Q2 24/25

Nov 13, 2024

Quarterly report

Summary

H1 FY25 total income rose 86.27% YoY and PAT increased 23.4%. Growth plans emphasize higher-margin products, B2B expansion and a new showroom, though its stated opening timeline varied.

Ladies and gentlemen, good day and welcome to Khazanchi Jewellers Limited Q2 FY 2025 results conference call hosted by Kirin Advisors. As a reminder, all participants' line will be in the listen-only mode, but there will be an opportunity for you to ask questions after the presentation concludes. If you need any assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note this conference is being recorded. I now hand the conference over to Ms. Sneha Rathod from Kirin Advisors. Please go ahead and over to you, ma'am. Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Khazanchi Jewellers Limited. From the management team, we have Mr. Rajesh Mehta, Joint Managing Director, Mr. Vikas Mehta, Chief Financial Officer. Now, I hand over the call to Mr. Rajesh Mehta. Over to you, sir. Thank you, ma'am. Hello, everyone. Good afternoon and welcome to our H1 FY 2025 conference call today. I will provide an overview of Khazanchi Jewellers Limited, highlight recent developments, and discuss the impact of recent policy changes before going into our H1 FY 2025 performance metrics. Headquartered in Chennai, Tamil Nadu, we are known for our dedication to quality, innovation, and technical craftsmanship. We proudly hold the BIS Hallmark certification and are an authorized member of IIBX, underscoring our reputation as a trusted jeweler. Our primary retail location showroom is in Sowcarpet, Chennai, offering a comprehensive shopping experience across 25,000 square feet facility, with a design diversity of over 5 lakh unique designs. The showroom attracts approximately 120,000 visitors, reflecting its strong market position and customer engagement. I am also pleased to share that we will soon be expanding our retail footprint with a second flagship showroom in Chennai's prestigious Sowcarpet area, scheduled to open by April 2025. This 10,000 square feet facility will feature an even wider selection of gold, silver, diamond jewelry, elevating the shopping experience for our customers. Our strategy for this showroom is to focus on strategic placement also, enhancing our market positioning and attracting our customers' interest approach. Strategically, we are shifting our focus towards high-value temple jewelry, which aligns with our cultural heritage and offers strong margins. Additionally, we are making significant inroads into the B2B market, with our jewelry now available in prominent multi-stores and renowned traditional jewelers throughout South India. This expansion strengthens our presence and enables us to serve a broader customer base. Now, I present the financials of H1 FY 2025. Khazanchi Jewellers has demonstrated remarkable financial performance. The company reported a total income of INR 755.56 crores, marking a substantial year-on-year growth of 86.27%. Net data reached INR 28.8 crores, reflecting an impressive year-on-year increase of 28.78%. PAT stood at INR 20.01 crores, up by 23.4% compared to the previous year. Earnings per share also shows a significant trend, growing at 26.26% to INR 10. These results underscore company's strong financial health and strong growth trajectory. In conclusion, our strong performance in H1 FY25, along with our strategic initiatives and future collaborations, sets Khazanchi Jewellers on a path to continued success. I am confident that our strategic initiatives and the new showroom will further enhance our market position. I appreciate the ongoing support of our shareholders, customers, and employees, and I look forward to achieving new milestones together. Thank you for joining us, and now I'm excited for the opportunity and light ahead. With these brief remarks, now I request to open the floor for Q&A. Thank you, everyone. Thank you very much. We will now begin the question-and-answer session. Anyone who wish to ask a question, please press star and one on your touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. All participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Rashna Sharma from Sharekhan. Please go ahead. Hello, am I audible? Yes, ma'am. First of all, thank you so much, sir, for providing me this opportunity. My question is, could you share more on company's gross margin performance during H1 and plans to maintain or improve it? Yeah. The company has achieved a gross margin of somewhere around 4.5%-5%. Next question of working on the. Okay, sir. My next question is, were there any significant one-time expenses or savings after the H1 FY25 results? How is the question? Share. My question is. Could you repeat the question? Yeah. Were there any significant one-time expenses or savings after the H1 FY25 results? No, it is not much of the significant any one payment was made. Going on the routine basis, all the sales results were improving. Okay, sir. My last question is, what challenges were faced in H1 FY25 results, and how did the company address them to achieve these results? That was not much of the challenges. Even the opportunities were there in the FY25 results. The management has advised earlier, after this year, the challenges were easily addressed and gone. Okay. Thank