Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Agarwal from Strategic Growth Advisors. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and thank you for joining us on Kalyan Jewellers India Limited Q3 and nine-month FY 2025 earnings conference 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 got an opportunity to go through our financial results and investor presentation uploaded on the company's website and stock exchanges. We will begin the call with opening remarks from management, following which we will have the forum open for question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier.
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.
Thank you. Good evening, all of you. Welcome, everyone, to the call. It has been an excellent year so far, with consolidated revenue growth of approximately 35% and standalone revenue of approximately 37% for the first nine months of the financial year. SSG is again very strong. Q1 recorded at 12%. Q2 was at 23%, partially driven by the import duty cut. Q3 was at 24%. Q3 SSG has been driven largely by the robust festive and wedding demand, and a lesser number of Shraddh days also played a part. Revenue growth for the recently concluded quarter has been 40% on a consolidated basis and 42% in India. Growth has been broad-based, with robust growth across gold and studded categories. Adjusting for the loss due to reduction of import duty, growth in PBT is around 53% on a standalone basis and 46% on a consolidated basis.
As we indicated earlier, for FY 2026, we have drawn up plans to launch 170 showrooms across Kalyan and Candere formats: 90 Kalyan and 80 Candere. We have completed signing of LOIs for showrooms to be opened during the first half of FY 2026. Talking about the current quarter, the quarter has started off well despite the volatility in gold prices. We are upbeat about the ongoing wedding season and expect to end the financial year on a strong note. We are on track for the launch of 30 Kalyan showrooms and 15 Candere showrooms in India during the current quarter. Over to you, Sanjay.
Thank you, Ramesh. Good evening, everybody. We just completed a fantastic quarter, and I'm happy to share some information about our numbers. We reported a consolidated revenue for the quarter of INR 7,287 crores, a 40% growth over the same period in the previous year.
Consolidated profit after tax came in at INR 219 crores versus INR 180 crores during the same period in the previous year. Adjusting for the loss due to the customs duty cut, consolidated profit growth would be about 43%. Now, I shall give you a breakup of the financial numbers between India and the Middle East, starting with India. India revenue came in at INR 6,393 crores, a growth of 42% when compared with the corresponding period of the previous financial year. India profit after tax came in at INR 218 crores, compared to INR 168 crores in the corresponding quarter of the previous financial year, a growth of 30%. Again, adjusting for the loss due to the customs duty cut, profit after tax growth would be 54%.
Talking now about our Middle East business, revenue for the quarter came in at about 840 crores, a 23% growth compared to the corresponding quarter in the previous year. The Middle East business posted a profit of 15 crores for the quarter, compared to 14 crores for the corresponding quarter in the previous year. Profit grew by 23% over the corresponding quarter of the previous year. However, PAT growth for the current Q3 FY25 was impacted due to the introduction of corporate tax in the UAE. This is the first quarter after corporate tax comes in. During the quarter, we opened 45 showrooms in India across Kalyan and Candere platforms, and we opened our first showroom in the U.S. With this, we are done with the summary of the financials, and now open the floor for questions. Thank you.
Thank you very much. We will now begin the question and answer section. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from 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 Gaurav Jogani from JM Financial. Please go ahead.
Thank you for taking my question. Sir, my first question is with regards to the demand conditions that you have witnessed in Q4, especially with one month ahead now in the quarter. And also, with the recent surge in gold prices, has that had any impact on the demand for the same?
The demand is strong. As we see, because it started off very well and the wedding demand was very strong. The last one week, there is some turbulence in the gold rate, gold prices, but even then, demand per se, it is still strong.
Sir, we have been seeing that for you, at least the studded growth has been quite good, and in fact, you are seeing a greater studded share. I also just wanted to know from a lab-grown diamonds perspective, if you are seeing any impact, and if you can give some color on what kind of studded jewelry you have, which kind of is not too much impacted by the lab-grown diamond thing.
