Q2 23/24

Nov 10, 2023

Summary

Revenue grew against a contracting industry as lab-grown jewelry mix rose to 34%-35%. Margins were affected by INR 10 crore-INR 12 crore of H1 inventory realignment, while management cited a 20%-25% EBITDA margin range and continued geographic expansion.

Ladies and gentlemen, good day and welcome to Goldiam International Q2 FY 2024 Earnings Conference Call, hosted by Monarch Networth Capital. As a reminder, all participant lines will be in 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Dani from Monarch Networth Capital. Thank you, and over to you, sir. Yeah. Thank you, Rohit. Good afternoon, everyone. On behalf of Monarch Networth Capital, it's our pleasure to host the management of Goldiam International, and we have with us Mr. Rashesh Bhansali, Executive Chairman, and Anmol Bhansali, Managing Director of the company. We will start the call with opening remarks from Anmol Bhansali, and then we'll move to Q&A. Thank you. And over to you, Anmol. Thank you very much, Rahul. Am I audible? Yes, sir. You are audible. Great. Thank you. Ladies and gentlemen, good evening. Firstly, I would like to extend my warm wishes to each and every one of you on the auspicious occasion of Dhanteras. May this festival bring prosperity and joy to all yours and your family's life. I am delighted to stand before you today to share the remarkable success of Goldiam International Limited in the second quarter of fiscal year 2024. Despite the challenging macro environment in our key markets, particularly in the U.S.A., our company has exhibited solid growth, showcasing the growing resilience that Goldiam possesses in the face of adversity. The results we present today are a testament to the hard work and dedication of our team. Over the past quarter, Goldiam has faced and overcome challenges, marking a turning point after four consecutive quarters of a tough macro environment. This growth is underpinned by our commitment to excellence, better product management, a refined sales strategy, and a very robust balance sheet that is at the heart of our company. I am pleased to announce that our lab-grown jewelry division is advancing exceptionally well. Our strategy to focus on selling the best designs and higher caratage lab-grown diamond jewelry has proven successful. Goldiam is at the forefront of the industry's transformation, transitioning from a traditional in-store natural diamond jewelry supplier to a major player in the lab-grown diamond jewelry value chain. Our strong omni-channel sales as well has been a key driver to further enhance this success. In line with our commitment to shareholder value, the board of directors has recommended an interim dividend of 60% of the face value, continuing with our profits distribution policy. While the U.S.A. remains a crucial market for us, we are excited to share that Goldiam is expanding its footprint into newer territories. We are making strides in the Middle East, the U.K., the European Union, as well as potentially broadening our horizons with an introduction in India in order to reach new audiences. Our order book, excluding online sales, stand strong at INR 155 crores, reflecting the confidence our customers have in Goldiam's products, design capabilities, and services. In conclusion, I would like to express my gratitude to our dedicated team, our valued customers, and esteemed shareholders for their continuing support. Goldiam International Limited remains committed to delivering excellence, innovation, and value in the dynamic world of studded jewelry. Thank you. Here's to a prosperous future for all of us, and I would like to now open the call for questions from all participants. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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'll wait for a moment while the question queue assembles. The first question is from the line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead. Yeah. Thanks for the opportunity and congratulations for a good performance considering the environment in the U.S. My first question is on the demand scenario. If you can broadly touch upon that, in the U.S., how is the demand scenario at ground level separately for natural diamond and the lab-grown diamond? Do you feel that the growth in such an inflationary environment, the lab-grown growth can help us survive the downturn? Secondly, in Q4 con call, you have mentioned that many retailers are doing the discounting at the store level. Has that scenario is also behind us, or still you feel that the discounting will continue for a few more quarters? Our third question was, if we see our revenue mix has shifted from natural to lab-grown year-on-year significantly. Still our margins were lower, or I would say that it has not expanded much. Are you seeing the pressure on the margins in lab-grown? Thank you, Mr. Dixit. Very interesting questions. Let me address the first one. Demand scenario in the U.S., of course, the macro environment remains challenging, particularly for our set of retailers, our target audience, which