you so much, sir. Thank you. That is it from my side. Thank you. We have next question from the line of Alok Bawale from Nuvama Wealth. Please go ahead. Thank you for the opportunity. Sorry for interrupting, sir. Your voice is not audible. Is it audible now? Yes, sir. Much better. Yeah. Hi, sir. Thank you for the opportunity and congratulations on these results. Thank you. Sir, what was the contribution from gold versus ornament versus bullion? That was for the H1 results, there were around 75% of the sales from gold ornaments and nearly 25% bullion. This must be the reason for margins coming down, right? Yes. Okay. Yes. Yeah. Sir, where do you see the Even this was the last, what they say, last half only even the ornament sales have improved significantly. Sir, what was the contribution last year? If you could give that number, that would be really helpful. Right. Currently, I don't have the details in hand. I will share you in a bit. Okay. That is fine. Yeah. Sir, your operating cash flows have turned positive. Will you foresee cash flow being positive for the whole year or going forward? If you give some color on that would be great. Yes, it is, what to say, the management has always involved that company system only into the business. It is going to be positive only for the whole year. Sir, for next year, when you open the retail store, will it affect, or do you expect that cash flows going to be positive from next year also? Yeah, consequently, as the management has decided to, how to say, open a new store, which is quite difficult. In that case, it is positive only. And sir, what kind of demand, like momentum, are you seeing in demand? Can we expect a similar number in H2 also? Sir, the management has been working on the various activities and working hard on Google and growth of offline and bottom line also. The numbers will not be somewhere. Yeah. Okay. And sir, in terms of next year's opening of new showroom, what kind of revenue it can generate in the first year? Sir, we have a clear addition of somewhere around, what they say, addition of INR 150 crores in the retail segment. Okay. Sir, do you expect that the ornament versus bullion ratio to be same as H1 for the whole year, or ornament sales would be more? Ornament sales gradually improving, sir. For the whole year, the whole proportion would be reducing to somewhere around 20% bullion sales. Okay. That's it from my side. Congratulations again for the good performance. Thank you. And all the best. Thank you very much. Participants, if you wish to ask a question, please press star and 1 now. We have a question from Utkarsh Jain from B Street Broking. Please go ahead. Yeah, my question has been answered. I'll join back to queue. Okay. We will take next question from the line of Priya from Green Capital. Please go ahead. Hello? Yes, ma'am. Your line is unmuted. Sir, my question is, could you discuss how demand has evolved during the first half and if any? Could you repeat the question? Yes, yes. My question is, please discuss how demand patterns evolved during the course of the year, and if any seasonal trends were observed. Here in Bombay, mostly the demands are uniformly changed for the whole year. Only the few days as, what do you say, Shraadh or the days were quite slow. Overall, the headway was good. As the commodity was reduced, the demand was even higher during the festive season. I have one more question. Is there any specific marketing or promotional activities that had a notable impact on your sales? Yes, of course. We have approached all our B2B clients. We do B2B marketing. We understand their demand requirements and produce the product accordingly. This is going on well. Okay, good. Just one more question from my side. How fluctuation in customs duty impacted import cost and overall profitability in Q1? There was not much impact on the margin. Only the rejection of bids was very broad, she said. When the budget was announced, the clients reduced the quantity due to the client concern. But within the short span of 20 days, around 20 days, the clients appreciated that it was easily digested in the market, and there was not much impact on the market. Oh, that's so good to hear. That's it from my side. Thank you, and all the best. Thank you, ma'am. Thank you very much. We have next question from Rajesh Dave, Proinvestor. Please go ahead. Sir, my question is that, I understand there are five legal heirs of the founder. Is there any succession plan on the table, or how is it? I did not understand your question, sir. I understand that there are five legal heirs of the founder. The founder of the company, there are five legal heirs. Is there a succession plan on the table currently, or how is it? It has been working with all the legal heirs along with the company and working good. Nothing as such planned on that. There is no succession plan as such? Yeah. Okay, good. Okay. Second question is that, actually, you see a master data, it shows that there are property charged to the extent of INR 30 crores from HDFC Bank. Yeah. Basically, what loan do we have, or books, long-term borrowings, anything? The company was in loan of around INR 40 crores, CC limit. From HDFC Bank? Yeah. From HDFC Bank. There are four charges on HDFC Bank. There is one on Indian Bank, and one statement from HDFC