As mentioned earlier, lab-grown diamonds basically come in the solitaire space. And if you look at Kalyan as a brand, we don't focus too much on solitaire. And if you look at our revenue base, maybe 5%-6% of the total diamond revenue will be solitaire. Approximately 3% of our studded will be solitaire. Maybe 1% of our total revenue will be solitaire. So the impact on a certain segment of solitaire, wherein above a specific one-carat range is where the lab-grown diamond has at least some demand. And if you look at our total sales, demand is even lower. So we don't have any impact on studded category.
Okay. Sure. And sir, my last question is with regards to this recent saga. Have you seen any impact on the addition of the franchise partners or any change in the store addition guidance, not only for this quarter but of the future year, the next year as well? Anything on that front?
There is no change at all. I told you we have already signed all LOIs for the first half of the next financial year. This quarter also, we are adding to it, and there is no change per se for franchisee momentum at all.
Okay, so thank you. That's all from me.
Yeah.
Thank you. A reminder to all participants, you may press star and one to ask question. The next question is from the line of Pulkit Singhal from Dalmus Capital Management. Please go ahead.
Thank you for the opportunity and congrats on a good set of numbers. Based on the adjusted profit growth that you have given, my understanding is that the PBT margin this time is around 5.43% versus previous year 5.01%. It's almost a 42 basis points PBT margin expansion. Is that calculation roughly correct? I mean, 40 basis points plus?
Yeah. So basically, yes, the PBT margins have gone up around 0.4%, and it is predominantly because of the ad spends. As I had mentioned earlier, Diwali this time was early Q3, and our campaigns had started in Q2 itself. So you would have seen some ad spends higher in Q2, which has been lower in Q3. So that is why your Q3 majorly employee expenses and ad spends are where we have gained in the PBT margin.
Right. So once you look at maybe Q2 and Q3 together to kind of.
Better way to look at it.
Better way to look at it. Either way, it could be easily a 20 basis points or average impact, maybe. But my point is, directionally now, are you confident of this kind of margin expansion, or do you think there's a certain one-off here and you don't anticipate that?
I think there's a certain leverage in employee expenses because that also I had mentioned earlier, wherein our base is getting higher. So the new staff, which we are taking for the stores which are going to open, the quotient when compared to the base, we can because already the base is high now. So you can see leverage in employee expenses, and margin leverage in ad also can be expected. So maybe these levels can be expected for the next year, and we also have savings of interest for the next year because we are reducing our debt.
Yes. Okay. So that's great. Secondly, I mean, are you seeing any increase in gold lease costs or expected increase in gold lease costs, I mean, because of some kind of expectation of tariffs in the U.S.?
It's stable.
It's stable.
Yeah.
Understood. So there is no such expectation as well from the banks?
Expectation, meaning as of now, it's very stable.
Understood. So for whatever reason, if it were to increase, because there's an article which talks about how the U.S. might increase tariffs on gold import, which in turn may lead to lease cost increase. Either way, if that were to happen, you would pass it on to the customers, or how does it work? Or do you have avenues of kind of managing that cost?
No, so interest rates cannot be passed into the customer. Meaning, as of now, we cannot speculate on that now because nothing has come out.
Sure. All right. Great. Thank you, and all the best.
Yeah. Thank you.
Thank you. The next question is from the line of Ashish Kanodia from Citigroup. Please go ahead.
Yeah. Thank you for the opportunity. So the first question was on the store-level gross margins. If you can give some color how the store-level gross margins have trended this quarter.
Yeah. Margins have been almost stable, so pretty much the same as maybe the last few quarters.
Sure. And the second question was in terms of the customs duty cut, that impact, is it fair to assume that all the customs duty cut, that impact is already captured in 2Q and 3Q, and there shouldn't be any more impact going forward?
Yeah. There's no more impact, so meaning 120 odd, everything is over now.
Got it. And third one, just on the lab-grown diamond and studded side. So on the diamond prices, especially I'm just talking about the smaller stones, on the sourcing side, have you seen any price correction, etc., say, in the last few months? And the second thing is also on the consumer-facing side, how are the prices trending, especially when you look at whether your own pricing or for other players? Has there been any reduction in diamond prices on the smaller stone side?