is middle market U.S.A. The end customer is impacted by higher mortgage rates, higher interest rates that are eating away from their available wallet share for discretionary spend. So definitely the demand scenario in general on a macro level is challenging. This is also compounded by the fact that in the prior years there was a boom in bridal sales and our company being more of a bridal-focused company, we have enhanced presence within bridal jewelry. So the last four quarters, we had faced a challenge in terms of further uptick of bridal jewelry sales. As a result of this macro environment and the change that happened between natural diamond jewelry moving to LGD, we see that we are mitigating the lack of demand in natural diamond jewelry with an increase in demand in lab-grown diamond jewelry. I think the reason for that is it's a very unique sales channel that Goldiam has where we are in fact, benefiting because of this almost dip in demand and the challenging macro environment because consumers are being almost pushed into buying more lab-grown diamond jewelry because of tighter wallet restrictions. With our presence in lab-grown and the end-to-end supply chain that we have within our company, I think this in the long term will bode well for us, especially when lab-grown prices find stability. Addressing your next question, in the previous con call we did suggest that there was discounting happening at the retail level. I see that continuing, especially as we enter a very crucial season of Thanksgiving and Christmas. This is the main selling period in the U.S. when a lot of retailers take large discounts to attract shoppers into their stores. It is the equivalent in the U.S. as the Diwali and festive sales period in India. So it's a very crucial sales period for us. I do believe that our target set of retailers, which is these retailers that address the middle market and mid-income levels in the U.S., they will be aggressively discounting to peter down their inventories of natural diamond jewelry that they have with them. Increasingly, we are seeing all these retailers shift towards new orders being placed on lab-grown, as you can see in our sales mix as well. Addressing your third question. Yes, the revenue mix has shifted. We are extremely positive and extremely happy that we've been able to increase our percentage of revenue on a higher base of lab-grown diamond jewelry from 19% in Q2 FY 2023 to 34%, 35% in Q2 FY 2024. This is an exciting development and shows the strides that we are taking as a company to be branded as the go-to supplier for large major retailers in the U.S. for lab-grown diamond jewelry. They now know us not just as a bridal house, not just as a well-run design and well-designed providing jewelry manufacturer and OEM manufacturer for their needs. But they also see us as an end-to-end supplier now within the lab-grown diamond space, where they know we are able to grow diamonds ourselves, create beautiful jewelry using our own grown diamonds thereby giving them the best prices, as well as being capable to deliver lab-grown diamond jewelry within dotcom, which is 5 to 7 business day orders. Yes, we're very happy with the shift in revenue mix. This has come in on an environment where lab-grown diamond prices, as you must have read, have fallen globally. So I think we've managed and mitigated our inventory accordingly. So far the EBITDA margin on an overall have been stable around that 20%, 22%. We're very happy with this. I think in the long term, stability in this range is something we can look forward to and we would be very happy with. Yes. Just to add to that point, we see lab-grown prices now moving forward being fairly stable as well. Okay. I have couple of more questions. Should I ask? Sure, you can. Yeah. Thanks. One is on, you have mentioned that 75% of the inventory is lying at the store level. In the inventory at the store level and also in the order book, what percentage would be lab-grown jewelry and natural? My second question was regarding the India strategy. Last time in the call you have mentioned maybe six months down the line you will elaborate a bit more. If you can share any more thoughts on that. In India, looking at the real estate prices and the rentals, do you feel that the online model would be a much better than the offline model? Thank you. That's my question. Thank you, Mr. Dixit. Yes, 75% of our inventory sits with customers. It's constantly selling every day. We get consignment sales, so we get reporting every month from our customers, and we know what's selling, and it gives us great data to power new designs with. I don't have the figure offhand, but I would estimate over 40%-45% of our inventory sitting with customers is now LGD, lab-grown diamonds. I can get back to you with the exact figure after the call. Regarding the India strategy, the update generally is that management is working towards planning how we should go about launching stores in the country. We would like to do a test pilot. We have no large order updates other than the willingness