Kalyan Jewellers India Ltd — Q4 FY25

KALYANKJIL Q4 24/25 Earnings Conference Call https://stockanalysis.com/quote/nse/KALYANKJIL/transcripts/303967-q4-24-25/ Published: sourced from public earnings transcript

Operator Ladies and gentlemen, good day and welcome to the Kalyan Jewellers India Limited Q4 FY 2025 earnings call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Agarwal. Thank you, and over to you, sir. Rahul Agarwal Associate Director of Investor Relations, Strategic Growth Advisors Thank you. Good evening, everyone, and thank you for joining us on Kalyan Jewellers India Limited Q4 and FY 2025 earnings call. Today on the call, we have with us Mr. Ramesh Kalyanaraman, Executive Director, Mr. Sanjay Raghuraman, CEO, Mr. V. Swaminathan, CFO, Mr. Sanjay Mehrotra, Head of Strategy and Corporate Affairs, and Mr. Abraham George, Head of Investor Relations and Treasury. I hope everyone had a chance to view our financial results and investor presentation, which were recently posted on the company's website and stock exchanges. We will begin the call with opening remarks from management, followed by an open forum for Q&A. Before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking. A disclaimer to that effect has been included in the earnings presentation. I would now like to invite Mr. Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers India Limited, to give his opening remarks. Thank you, and over to you, sir. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Thank you. Good evening, and let me welcome everyone to the call. Q4 has been fantastic. We ended the financial year on an excellent note. The consolidated revenue and PAT growth for the quarter has been approximately 36%. Stand-alone business recorded revenue growth of 38% and PAT growth of around 41%. For the full financial year, we recorded a revenue in excess of INR 25,000 crore and a PAT of approximately INR 714 crore. At the beginning of the last financial year, we had kept certain targets around showroom network expansion and debt reduction. We launched 76 Kalyan showrooms and 60 Candere showrooms in India, and our first showroom in the U.S. during the last financial year. The year also saw a reduction in debt in India by around INR 250 crore. Even though our objective was to reduce non-GML during the year, the reduction of debt has been done mostly in the GML due to the temporary disruption around GML in India over the last three to four months. With the situation slowly returning to normality, we expect to swap positions and reduce non-GML levels over the near term. Total debt reduction over the last two years stands at around INR 520 crore. In line with our announced dividend policy, the Board of Directors has recommended a dividend of approximately INR 150 crore, payout in excess of 20% in the net profit generated during FY 2025. As previously communicated, during the ongoing financial year, we plan to open 170 showrooms across Kalyan and Candere formats and plan to reduce debt in India by another INR 350-400 crore. Let me spend some time on our omnichannel platform, Candere. As I indicated earlier, ever since we made Candere a wholly-owned subsidiary, we have been infusing fresh talent at the senior management level and have been working on creating a totally refreshed merchandising strategy, brand identity, and omnichannel rollout plan. Now, with 73 active Candere showrooms, we have finalized the launch plan for the nationwide campaign for Candere. We have held back the official launch of the campaign given the recent Pahalgam incident. We plan to launch 80 Candere showrooms in India during the current financial year through a mix of FOCO and COCO showrooms. The bulk of the showroom launches during Q1 and Q2 of the current financial year will be franchise showrooms. We expect Candere to be profitable at PAT level during the current financial year. Now, talking about the ongoing quarter, we had an excellent start to the financial year despite continuing volatility in gold prices. We witnessed robust growth in our Akshaya Tritiya sale this year, and we continue to see encouraging momentum in consumer demand, especially around the wedding purchases during the current quarter. Thank you, and I'll hand over to Sanjay. He will read you through the numbers. Thank you. Sanjay Raghuraman CEO, Kalyan Jewellers India Limited Thank you, Ramesh. Good afternoon, everybody. I'm really happy to be talking to you all after a great financial year. Let's start with the just concluded quarter. Our company reported consolidated revenue of INR 6,182 crore in the just concluded quarter, a growth of 36% over the corresponding quarter of the previous year. Consolidated EBITDA came in at INR 399 crore versus INR 296 crore in the corresponding quarter of the previous year. Consolidated profit after tax came in at INR 188 crore versus INR 137 crore during the corresponding quarter of the previous year. I'll now give you a breakup of the financial year performance between India and the Middle East, starting with India. For the just concluded quarter, revenues