Yeah. So basically, I told you again, the solitaire is the area where the price correction majorly happens. So here, if you look at Kalyan, out of the solitaire inventory and revenue, almost 85%-90% is below 50 cents. There, price correction is not significant. So price correction is significant in 50-cent-plus category, which is maybe 10% of our total revenue and 10% of our total inventory also.
Sure. Got it. And maybe just last bit of a question, more on the data and GML side. If you can help us with what was the borrowing and GML for 3Q? And secondly, in terms of land sale, etc., if you have any more visibility, please?
Yeah. So no major change in the what you call GML debt level, etc., for Q3. And we have not repaid any further debt also in Q3. So there is no major change in that area. And what was the next question?
The land sale, any further update in terms of timeline, etc.?
Yeah. So, collateral release, we have two steps towards it. The first step is to, of course, reduce the debt. And then we go to the banks and say that we need only this much limit. So that has been done, with which now, meaning if you look at over the past 18 months, we would have reduced approximately INR 450 crores of debt in India, right? And we will, again, further reduce around INR 150 crore during this quarter. So we have been in discussions with the banks for the release of collaterals. As I mentioned, there are two steps in the process. First is to reduce the ABF limit. We had sent the proposal for the reduction of ABF, and banks are already given. The collateral given is more than required. So that is the second step wherein we ask for the collateral back.
So maybe three, four months for the entire process wherein we might get clarity on the asset release is what we estimate now.
Sure. That's helpful. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask question. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead.
Hi, team. A couple of clarifications from my side. One, double-clicking on what Pulkit asked a little earlier on the PBT margin part of it, let's say, looking into FY 2026 and beyond, is it fair to, let's say, make a statement of hypothesis that given that you have been, let's say, in a hyper-expansion mode in the FOFO route over the last, I would say, 18-24 months, and also that most of it has come into base, those who have ramped up as per your plan, etc., is it fair to make a statement that, let's say, going into FY 2026 and beyond, let's say, PBT growth will be ahead of the revenue growth?
Yeah. It should. That is what we plan to. Yes. So PBT margin should be higher than revenue growth.
Understood. And I recall the comment as of the last quarter going into FY 2026. So there's no change in the expansion plans, right? I mean, let's say 90 stores for FY 2026, etc., it's absolutely intact.
Everything intact, and again, repeat, H1 expansion already signed.
H1 FY 2026?
Yeah.
Okay. Understood. Secondly, on the revenue aspect, once again, let's say, if you could call out if there's any regional variations in growth, let's say, South in the other three parts?
South, yeah. So this time, if you look at SSG, SSG would have been a bit more heavier, what you call, south will be in the range of what, 23, and non-south may be in the range of 25.
That's statistically insignificant, right? It's largely similar to what you're actually saying, which is actually slightly different from the trajectory what we have seen in the past.
So yeah, if you look at 1% or 2%, it's the same, meaning it was almost opposite in Q2. It was 25% and 23%, if I remember right. So that's what changes only there. There's no major change in SSG levels.
No. The reason was because, historically speaking, maybe year back or so, there was a market context which was called out by your peers. Otherwise, also non-listed companies also have heard that, let's say, the South market has seen significantly higher competitive activity leading into competitive intensity. Is that largely behind us, or is it just still as usual?
It's a competitive intensity. As I mentioned earlier, we have always faced competition because we are a hyper-local player. We have to compete with local players, regional players, national players. So it has been a part of our life since inception. So there, we have not seen anything major in changing in the last two, three years, except that campaign levels in a local market, they are also active today. And that has really changed. So we are forced to spend some more money than expected in a franchise store which we launch or in a tier three, tier four city in South or non-South. That has really changed because of the digital media coming in place. They are also able to spend money and compete with a national brand in that local market. That is different from before. Otherwise, everything remains the same.