that we want to make a small investment to test out this distribution channel. And we will be sharing further updates once plans are made complete and sorted out. In general, we have seen, however, just sharing my personal thoughts, because jewelry is a larger ticket size item in India. Most sales happen in stores, so it works out better to invest in brick-and-mortar than online. Online is a great piece to always have because people look online, they want to see new collections online, they discover brand and new items online. But they more so, what we have seen is they end up coming to stores to actually make a purchase happen. That is the thesis we are currently working with, and once we have further updates, we can certainly get back to you on that. Okay. That is it, my friend, from my side. Thank you. Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask question. The next question is from the line of Rajesh Aggarwal from Moneyold. Please go ahead. Hello. So, what do we mean by the inventory sitting with the customer 75%? Is it a sale or can it be returned back? Thank you, Mr. Rajesh. This inventory is what we call consignment. It is inventory that sits on our books, but it is physically present in the retailer's zone. It is considered a sale once it is sold by the retailer and they report sales to us on a monthly basis and pay us accordingly, immediately, every month as and when they report sales. Okay. It is certainly open to be sent back to us, and it is not booked as a sale on our consolidated P&L. Okay. Sir, the second question is on margin. The product mix is changing, it is going more to LGD which we had a better margin. So why the overall margin has fallen? Thank you. In general, in H1 we have about INR 10 crore-INR 12 crore of inventory realignment that we have taken as lab-grown prices have fallen. We have that booked in our financials as well. I think it is sustainable, as the lab-grown diamond industry matures to expect a 20%-25% broad range of EBITDA margin coming from lab-grown diamond jewelry sales. I think we are very happy with the level of margin performance we have delivered in the range of 20%-22%. If we can sustain this during this environment, we would certainly be very happy with that. I will open the floor to our chairman as well, if there is any comments regarding the margin percentages as well. Yeah. Hello, Rajesh Aggarwal. Yes, sir. Hello, everybody. Regarding the margins, it is very clear that, honestly, the company is very happy looking at the industry, looking at the scenario, and I believe we are leaders in the margin front for sure, including design. Okay. If you compare any other balance sheets, like-to-like balance sheets with companies who export LGD jewelry or natural diamond jewelry, you would see that Goldiam International will shine brighter in terms of margin than anyone else, listed or unlisted. That is number one and number two, as Mr. Anmol said, that we have taken an inventory revaluation and that has reduced. Okay on books the margin percentage. With this revaluation of inventory and with the pricing stabilizing in LGD, we are confident that we will maintain the current margin that you are seeing going forward. The current margin has come down. Going forward, we will maintain 22% on both natural and LGD mixed together or- We are looking at anywhere between 20%-25% EBITDA margin on a company level, on the balance sheet. Company level. Okay. Including a mix of both natural and lab-grown? Yes. But lab-grown business will continue to grow? That will have a better margin than natural diamond? Traditionally, always LGD will enjoy a better margin because number one, Okay you have to understand that we are growers, so we have a complete backward integration. Backward. Right? And that helps us to achieve better margins than natural diamond business. Okay. And sir, on the demand outlook in U.S., is this because of the seasonal in nature for the Christmas and all, or it can sustain, that LGD demand can sustain? You see, the jewelry business works on a seasonal cycle. So clearly this is Christmas time and orders, what you're seeing is getting prepared for Christmas. So always these two quarters and the existing quarter will be our best performing quarters. Okay. But going forward, still the LGD year-to-year or quarter-to-quarter still will grow by double digit? Yes. We hope that will happen, yes. Okay. But there is no cannibalization in that. Lab-grown, the market share has not increased, the lab-grown has eaten the market share of natural diamond? Or the market is growing? What is happening is lab-grown diamonds, whether it is physically, optically, chemically the same as a natural diamond product. Okay. Eventually, with the interest rate and the cost of natural diamonds, people are preferring, consumers are preferring to buy lab-grown diamonds. Okay Because number one, the product is the same. Okay. Right? The look is better, and the pricing is much more economical for their wallets right now. Okay. I assume in time, both businesses, both type of products will run