.

BlueStone's IPO comprised a fresh issue of shares worth Rs 158 crore and an Offer for Sale (OFS) of Rs 227 crore by existing shareholders, bringing the total issue size to Rs 385 crore.

The shares were priced at Rs 367 each. On its listing day, the stock opened at Rs 380 and closed slightly lower at Rs 379.80, a modest premium over the IPO price. However, this marginal gain on listing day does little to offset the deep discount at which the company ultimately went public compared to its earlier private market valuations.

BlueStone, founded by Gaurav Singh Kushwaha, has carved a niche in the jewellery market by combining an online presence with a growing network of physical experience stores.

While the company continues its journey on the public markets, the BlueStone IPO serves as a compelling case study on the critical importance of entry valuations in the high-stakes world of venture capital, vividly illustrating how timing and investment stage can dramatically dictate investor outcomes.