Bank. The INR 30 crores which has been long-term borrowings, right? Or what is it? That is why this is a CC limit, not all of that, okay? CC limit, okay. These INR 30 crore are entirely from HDFC or Entirely from HDFC only. Because the State Bank and Indian Bank also have charges. Previously, Indian Bank limit was transferred to HDFC, now it has been shifted to HDFC. Okay. Sir, it has property which still remains with State Bank of India? No, it has been already transferred to HDFC Bank. Okay. Sir, silver, what is the update on the silver trade front? Because silver prices are being recorded high. Okay. What is the update on that front, Khazanchi Jewellers? Do you have a showroom there, or how is it? Yeah, Khazanchi showroom is in our sister concern. That is, they have our showroom there, and it is a promoter group company. Khazanchi Jewellers Limited will be entering into silver segment very shortly in the plans to enter. Mm-hmm. So, the update on the last quarter of the sales and how much we made the last quarter? What? The sales. The sales. With the Khazanchi Jewellers? You are talking about the Khazanchi Jewellers now? No, silver. I am seeing it particularly on the secondary sector. Subsidiary. The data I do not know actually, and we will share it with you at a later time. Okay. The new showroom which is coming up- It is not subsidiary, it is a promoter group company. It's a promoter group company, it's not a subsidiary of Khazanchi Jewellers? No, it's not a subsidiary of Khazanchi. Okay. You're not taking the listed company. Yeah, yeah. Right. Just one more question. When is the new showroom coming, and when is it likely to open? New showroom is coming on NSC Bose Road. It is a very prominent area, as you know, Kamala Mills area in Mumbai is the most familiar and most widely known area here. It is coming up in NSC Bose Road, and it is about 10,000 square. It will start by somewhere around April or May of 2026. Okay. Okay. Okay, that is it, sir. Those are all questions from my side. Thank you. Thank you. We have the next question from the line of Jayraj Jain from EY-Parthenon. Please proceed with your question. Thank you for the opportunity and congratulations for a very good set of numbers. Thank you. Sir, I can see that your PAT grew by, like profit after tax grew by 22% on YOY basis. Can you please elaborate on which specific sectors that drove this profit, like profitability intake? Yes, sir. Mainly we are focusing on the 90% of the sales is on B2B segment. 10% is on retail segment. And the growth of profit bottom line is come from both the segments. Approximately. Is there any plan for increase from B2C in the next coming years or quarters? Yes, sir. We have an expansion plan of 10,000 square feet coming up in April 2025. Six showrooms for the B2C segment. It is a new time launch in segment, but we are making a difference. Okay. I have seen that there was an 86% growth in total income. Who are the contributors in your, like, for this growth? Can we expect this opportunity into H2 FY25 also? Yes, sir. It is a growth, as I told you, it is a proportional contribution from B2B and both the segment. It is not only some few clients. It is an approach that we have an increased customer base, and it is jointly we have added new clients also. You can see from all there. What was the next question, sir? How can we expect the same to continue in H2 FY25? Yes, yes. You will be having very good growth in the coming H2, and we are working on this to achieve higher numbers in the future. My last question is, can you provide more insight on how you managed your cost management practices, which resulted in your EBITDA growth of 38%? How did you manage to achieve 38% EBITDA growth with your cost management practices? That is what, we have a bit of a higher margin products we have introduced, and this day-to-day marketing, our stock rolling period we have improved very much from last year. The EBITDA margin has improved. Okay, sir. Thank you for answering my question. Thank you. Thank you so much. Thank you very much. We have a question from Paras Savale from Nuvama Wealth. Please go ahead. Thank you for the opportunity again. Sir, could you give the margin breakup between B2B and B2C? Sir, B2C, we have a gross margin of 80.424% for B2B, and B2C we have margin of 35.75%. Okay, sir. Thank you for the data. That's it from my side. Thank you, sir. Thank you very much. Before we take the next question, we would like to remind participants to ask questions, please press star and one. We have a question from Tara Kaur from IIFL Capital. Please go ahead. Thank you for the opportunity. My question is that, we see that there is an 80% YOY growth in your total income. I just wanted to know the breakdown of the, you know, the net category. So how much gold were they able to get into business segment and, you know, other section? That's what, we are certainly into gold business. Diamond proportion is very less. We are expanding our diamond proportion now, and we are going to start a B2C distribution in diamond also shortly. So the major proportion is gold ornament. The majority is coming from gold only, right? Yeah. 90% is of B2B, and 10% is of B2C. Now since we are expanding on B2C segment, the B2C segment is going to improve at a fast rate. Okay. B2C is fully showroom