their own race, and both will continue to be part of jewelry business. But is there a competition in lab-grown diamond, the margins may reduce? No, it may not reduce. You see, for us, because of the backward integration that we currently enjoy, and we are probably one of the only companies out there who actually grow the diamond, cut the diamond, design the jewelry, produce the jewelry, and export jewelry to direct retailers. I think with that, margins will continue to be stable. And current year, revenue growth will be there in double digit, in the current year? That I'm not very clear about because our order book currently is at INR 165 crores. I think next quarter or the current quarter also will stay good, and then we'll have to see what the first quarter brings to the table. So when we talk about order book, is it towards the retailers or it is like a raw LGD? No, it is retailers' orders on us. Yes. Retailers. Okay. Thank you, sir. Thank you, Rajesh Aggarwal. Thank you. Anmol Bhansali, you- Sure. Yes. Thank you. The next question is from the line of Priyank Parekh from Abacus PMS. Please go ahead. Yeah, thanks for the opportunity. Am I audible? Yes. Thank you, Priyank. Yeah. Thanks. Wanted to understand on our strategy with respect to the treasury investment we have in our books. How we are planning it over a long-term period? Sure. Thank you, Priyank. The treasury we have on our books is largely invested in mutual funds, liquid funds, and direct bonds. We only work with very safe products, as we are a publicly listed company. We have our treasury available for us such, as and when investable opportunities come our way. Okay. So eventually we want to use it for our core business. Is that the right way to conclude it? Yes. Eventually, that would be the idea. Okay, got it. Secondly, I want to understand on the competitive forces around that business. The question is like, when the opportunities are such large around the LGDs, are we seeing the original manufacturers like De Beers or other big manufacturers coming into this space? If they come, how we are going to tackle that competition? Understood. De Beers specifically already is one of the largest diamond growers in the world. They have a diamond growing factory in the U.S., and they are selling only direct to consumer finished jewelry themselves through a brand called Lightbox. They are already very present in the industry, and I think we are well capable to take on this competition. They are not selling into the trade and into the trade channels, which gives us a great opportunity to take market share in our retail clients. More than anything else, I think De Beers' entry, which happened 3, 4 years ago, really formalized and ignited the fire behind the LGD sector. It almost made it such that this part of the industry could no longer be ignored, and large retailers in America had to create presence of jewelry inventory in their stores of LGD jewelry. This gave us a great boost and it is almost institutionalized the industry. Specifically this financial year, we have seen a large flip where, as in the Jacob, the mass consumer adoption is happening, where general public in the U.S. no longer has any misconceptions about LGDs. It is very common, what these diamonds are, why are they different from natural, if at all, is there any differences in pricing and in quality or any such thing. The general adoption levels have now reached a standard where it is really getting into that mass adoption phase. I think there De Beers' entry has only been helpful, and we look forward to continuously working on our mix. I want to understand what sort of competitive advantage we have in this space. Is it our distribution network? Is it the technique we have for growing the space in a more cost-efficient manner or something on that front? Sure. It's a great question. What we've maintained always from the past has been that the only sustainable competitive advantage and the only sustainable right to win is in distribution. For a company like ours, being backward integrated into growing lab-grown diamonds will not only help us with additional margin and a boost to our margin profile, but the true sustainable advantage and competitive advantage is in securing strong distribution with large retail partners and forward integrating into jewelry as much as possible. About three years ago, when Goldiam invested in the lab-grown diamond space through Eco-Friendly Diamonds LLP, the subsidiary, which is Eco-Friendly Diamonds LLP, that was in the growing business, almost all of its diamonds which were being grown were being sold loose in the wholesale market. Today, over 90% of it is forward integrated into Goldiam's order book and sold as finished jewelry to large retailers. Not just that, but we add additional value to our retailers through extremely strong design practices, data-driven design development and new product development. And of course, something that our retailers love, which is our capability and strength of supplying lab-grown diamond jewelry on their online websites. Even within lab, we've matched our time frames as we do in natural diamond jewelry, which is if an order comes on day one, within five to seven days, finished ring size customized jewelry gets shipped out to the end customer. So these forward integrations, these value-add services, the strength we have on designing, all of these are the true sustainable competitive advantages that we enjoy even within the lab-grown diamond space. Cool. So yeah. And doing just Thank you. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead. Yeah. Thank you for the opportunity and congratulations to management on good set of numbers. My first question is related to the INR 165 crore order book. Just wanted to know, what is the timeline to execute this order, and is it a one-time order, or will it be a repetitive order for next year as well? Thank you, Bhavya. The INR 165 crore order book will be executed in the next three to four months. This is usually recurring orders that come from our existing styles that is already in the retailer's stores. Style expansions or new style launches with our existing large retail customers. Okay. So basically, it is a recurring- Yes order only. I mean, that's an ongoing process, not one time or one-off sort of contract. Right? That's correct. It's a recurring. Recurring. Another question is related to capacity constraint. As such, we don't have any capacity constraint. Say, for example, if the demand shoots up during Christmas or this festive season, we don't face any capacity constraint, right? Or are the laborers become like a limitation or a constraint to produce the jewelry? We don't have any such capacity constraints. Our business is and always has been seasonal, where Q2, Q3 are always our best quarters. We've always maintained that as a company, we should be evaluated year-on-year rather than Q-on-Q because only Q2, Q3 is comparable to Q2 and Q3 of the last year. As you've seen historically, where we've well managed the rise in sales during these two quarters every year, there is no such capacity constraint in delivering more jewelry product. Right. With respect to our retailers in U.S.A., are they startups or established players? Just wanted to know, are they funded through external parties? Because in the initial phase, what happens is they are startups, they may pump in money to grow their sales, but once they stabilize, their growth itself becomes shady in the long run. If you can throw some light on that and what is their revenue contribution, top five customers to the overall revenue, if you can throw some light on that. Sure. Our largest customers are all very well-established traditional retail houses. We work with the largest retailer in the U.S., the largest jewelry retailer in the U.S., which is a listed U.S. company called Signet Jewelers. We work with many large, very well-established department stores, wholesale clubs, and specialty regional retailers and large wholesalers as well. So fairly well-established dominant retail customers that have been around for at least a decade, if not much, much more. In terms of our revenue contribution, our top five customers would probably be, I don't have the exact figure with me, but they would be in that range of 50%-55% of our overall revenue. Okay. Top 10, if you have it handy or if you're aware of. I'll be able to get back to you on that, Bhavya Gandhi, after the conference call. Perfect. No issues. We have 30% backward integration when it comes to manufacturing LGDs, right? Correct. Perfect. Any plans on increasing the capacity or let the price fall and maybe at later stage when we find some opportunity at that point, we plan to add machines over there? Yeah. Our distribution of lab-grown diamond jewelry has really exceeded all our thoughts as well. We are very happy with how we have been able to distribute jewelry effectively to large U.S. retailers, such that, as you mentioned, out of the sales that we do of lab-grown diamond jewelry, about a third is grown in-house. The balance we are sourcing from other growers whom we have partnered with. I believe once there will be a sustainability in the pricing and a strong flow has been reached and the market has reached some sort of maturity, we will take a capital allocation call at that time. For the time being, we are seeing we are able to find supply at very attractive margin because of the sort of supply that is available from large growers in India. Right. If I am not wrong, our competitors are struggling. When I look at their numbers for this quarter, others have de-grown while we have shown growth. Is it because of the design or the customer selection that we have done or the sort of some moat we might be having? If you can throw some light on that as well. Yeah. Thank you for bringing this up, Bhavya Gandhi. I believe the overall industry in the last quarter has de-grown by 3%-5%, whereas Goldiam has a revenue growth. Clearly that means we have gained market share in terms of our sale of jewelry to the U.S. retail market. I think this is a very commendable effort from