in India came in at INR 5,350 crore versus INR 3,867 crore compared with the corresponding quarter of the previous year. India Q4 EBITDA came in at INR 343 crores versus INR 255 crores when compared with the corresponding quarter of the previous year. India profit after tax came in at INR 185 crores compared to INR 131 crores in the corresponding quarter of the previous year. Moving on now to talk about our Middle East business. Middle East revenue for the quarter came in at INR 784 crores versus INR 623 crores in the corresponding quarter of the previous year. EBITDA in the Middle East was INR 59 crores versus INR 44 crores for the same period of the previous year. The Middle East business posted a profit of INR 12 crores for the quarter compared to INR 10 crores in the corresponding quarter of the previous year. Lastly, talking about our e-commerce business, Candere, we posted revenues of INR 28 crores versus INR 36 crores in the corresponding quarter of the previous year. The quarter recorded a loss of INR 12 crore in Candere versus a loss of INR 70 lakhs for the corresponding quarter of the previous year. For the full year 2025, on a consolidated level, India revenue came in at INR 25,045 crore, and consolidated profit after tax came in at INR 714 crore. With this, I'm done with the summary of the financials, and we now open the floor for questions. Thank you. Operator Thank you, sir. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Manoj Menon from ICICI Securities. Please go ahead. Manoj Menon Head of Research and Consumer Analyst, ICICI Securities Hi, Ramesh. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Hi. Manoj Menon Head of Research and Consumer Analyst, ICICI Securities Nice evening. I just seek your insights on consumer behavior on a few aspects to begin with. Now, given the material gold inflation which you have seen, I'm sure you would have seen similar templates playing out in your long experience as well. What's the consumer telling you in terms of the consumer behavior? Let's say, given the 40% sort of increase we have seen over the last six months, there are a lot of facets to it. Let's say, for example, is the salience of a non-22-karat increasing? Is there a consumer demand for it? Anything you see on the consumer behavior, and I've got a few follow-ups on this. Thank you. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah, as you rightly mentioned, we have seen this cycle over the past three decades now a couple of times. Whenever the gold price increases, demand per se, what happens? People take a pause. People see where the gold price is going, and then they either postpone or prepone the purchase according to the occasion. Demand per se, there is no issue. I told you Akshaya Tritiya was also strong. Footfalls are strong. SSGs are strong even for Akshaya Tritiya. Yes, the inventory composition, etc., on 18-karat, 22-karat, again, the heavyweight versus lightweight versus midweight products, these kinds of things we keep on changing when we have a 30%+ price increase for a commodity, which is again a constant process. It is not an overnight thing. The price, say, was X three years before, Y now, but there has been a path wherein it came from X to Y. Constantly we work on the composition of inventory in terms of 18-karat, 22-karat, lightweight jewelry, midweight jewelry, heavyweight jewelry, etc. Manoj Menon Head of Research and Consumer Analyst, ICICI Securities Understood. Ramesh, understood the composition of the, let's say, on the weight side of it, understood that aspect. But on the 18, 14, 22, is the consumer or let me put it differently. Can a common consumer make out, let's say, somebody's wearing an 18-karat or a 22-karat? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited No, nobody can make out because the product is the same. Okay, so it's not about whether people know or not. It is about their personal satisfaction, whether it is a 22-karat versus 18-karat or 14-karat. As of now, plain gold we do not do in 14-karat. Diamond jewelry, it was earlier done in 18. Now it is mostly done in 14. Plain gold jewelry was only 22, and 18-karat was only for certain stylized products wherein Gen Z products. Now 18-karat is there for even staple products. We have started keeping 18-karat in certain markets. Certain markets like Tamil Nadu, it is still very tough to crack an 18-karat. People still buy 22-karat. 18-karat is only for Gen Z products. It is upon market to market, and we cannot just give you a blanket answer. Manoj Menon Head of Research and Consumer Analyst, ICICI Securities Understood. Loud and clear, I'll take it separately. Now, just on the making charges bit here, does it make a difference to your profit pool or the making charges when it comes to 22, 18? I'm talking about only plain gold, not karat. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited No, no, no. We will actually, you know, our profitability is on the cost price of the product which is made, and then selling price is the making charge, right? Our margin is only regarding the making charge. As a percentage, we will not compromise on our making charge at all. In fact, 18-karat will have a bit more profitability than the 22-karat. Manoj Menon Head of Research and Consumer Analyst, ICICI Securities Understood. If I may just quickly a second, and then I'll come back in the queue. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. Manoj Menon Head of Research and Consumer Analyst, ICICI Securities Historically, my understanding, I just want to stress that hypothetical understanding from the past that whenever gold has seen material inflation, the ability of the salesperson to actually upsell a studded is far better is what conceptually what I have been told in the past. That when a consumer says, "Look, for buying a 10-gram side, I'd, let's say, shell out INR 100,000," right? I'm kind of in a situation wherein that upgrading helps you capture far better gross margin. Is the hypothesis correct, and is it happening on the ground? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah, yeah. Studded conversion becomes easier when the gold price is very high. Very simple reason. Because customer comes with INR 1 lakh, okay, for example, if it is plain gold, he or she will end up buying 10 grams, right? Approximately, I'm telling you. Earlier, they could have bought 13 g-14 g, which is now they are able to buy only 10 g with the same budget. Customer might not get the same product which was there in his mind because volume-wise, they would have cut by around 30%-35%. When it comes to studded, at least 40%-50% is taken care of by the stone. Only the gold, rest of the gold where this volume issue is coming. For studded product, the perception of the customer for what he or she should buy versus what reality is will be more closer than the plain gold. It makes us easier to convert to studded when the prices go up. Manoj Menon Head of Research and Consumer Analyst, ICICI Securities Understood. One last question for now is, as I understand that the retail prices of, let's say, diamonds are largely flattish versus material inflation in gold. Now, can this have an impact incrementally on the consumer's, let's say, propensity or willingness to actually buy a diamond? Because let's say if I'm a consumer who bought two or three years back, and suddenly I'm finding that when I come to, let's say, store for an exchange, that my diamond price has not inflated, whereas gold has inflated. Is there any such consumer behavior which we should watch out for? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. Again, everybody does not buy in an angle of just getting a price, what you call, elevation for a product which they, a commodity which they have bought, right? Even when you buy a diamond jewelry, there is gold quotient in it. And diamond also, it is not that price has been stable for the past 10 years. It has been moving up, right? 65% in a studded product is also gold, no? First, the customer happiness comes for satisfaction of wearing that product. Everything comes behind that. They have to be satisfied in wearing that product, which is more in a studded when compared to plain gold because the price went up 30%-35% in a very short time. Manoj Menon Head of Research and Consumer Analyst, ICICI Securities Very clear. Thank you, and all the best for the medium term. Thank you. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. Operator Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Devanshu Bansal from Emkay Global Financial Services . Please go ahead. Devanshu Bansal Research Analyst, Emkay Global Financial Services Sir, hi. Thanks for the opportunity and congratulations for a great set of numbers. Sir, just wanted to check on the robust demand trends in the current year, right? You mentioned that Akshatridya sales were pretty robust. I just wanted to check, is it a specific day that you are talking about, or is it whatever, 35-40 days that have been in the quarter? Throughout the quarter, have the demand trends remained robust? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited The demand has been robust right from the beginning of the quarter. What I told you is about the Akshaya Tritiya day, and usually what happens, all the offers or the pre-book redemptions, etc., happen 10 days in the Akshaya Tritiya zone, meaning Akshaya Tritiya minus 10 days. Both hands when you see, the SSGs have been strong, and there has been good momentum at the store level. Devanshu Bansal Research Analyst, Emkay Global Financial Services Understood. Understood. Sir, in your initial comment, you mentioned that the gold metal loan was sort of reduced in FY 2025. In another way, this is a hedging instrument also. Have we changed our way of hedging recently? What is the outlook there? Secondly, as we understand, there was about 200 basis points of increase in interest rate on gold metal loan, and you indicated that there is some relief that has been there. What is the exact quantum of increase that may be there for the current FY 2026 year? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. Gold loan interest rates have been increased in the range of 2%-2.5%. It has started coming down from the peak, which was at around 5% oddish. Now it is slowly settling down. Once it gets settled down, we will swap the gold loan to, meaning the gold loan will go up and the CC will come down. It is still not back to the normal levels. Devanshu Bansal Research Analyst, Emkay Global Financial Services Understood. Any quantum, sir? As in earlier, it was 2%-2.5%. As of now, where does it stand? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited It was in the range of 3-3.5. Now it is in the range of 5. 5-ish, meaning 5-5.5. Devanshu Bansal Research Analyst, Emkay Global Financial Services 5-ish. Okay. Understood. Sir, this year, we have inked about INR 350 crore of CapEx, right? The understanding was also that you will be changing the model, right? For FY 2026, what is the CapEx expectation from showroom additions in India? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Even in this financial year, if you remember, initially, the first half was the old model where CapEx was put by Kalyan and Fantasy was investing in the inventory. Okay? Around 30 showrooms in this financial year, it was our CapEx, meaning Kalyan Jewellers was investing for CapEx, and only the investment on inventory was coming from them. Predominantly, the first half CapEx amount was that. In the second half, there has been what you call the renovations which will happen, etc., which will be in the range of what usually INR 150 crore. Next year, if you ask, CapEx should be in the range of INR 150 crore because only the maintenance CapEx will be there because next year plan is to open all stores through the new model. Plus, of course, Candere stores will be there, which is owned for which CapEx will be put by Candere, meaning Kalyan. Yeah. Devanshu Bansal Research Analyst, Emkay Global Financial Services Okay. So sir, if we have to break this INR 350 crore and INR 150 crore has gone into maintenance, so new store Capex has been about INR 200 crore in FY 2025. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited It will be like what? Yeah, 30 showrooms which we would have done CapEx, 30, what, into 4, maybe INR 120 crore. Again, INR 150 crore will be maintenance CapEx. There has been one or two showrooms like Chennai we completely revamped, which is of a high cost. It is not in the range of INR 2 crore-INR 3 crore. It will be much bigger than that. That is about the CapEx which has been spent for this year. Devanshu Bansal Research Analyst, Emkay Global Financial Services Fair enough. Last question from my end. I was seeing your payable days, so that is slightly higher at between 30-35 days versus 10-20 days for other jewelry retailers. Do you anticipate this to reduce going ahead or remain stable at current level? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah, yeah. That CapEx, one more thing which I missed out is south, our franchisee model, if you remember, south is that even now, in this financial year, we opened nine stores in the south. CapEx will be put by Kalyan, and only inventory will be done by franchisee. South franchisee model, even now, is CapEx by Kalyan. That will also be in the range of INR 40 crore-INR 50 crore in the last financial year. Okay? Now coming to payable, payable depends upon the inventory which you keep. If you look at from far, it will be only gold or a diamond. When you go further into it, in gold itself, there are premium products in gold which have a better margin and better credit base, which is not kept by all brands. There are brands predominantly keeping only staple products for which the number of payable days cannot be like what we enjoy. There are certain brands who do not keep as much as studded as Kalyan. If you look at our payable days, it has been only reducing or it has been stable. If you ask whether we will improve the number of working days, yes, of course we can because the revenue is growing. If in case we are not adding inventory, then the payable days should come down. Devanshu Bansal Research Analyst, Emkay Global Financial Services Got it. Got it. Thanks for taking my question, sir. Thank you. Operator Thank you. A reminder to all participants, please press star and one to ask a question. The next question comes from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Hello? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Hi. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Am I audible, sir? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah, yeah. Very, very light. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Okay. Thank you very much, sir, for this opportunity. I just wanted to understand first about the margin front. I mean, this year as a whole, our PBT margins were down to 3.8%, which is largely driven also by, I think, INR 120 crore-INR 130 crore of impact on inventory. How do we see the PBT margins for this year, FY 2026? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited If you, first of all, as you rightly said, if you negate the INR 120 crore-INR 130 crore, the PBT margins would have been in the range of 5%, right? Approximately 5% for even the last financial year. The running financial year, it should be slightly higher than that because interest saving can also come because we have reduced our debt. It should be about 5%. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital If I adjust INR 130 crore, your PBT margin increases from 3.8% to 4.3%, right? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. In Q4, you can see, when in Q4, the PBT margins are in the range of 4. Yeah. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital One. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. 4.1. So I think we should target for a PBT margins of in excess of 5%. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital In excess of 5% for FY 2026, right? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. Yeah. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Okay. Okay. Understood. In terms of debt, you mentioned we are looking to reduce debt by about INR 300 crore-INR 400 crore this year, FY 2026? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yes. That is the target. Our target for this financial year, debt reduction will be in the range of INR 300 crore-INR 400 crore. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Okay. Okay. How do we see the growth for this year, FY 2026 as a whole? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited For growth, you know that we are opening 90 Kalyan showrooms, out of which, what, 80 plus will be in India. We have opened 76, 77 showrooms in the last financial year. That revenue, we are not, it's not a full revenue which has been absorbed in the last financial year. That revenue should also come. SSGs, of course, in the last financial year, SSGs were extremely strong. Even if you, for a budget sake, if you reduce SSG a bit than last year, overall revenue growth should be, what, it should be good. Meaning I'm sure that you will be able to assess the overall revenue growth. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Understood. We are looking to open around 150 stores, right? Out of which, 90 would be Kalyan and remaining would be Candere? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. 90 plus 80. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Around INR 170 is what we are targeting. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yes. Yes. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Okay. Okay. You mentioned the CapEx amount. I missed that amount. What would be the CapEx amount for this? I mean. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited For the next financial year, no? For the running financial year. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Yeah. FY 2026, yeah. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. The maintenance CapEx will be in the range of INR 150 crore. South stores, if we open, what, seven or eight showrooms, that also can come to around INR 50 crore because south CapEx is done by us. And Candere, whatever comes, will come. Our own store, Candere, will be done by us completely, inventory plus CapEx. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Somewhat higher than 150, I mean, somewhere around that is what you said. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited No. Yeah. 200 for sure because 200 plus for sure because 200 will be for Kalyan itself. So 200 plus Candere will be the right way to look at it. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital Okay. And how much would be Candere? 80 stores, what can be the? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Kandere predominantly will be, it's a mix of franchisee and COCO. It depends upon how many COCO, how many COCO. Even if you look at, what, 50/50, then 40 showrooms will be done by the company. Okay? Into, say, INR 102 core , it's INR 80 crore CapEx. Deepak Poddar Portfolio Manager of Fund Management, Sapphire Capital INR 60 crore. INR 80 crore. Understood. That's very clear, sir. I think that's very helpful. That would be it from my side. Thank you so much. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. Operator Thank you. The next question comes from the line of Videesha Sheth from Ambit Capital. Please go ahead. Videesha Sheth Equity Research Analyst, Ambit Capital Hi. I hope I'm audible. Thank you for taking my question. I just have one query. In continuation to what you responded to earlier, participants' question, just wanted to know what incremental initiatives are you as a brand undertaking to drive this mix and studded? One, definitely, you did talk about that conversion becomes easier. Any other initiatives that you'd like to highlight with leading to this increase in mix? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yes. Studded mix for Kalyan, the major driver for the past, say, 8-10 quarters, was because the mix of non-south, south revenue is the major driver because non-south revenue comes with better studded ratio than south. That was a major driver. Of course, on a store level also, we try to improve the studded ratio. We give incentives to staff. We do campaigns around studded. We do promotions around studded. That is how our studded ratios improve. Videesha Sheth Equity Research Analyst, Ambit Capital Okay. Got it. Got it. Thanks. That's all from my end. Operator Thank you. Participants, please press star and one to ask a question. The next question comes from the line of Bhavya Gandhi from Dalal and Broacha Stock Broking. Please go ahead. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking Yeah. Hi. Thanks for the opportunity. Hope I'm audible. Hello? Operator Yes. Please go ahead. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking Yeah. So just wanted to understand how is the renewals of franchisee taking place because I believe we started somewhere in June 2022, and the three years our franchisee agreement gets over, right? If you can throw some words on that. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Four years. The lock-in is for four years. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking Okay. Lock-in is for four years. Any early renewals are we seeing at the moment, or how is it? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited No, they don't have to renew. No. Four years, there is no renewal. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking No, no. One thing. Franchisee agreement ends at the end of fourth year. How is it? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited The agreement is for nine years. Four years is a compulsory lock-in. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking Okay. Four years is the compulsory lock-in. Okay. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Agreement is for nine years. They don't have to do anything after four years. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking Okay. Got it. Got it. Fair enough. Just wanted to also ask you on the gold price impact. I mean, because you have been there for the last three decades, what typically happens to the absolute revenue and EBITDA when there is a gold price falling scenario? Let's take an example of INR 1 lakhs becoming INR 90,000. In that case, I mean, demand will not start picking up immediately, right? If you can just help us explain how the numbers look like when there is a downward gold price scenario. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited No. Customer, you should look at through the customer point of view. Customer comes not with a volume in mind. They come with a budget in mind. So the customer, the first question which our sales team will ask a customer, of course, after welcoming and stuff, will be the budget of the product which they want to buy. If they say INR 5 lakhs, the sales team will start showing product from INR 6 lakhs or INR 7 lakhs or something so that then they can upsell a bit. Customer comes with a budget in mind. When the gold price comes down, automatically volume goes up. Because they want to, they can buy only for the amount which they have in their hand. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking Got it. In that case, does the studded ratio get impacted? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Studded ratio when the gold price comes down, you mean? Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking Yeah. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited You should understand that the gold price is now 30% upwards over the last one year, right? Before that, also, studded, it is nothing related to it becomes easier when the gold price is very high for conversion. That's it. Organically, itself, all of us know that there is an inclination to studded for the young generation. They see Polki, diamond, and precious, uncut, etc. Organically, there's a driving force to studded. Sales team, they will push for studded because they have been incentivized that way. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking When the gold price is very high, conversion becomes much easier than when it is low because the customer, when they have a perception in mind that for INR 1 lakhs, they will get a product, that product in size and price will not be too much different if they buy a studded because studded takes care of 40% of the product. Got it. Fair enough. What is the average invoice value for Candere, if you can just throw some light on that as well? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited It will be 20,000, what, 25,000, 30,000. Bhavya Gandhi Equity Research Analyst, Dalal and Broacha Stock Broking 25,000, 30,000. Okay. Fair enough. Thank you so much. Really helpful. Yeah. Thank you. Operator Thank you. Participants, please press star and one to ask a question. The next question comes from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Pallavi Deshpande Head of Research, Sameeksha Capital Yes, sir. Thank you for taking my question. Just one here on the borrowings. We're not seeing a decline, and we're seeing a high cash balance. If you can just explain that. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Can you repeat the question once more? Pallavi Deshpande Head of Research, Sameeksha Capital It's the borrowings. They're not declining as guided, and the cash has increased. I just wanted to understand what am I missing. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Two things. One is that in India, if you look at the debt level, it has come down by INR 250 crore. On a consolidated basis, you might not see a huge difference because in the Middle East, the debt would have increased. Predominantly, what happens is when gold price moves up, GML levels tend to increase as banks revalue the loans at the end of the period on the prevailing gold price. Actually, given the sharp rise in gold price during the second half of the last financial year, GML should have ideally seen a noticeable increase. Since we reduced our GML loans by around INR 250 crore, the total GML is seen as INR 250 crore. GML loans we have reduced by a much higher proportion, but you see only INR 250 crore because the banks have revalued the GML with the current gold price. In the Middle East, we have not done any reduction in GML from our side. Hence, you see the increase in level of GML driven by the increase in underlying gold price. Pallavi Deshpande Head of Research, Sameeksha Capital Right. The part would be that we were planning to decrease the non-GML, actually, right, because that was cheaper for us. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited That was because of the uncertainty around GML. No, I told you last two, three months, GML had a huge turbulence because of other reasons, right? There was GML uncertainty around GML, especially over the last one or two months. That is why the GML limits was not reduced. Okay. Once the situation is back to normality, we can immediately swap it. Pallavi Deshpande Head of Research, Sameeksha Capital Now, what would be the guidance for gold? Why is the cash balance so high? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Cash balance, what it's a okay. I'll check the cash balance. What I saw was it's only a difference of INR 60 crore increase in Middle East. That is predominantly because the cash is going and sitting in the gold loan, right, because we like to pay money. Pallavi Deshpande Head of Research, Sameeksha Capital Right. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Am I clear now? Pallavi Deshpande Head of Research, Sameeksha Capital Yes. Thank you so much. Yeah. Yeah. I'm going to ask. Okay. Hello. Am I audible? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yes. Hello? Yeah. Yeah. I'm able to hear. Yeah. Sure. So my question is on the Candere. Since we plan to open around 80 stores next year, correct? Yes. What are the markets? So far, we have seen success for this model. Considering you are doubling the store count to next year, any target markets where you think that the rollout will be faster? Typically, what kind of a gross margin or unit economy can you expect that once you see the mature stores will reach? What kind of unit economy can you expect from Candere? Candere, in an ideal situation, on a matured store or maybe a closer to maturity store, the stock turn should be in the range of 2%. Margins, you know that it is in the range of 30%-35%. Okay. That is a store which is almost matured. That is the store economics. Okay. Margins will be, what, 30%-35%? And stock turn should be in the range of 2%. Now, about expansion, our primary focus will be metro, tier one, and tier two locations. We are not pinning down any particular metro to focus more. We will be expanding across the country. Right from when Candere is a wholly-owned subsidiary, we have been constantly infusing talent across the senior management and the other areas like marketing and stuff. Again, merchandising strategy is also completely revamped. Now, we are very clear on how the brand identity should be. Strategy is also laid. We were almost about to launch the campaign, wherein once we launch the campaign, only we can expect footfalls and things will come to where we want. However, because of the recent incidents, we actually pushed the campaign. Our target for this financial year is to make Candere profitable at that level. Does that answer your question? Sure. Sure. And typically, what is the studded mix for Candere? At a store level, it is 70% studded. 70%. Yeah. What is our store size typically? Are you thinking to use e-com channel also for this platform going ahead? Yeah. It's an omnichannel. Now the Candere showroom size will be in the range of 1,500 sq ft. Of course, it's an omnichannel, wherein it is not only dependent on store, but we need an online platform also to help drive footfalls to the store. Sure. Thank you so much, sir. That's all from my side. Yeah. Operator Thank you. The next question comes from the line of Parikshit Gupta from Fair Value Capital. Please go ahead. Parikshit Gupta Investment Analyst, Fair Value Capital Thank you for the opportunity and congratulations on a great result. I just have one question, and I joined a little late, so I'm sorry if I'm repeating it. With the India-U.K. FTA, there is a lot of news going around about a boost in gems and jewelry exports from India. Can you throw a little light on it about how it might be beneficial for us, or is it a little too early to talk about any positive signs from it? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited As you know, we do not export for others, wherein we do not have export business. We have plans to open our showrooms in the U.K. this year for which we can export from India. Otherwise, we do not have a direct benefit because of this. Parikshit Gupta Investment Analyst, Fair Value Capital Understood. So the Middle East business only caters to the GCC area? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Middle East actually looks after our Middle East operation. Also, as we speak, there are products from Middle East which are sent to the U.S. operations also. Parikshit Gupta Investment Analyst, Fair Value Capital Okay. Can you please spend a minute on how the FTA would be a positive push for the industry overall? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Overall industry, it's a bit tough for me to guide, but what I hear is that exporters have a merit on it. Parikshit Gupta Investment Analyst, Fair Value Capital Oh, okay. Obviously, the realization levels—I'm sorry, I'm not very comfortable with this segment—but in terms of the overall realization levels, is it widely different in terms of domestic versus export? I didn't get you there. Can you repeat? Repeat the question. I'm sorry for not wording my question correctly. From what I understand, in terms of jewelry, you obviously have the whatever metal, gold, silver is used, and then the making charges. However, in terms of export, I would assume that the gold prices would still be the same. The making charges, and then on top of that, there will be freight and different components to it. I just am asking if exporting jewelry is more profitable as compared with selling it domestically, or is it not much of a difference? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Exporting majorly happens only for selling it to retailers now. Otherwise, they will not be able to sell to end consumer. As per my understanding, the margin for a retailer will be much higher than a margin for a wholesaler or exporter. Of course, I do not know about it because I am not an exporter. As far as I understand about the segment and my experience, I can talk only about our experience so far. Retail margins are much higher than any wholesaler or an exporter, right? Because U.S., our margin—yeah, it is 25% plus our margin in the U.S. at the store level. Parikshit Gupta Investment Analyst, Fair Value Capital Understood. Understood. This was helpful. Thank you. Thank you for your time. Operator Thank you. The next question comes from the line of Pallavi Deshpande from Sameeksha Capital . Please go ahead. Pallavi Deshpande Head of Research, Sameeksha Capital Yes, sir. Thank you for taking my question. Just wanted to understand what is the interest rate now for the gold metal loan that we repeat upon, how much higher it is? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited It was in the range of 3-3.5. Now it's in the range of 5-5.5. Just in the level of 5 now at six weeks, coming in the level of 5. Pallavi Deshpande Head of Research, Sameeksha Capital Right. What would be in terms of the same store volume growth, any guidance that you would—and it's the beginning part of the call if I may have asked? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Yeah. So actually, we do not look at only volume because we look at value because we ourselves push for studded rather than gold, right? So gold volume will surely come down even if the gold price is flat. And even if there is SSG, the volume would not have grown as much as SSG because we ourselves would have pushed for studded. Pallavi Deshpande Head of Research, Sameeksha Capital Right. Right. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Okay. So our SSGs were in the range of 21%. Pallavi Deshpande Head of Research, Sameeksha Capital Right. What would be the target for the studded ratio for next year when you're pushing? Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Now, I think it should be in the same range, in the 30-31-32 range because the expansion now for the next running financial year is predominantly in tier two, tier three markets outside South India, where it will be the studded ratio will be lesser than what we enjoy in a metro or a tier one. Do not expect any sharp increase from the current levels. Pallavi Deshpande Head of Research, Sameeksha Capital Right. Right. Okay. Thank you. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Thank you. Operator A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Ramesh Kalyanaraman to give his closing remarks. Ramesh Kalyanaraman Executive Director, Kalyan Jewellers India Limited Thank you very much and a good day. Operator Thank you, sir. Ladies and gentlemen, on behalf of Kalyan Jewellers India, that concludes this conference. You may now disconnect your lines. Powered by