or any online we are doing, online sales? Yeah, at the time of opening our new showroom, we will be introducing an online app for online purchase. How much revenue we are getting from online app? On the opening of new showroom, we will introduce that. Okay. My next question is that, what are the factors that contributed to the better increase? We are seeing a healthy EBITDA of 38.79. What was the factor? Like operating income, operating expenses? Yeah, operating income only. As the introduction of various fast-moving products, marketing strategies, introduction of fusion jewelry, and decreasing of our stock rolling cycle, all these factors played a way through. Okay, sir. That's all from my side. Congratulations on your great set of numbers and all the best. Thank you. Thank you very much. We have a question from Aditi Roy from Kotak Securities Private Limited. Please go ahead. Congratulations, sir. Thank you for giving me opportunity. My question is, how is your company's financial growth and profitability? What priorities are set for the second half of FY 2025? Yeah. As per the top line is growing the same way, the profitability is increasing. Since we are focusing on higher margin product, profitability will be back in the coming year. Yes, the company is working on for better numbers for the coming half. Okay, sir. My next question is, can you share insights into new project launches or additions introduced in H1 and their contribution to revenue? Sir, the regular products, whatever is required, we are introducing it on day-to-day basis and focusing on the designs always. We have introduced fusion jewelry, lightweight jewelry. Since the prices of gold has increased, we are creating the same products in the look. All these things we are working on it. We are introducing various fusion jewelry. The base products are accessories are collected from various states all over pan India. These are assembled in one particular segment. They are also being taken great for the betterment of our business. Okay, sir. My last question is, what are the primary areas of focus on sustaining growth in H2 FY25 based on H1 results? Sir, the growth segments are same only. We are focusing on the products which are widely demanded all over our customer base. We are expanding our customer base, B2C expansion also we are progressing. After opening of the new showroom, even the exposure to B2C is going to increase, which is going to add an additional margin. Overall, the growth is going to be the same way for the coming half. Thank you, sir. Congratulations once again. Thank you so much. Yeah. Thank you. We have next question from the line of Mahesh, an individual investor. Please go ahead. Hello, can you hear me? Yes, sir. Good afternoon, and my question is, how has the rising or fluctuating raw material cost affected our EBITDA margin? Fluctuation does not cause much of our margin because we are working on a daily refill system. Whatever requirement is there, we purchase daily. Our gold, we sell daily. So daily basis we make that. Fluctuation does not make any much effect on our EBITDA margin. Okay, so due to the daily rate, the fluctuation doesn't impact? Yeah. Okay. Can you also elaborate on how the India International Bullion Exchange has influenced cost management? Yeah. As when we import gold from the exchange, we get an additional benefit of qualified jeweler. Since we are qualified jeweler, we are getting bullion at a lower rate of 1%. Okay. Does that have any impact on our income growth during this half? That was the cost of, the procurement of material helps in making an additional margin of 1%. Okay, got it, got it, got it. Can you also provide more insight on the performance of our retail versus a wholesale sales channel? Sir, currently I told you that previously, 80% of sales are from B2B segment, and 20% are from B2C. Now we are expanding on the B2C segment. After opening of the new showroom, for a period of another two years, the proportion of B2C will improve around 20% to 25%. So that after the inauguration of the new store, our B2C performance will improve, right? Yes, B2C performance will surely improve. Overall, we are around 80% of wholesale. Okay. Got it. Thank you, sir. That is it from my side. Thank you very much, participants. We would like to remind you can press star and 1 to ask a question. The question is from the line of Priya Gupta, an HNI investor. Please go ahead. Hello? Ma'am, please go ahead with your question. Yes. Okay, my question is, could you share your margin performance in H1 FY25 and any changes in pricing strategies to sustain it? Yes, margin was impacted in H1. The gold price of gold has increased, and even accordingly, the margins have improved. It is going to sustain for the coming years. Actually, we are working on different types of products which are highly acceptable in the market, which has a fast rolling culture, and which provides us higher margin. Okay. Okay, thank you. My next question is, were there any changes in sourcing costs due to import-export dynamics, and how did this affect margins? That's what, in posting costings, we have been, and colleagues of yours in IIBX, we are getting gold at a better price than the global market, so it has been going 100% according to the output. Okay, thank you, sir. Thank you very