our design team, our data team, as well as our sales team, of course. There are plenty of reasons we have been working on as a company to increase wallet share with our customers. The predominant one is, of course, the ability that we have had to successfully introduce very interesting, very unique, and very successful jewelry that is studded with LGDs. This category is rapidly growing, especially among our top two, top three largest customers, and we are more or less at the forefront with them, hand in hand to introduce, and if not introduce, grow their capability and the number of designs they have available of LGD jewelry. That has been the predominant reason we have grown, while not just our competition, but industry in general has de-grown. We are hopeful that will continue. On our side, we are looking at additional markets as well as, very importantly, additional categories of jewelry. We will not just be focused on bridal, but very soon we are planning on introducing new collections for high-end fashion where we will not drop our AURs, but within the higher ticket prices, introduce fashion lines as well within our existing retailer base. Okay, perfect. Also with respect to your venturing into other geographies, just wanted to understand over there also, a lot of people will be existing players who would have their own network and distribution with their retailers over there. Because say, for example, if you are a retailer with Signet Group, obviously you will not allow other players to enter, right? What would be the breakthrough strategy or thought process, or what would allow those European retailers to allow you to enter the space? Because they might be having 50 sourcing partners, right? Why would they add one more to there? Absolutely. Bhavya Gandhi, in terms of competitiveness, the U.S. is by far the most competitive region. We are well versed with what it takes to compete effectively for retailer wallet share. Within Europe and the Middle East, it is not as competitive, but I think that is where other things matter a lot more. Specifically, number one, design capability, which we have in plenty at Goldiam. Number two is service, both in terms of customer service as well as new capabilities like servicing.com, completing orders much faster than our competition would. These are the sort of levers we are able to, or carrots we are able to offer to these new retailers in new regions to convince them to start placing trial orders with us at Goldiam. Then hopefully it is our job to increase that wallet share with them once that first initial trial order is through. Perfect. Any similarities between the U.S. retailers who are supplying again in Europe, maybe Signet Group is supplying in Europe or something of that sort, because we can just extend our existing relation by changing just geography. The only major one is the Signet Group, which has retail stores and two retail brands within U.K. We are actively reaching out to them right now to help us introduce and extend our relationship to their U.K. brands as well. Perfect. Just one last question. If you can just give me a broad overview of the U.S. jewelry market, and based on that, how much would be bridal, how much would be fashion, and within that, how much would be LGD, diamond jewelry or gold jewelry? If you can just give us a synopsis of the entire industry, what the different kind of products and what's the market size. Sure. I'll try my best. Very quickly, very briefly, the U.S. jewelry industry, I believe, is about a $65 billion-$70 billion annual jewelry industry at retail sales. It's divided into major retailers whom Goldiam targets, and independent mom-and-pop, one-store, two-store family chains who we target not directly, but through our large wholesale customers. About 60% of these sales are within major retailers and 40% of this overall top-line figure is with independents and our mom-and-pop shops, family jewelers, et cetera. Our direct office, Goldiam USA, which is a 100% subsidiary, targets selling to these large major retailers, as I mentioned and gave an overview of. In general, about 40%-50% of sales would be bridal, with the balance being fashion jewelry, which is earrings, pendants, bracelets, necklaces. Unlike India, which might be a new concept for most of the people attending this call, unlike India, in the U.S., plain metal jewelry is a very small component of overall jewelry sale. In fact, it is almost only restricted to gold chains as a category, if at all, and nothing beyond that. Largely, a very high percentage of jewelry sales comes within the studded jewelry category, whether that is studded with diamonds or other precious gemstones. Goldiam, our focus as a margin-oriented company is to be on the better end of this pipeline. As we have shared, historically, within natural diamond jewelry, our average selling price used to be in the range of $500. Interestingly, even though LGD is a better or lower cost alternative, our average selling price of LGD jewelry is closer to $850, $900. This is the sort of area we play in. We are largely a bridal jewelry house. Also introducing now new lines of new categories of fashion jewelry and the focus is, in general, for major retailers and mid-market, middle America. That is the end target audience. Perfect. I just missed out the bridal figure. You said 40%-50% would be the bridal market out of the total market in U.S.? Yes, I believe so. I can get back to you with the exact figure, with more figures as we pull out from research reports we can see online. Perfect. That $65 billion-$70 billion would be growing at what? 3%-4% rate? I presume so, yes. Are the retailers in U.S. gaining market share? They are at 60% market share right now. If you look maybe 10 years back, were they at 40%, 30%? If you can just throw some light on that. Absolutely. That is correct. The large major retailers are gaining more market share from independent and family-owned jewelry stores. Perfect. That is really helpful. Thank you so much for my questions. Thank you so much. Thank you. Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask questions. The next question is from the line of Aryan Goyal. Please go ahead. Hi. Thanks for providing me the opportunity. So can you elaborate on the factors that contributed to the increase in online sales? This is my first question. In terms of Sorry. Sorry, sir. Your audio is a bit. We can't hear you properly. If you could just clarify the question again. Hello, am I audible now? Yes. Yeah. Can you elaborate on factors that contributed to the improvement in online sales this quarter? Sure. Addressing that question, one of the main things that resulted in the increase in online sales, especially on the value side, was our ability to market higher ticket item, lab-grown jewelry online within the same time frames required by our customers. If you see in terms of quantity, there is no change in the mix. Q2 FY 2023, online sales were about 22% of quantity and 22% of value. Q2 FY 2024 was 23% of quantity, but 28% of value. On a higher base as well, online sales in terms of value has increased even more than the unit sales have. That's largely driven by the strong increase and our strong capability to offer larger ticket item, lab-grown diamond jewelry online with our retail partners. Got it. Got it. My next question is what is the strategy to enter U.K., European, Australian market, as you mentioned in your speech? By when can we expect that you will be entering the Indian market? Sure. For other regional geographies, we are constantly reaching out to retailers to try and find space available and show them and highlight the differentiation of Goldiam. We have already had some success with the Middle East jewelers as well as the European retail chain. As we've disclosed and shared that in the past, we're actively looking forward to reaching out to U.K. divisions of some of our large U.S. retailers as well, as we've mentioned on this call. The work is ongoing and already we started getting sales. The strategy is to continue finding the right partners in terms of major customers within these regions and then reaching out to them. In terms of India, the opportunity we see is, I think within calendar year 2024, we should be able to have some start on that business venture. If you have any further questions, I'm happy to answer them regarding the same. We are entering by retail source, right? As you mentioned in your previous call. That is the plan at the moment. Okay, thanks. Thank you. That is all. That was really helpful. Thank you very much. Thank you. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead. Yeah. Thank you for the opportunity again. I just wanted to know, is there any inventory hit which is still left out that would be maybe due to fall in diamond prices? As I presume, because your jewelry is not commoditized, right? So there's no inventory hit on the jewelry part, at least. It's only on the raw material, maybe commodity part of it, where we take the inventory hit. Am I right in assuming, or you have a different view? Yeah. Yeah. Inventory is basically realigned to market prices, and it's largely done, Bhavya, on our open consignment inventory, which is sitting with customers. In order to make it saleable and selling, we need to ensure that it is selling at the right prices, and thereby it is sitting at the right cost. As a result of that, we have taken a realignment cost of about INR 10 crore-INR 12 crore in H1 of this fiscal year. We will evaluate if there is any need to further take any more realignment adjustments at a later time. But at the moment, we are going to evaluate how this very crucial next two months go in terms of the U.S. holiday season, and take a call thereafter. Perfect. Yeah. With respect to your gross margins last year on a YOY basis, your last year gross margins were 48%, and right now it's at 34%. So any reason for the same? Bhavya, I'll have to get back to you on that after checking those gross margin figures. You have to remove other income and ensure that that's the accurate figure. If I could get back to you after the conference