much. Thank you. Thank you very much. Okay. To ask a question, you may press star and one. Ladies and gentlemen, if you wish to ask a question, you may press star and one. We have a question from Deepak Yadav from Raj Industries. Please go ahead, sir. Thank you for the opportunity. My question is, what is the contribution of B2B business, the contract manufacturing, to overall revenue? That is what, and we do manufacturing by we do manufacturing from all over the artisans from Pan India, various factories, as per the requirement. Overall contribution-wise, what you see is B2B sales is of 90%, and 10% is of the B2C sale. Product-wise, 75% of the product is manufactured, around 15% is sourced from any certified dealers or any factory. Okay. Any new B2B client is added? Yeah, lots of B2B clients added. Here, all over South India, we have diversified the clients, because we do not we have all clients, manufacturing partners spread all over South India. Hello? Yes, sir. I am audible. Okay, and my last All over South India, we have been adding, and lots of clients have been added. Hello? We could not hear from Ms. Jeeves has been disconnected. We will proceed with the next question, which is from the line of Babu George, an investor. Please go ahead. Hello? Yes, sir. My question is, can you throw some light, what was the demand during this first half of FY 2025 for gold and other precious stones like diamonds? That is what, the demand for gold ornaments was very good. Since the proportion in which we deal in diamonds is very less, since we are going to expand it now only, our overall contribution, 2% was around our diamond demand. My next question is, for improving the EBITDA and PAT margins, are we having any improvement of process by which we are looking at? Yeah, that is what, we have been focusing on various designs in terms of lightweight, fusion jewelry, and widely diversified products, which improve our rolling cycle, so it will help to our EBITDA. Okay. My next question is, what percentage of total revenue came from bullion items compared to previous quarters? Yeah, the total revenue was around 22%-25% from bullion, and 75% from ornament sale. Okay. Thank you, sir. Yeah. Thank you very much. Ladies and gentlemen, if you wish to ask a question, you may press star and one. We have a question from Sandesh, who is an individual investor. Please go ahead. Thanks for the opportunity. Congratulations for the second quarter. Thank you. Sir, rather than talking about the business, I have just one main question regarding, where do we see ourselves in next, like, 5 years with Kalyan Jewellers at the top and Titan at the top? Do we consider ourselves capable enough to grow that line of scale or business to that level in future? What could be the possible timeline? I want to know the vision rather than the numbers, if you can see. I tell you one, the management has a very vast experience, has been in the field for more than two decades nearly. We are working in progress. We should also open up various stores. We have appointed our CFO, Mr. Prakash, to identify the potential locations for the expansion of our B2B business. Surely, in coming 5 years, you will see a very Year-on-year, there will be a growth of around 25%. As showroom adds on, even the progress will be high. Right, sir. Right now, we have clear visibility of revenue coming from our upcoming showroom. Then thereafter, since you have mentioned, we are planning to open three, four showrooms also. Yeah. Our geographical expansion to north, like we are mostly into south right now. What about our expansion, our plan regarding expanding in north? Or maybe the fundraise required for that into in plan, sir? That is what, sir. Initially, we are in south, and we are really road facing south. We are going to expand in south initially. Later on, we will think of expansion on an, what they say, other geographical area. Since the demand of overall gold jewelry is 40%, we are becoming the main potential here in South India. Right. Sir, one last question. Since in our previous presentation, we have mentioned that because of seasonality in the business, the current results should have not been that good, which are, I mean, very good in the seasonally weak quarter. So what were the reasons for deviating about the trend in current H1? That's what current H1 was pretty well because even the duties were reduced, taxes were reduced, so demand was very high. Hardly for the, what they say, last 15 days of the month was there, but that all quarter was very good. Right. Thank you so much, sir, and all the best. I wish we could come to meet the likes of Lucky and Khazanchi from the house soon. Thank you. Sure, sir. Thank you so much. Thank you very much. If you have any questions, you may please press R1 now. Since there are no further questions, I would like to hand over to Sneha Rathod for closing comments. Thank you everyone for joining the conference call of Khazanchi Jewellers Limited. If you have any queries, you can write us at research@kirinadvisors.com. Once again, thank you everyone for joining the conference call. Thank you so much. Thank you, everyone. Thank you, one and all. Thank you all. On behalf of Trade Advisors, this concludes this conference call. Thank you for joining us. You may now disconnect your lines.