call, I'm happy to share a detailed note on that. Perfect. Out of the 75% inventory which sits on the retailer's end, 20% is something that gets returned, that's the worst-case scenario return policy, right? That's correct. That's what we've seen historically. We don't see that trend changing, and it's part of the business cycle. We account for it both in terms of margins as well as having a constrained decision on what to place on consignments with our retailers, so that recyclability of the raw material of those diamonds, of that gold is extremely high. Okay, fair enough. Also on the inventory which sits with them and which they sell, if the prices fall, we take an inventory hit on our books, right? Because we have to evaluate an NRV or cost, whichever is lower, I mean. If we pass on any price adjustment to the retailer, then yes, that's correct. But if we aren't passing on any price adjustment to the retailer and keeping that inventory available at that cost, then there's no adjustment we take. Bhavya, this is Rashesh Bhansali. Sorry to interrupt you. I just want to clear that the margin fall is more because of the revaluation of inventory, not any other reason. Okay, perfect, sir. Yes. Perfect. Yeah. I think that is probably the only reason why there is a fall in margins and what you are looking at right now. Perfect. Yeah. Thank you so much. Yeah, that is it from my end. Thank you. Thank you. The next question is from the line of Deep Paul. Please go ahead. Yeah. Thank you for the opportunity. My question is more regarding the Indian domestic market demand scenario. Currently, Titan Management has said that they are not seeing much interest from their customers in stores regarding the lab-grown diamonds. Whereas certain companies like Limelight Diamonds and all other are growing their stores in Mumbai, three to four stores. How do you see the demand? Since we are planning for next year, some kind of retail distribution. Right. Thank you for the question, Mr. Paul. I think theoretically speaking, the thesis is that lab-grown diamonds should be something that fits very well with the aspirational Indian consumer. It offers a great opportunity for India, for the Indian consumer to enjoy diamonds which otherwise are totally unaffordable in the natural diamond space. If you think about it, a one carat solitaire, which retails in India, natural diamonds made for about four to five and a half lakhs, depending on where you buy it. It falls out of the product baskets for a lot of Indians. But in lab-grown, that same one carat diamond can be available for INR 50,000. That then opens up a lot of consumers who are aspiring to enjoy and gift something as beautiful as a one carat solitaire within the lab-grown diamond space. Theoretically, we see there certainly could be some possibility of success in India. We have seen track record through our existing business of retailers having great adoption in the U.S. We have more than half a decade of experience seeing the entry of LGD in the U.S. and how it picked up every year, YOY, and how retailers have enhanced their collections with LGDs. Now, given the situation we are seeing in the U.S., it is making us fairly bullish on this category. Of course, that gives us some indication on what could happen in other regions. This is our basic thesis. Again, once we have formulated an entry plan, I believe in the next conference call that we do at the end of the fiscal year, we should have a lot of updates to give regarding this, Sanju. Sure. My next question is regarding our competitiveness. Currently we are operating out of Mumbai's SEEPZ. Is there any requirement to maintain competitiveness to move or to create another manufacturing base out of Surat, like Diamond Bourse, which they are creating the ecosystem? Is there any need? Right. Not at the moment, Mr. Paul. I think Mumbai is a very strong base for diamonds. A lot of raw material is available through Bharat Diamond Bourse. The SEZ zone is the foremost region for diamond jewelry manufacturing and exporting within our country. It is the number one region for diamond jewelry exports that go to the U.S., and in general, that go from our country out to the world. At the moment, we do not see any need to realign location of any of our facilities. Okay. Thank you so much. All the best for the future. Thank you very much. Thank you. We take that as the last question, and now I hand the conference over to the management for the closing comments. Thank you very much all participants for attending the call. We believe we are at a great precipice right now at Goldiam, just coming out of a challenging macro environment, and we look forward to matching and beating industry growth with our current sales pipeline. I would like to thank Mr. Rahul Dani from Monarch Networth Capital, and all the participants for taking time out to join us today on this auspicious day. We wish you all a very happy Diwali and New Year, and thank you for joining us. Thank you. On behalf of Monarch Networth Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.