Understood, and lastly, in one of the disclosures, I noted that there is a reappointment of the Warburg Pincus nominee now for the next three years. How do we understand this now that, as I understand, Warburg doesn't hold in any share, let's say, taking the company as such?
Yeah. So we have reappointed Mr. Anish Saraf. We are happy that he accepted, and he is a non-executive director, and we have appointed him for three years. Vinod Rai has been reappointed as the Chairman. Salil and Anil, they also play an important role. They have also been reappointed. So we have enjoyed the journey so far till all of them. And we believe that they are also a part in our success. So we still look forward, again, to work with them in the next phase of expansion.
Thank you. Thank you, Ramesh. All the best.
Thank you.
Thank you. A reminder to all participants, you may press star and one to ask question. The next question is from the line of Soham from Centrum Broking. Please go ahead.
Hello. I'm audible?
Yeah. Yeah. Yeah. I can hear you.
Yeah. Thank you for the opportunity, sir, so just wanted to check a couple of things. As the gold price has been surged almost for last quarter, also more than 30%, so how do you look in the demand side? As consumer prefer lower carat right now, I mean, is it anything trend we're observing?
Yeah. So if you look at from Q3 to now, yes, the price has been almost 5%-7%. It has been increased by around 5%-7% now. So now, customers are also aware of all these. Now, it has become a habit for them also. It is almost like a habit for them. Gold prices are going up. So when the gold price goes up in a couple of days, or meaning three to five days, people might take a pause and look at the direction where the gold price is going, and they might prepone or postpone their purchase. But wedding revenue cannot wait for more than a week. So they immediately come in maybe after four, five days. So nothing major has impacted as we speak at the stores. Demand, per se, very strong. It is still continuing.
New customer growth and existing customer growth is intact.
But in case of non-wedding, how is it? Is it non-wedding?
Non-wedding is the purchase where people can postpone more than a week, but if you look at, as we speak, the first 30 days, January, the revenue, the footfall, wedding demand, non-wedding demand, everything is almost in place, and customers are also getting used to all these, and now we have 18-carat also at the store. 14-carat is also selling for diamond jewelry, so price is not impacting non-wedding too much like before.
Okay. Got it. So now my second question is, as of now, if I look at our model, basically, COCO is still 60%. COCO is 40% on a rough basis. And as we go more COCO, so it would be around 50-50 or 55-45 by FY 2027. So in that case, is it fair to assume that on an EBITDA margin basis, we could have the impact of 100-110 basis points kind of impact till FY 2027 for next two years?
Yeah. So there will be an impact for EBITDA margin. EBITDA margin will be keeping on growing. And EBITDA, I mean, the EBITDA margin for franchisee store. Number of franchisee stores, yes, you are right. EBITDA margins will be keeping on growing. But PBT margins are growing. Operating leverage is again stepping in. Interest rates are also, because we are repaying the interest debt, so interest can also come down. And PBT of franchisee stores are more than our own store. So EBITDA margins will keep growing, except that you can see a situation where we will start reopening our COCO, right? Because once the debt repayment is done, then the excess cash can be used for COCO. So from there, you will start to see EBITDA margins grow.
Got it. And, sir, the last question from Candere. Right now, what is the stage? What is the, how do you look for these new because most of the stores we are opening is majorly COCO for Candere. So how do you look for next couple of years, the journey, maybe profitability and all, if you can share something?
Look, Candere, we are looking into the next phase of expansion and we are adding stores. Again, Q4 also, we are going to add 15 more. Next year, we are adding stores in Candere and we will start our campaigns. We will focus on footfalls. We will focus on making the store EBITDA positive in the next financial year and in the next two, three years, take revenue to INR 1,000 crore. That is our target for Candere.
Okay. Got it. Got it. Thank you very much, sir.
Yeah. Thank you.
Thank you. The next question is from the line of Devanshu Bansal f rom Emkay Global, please go ahead.
Hi, sir. Congratulations on a very strong performance in Q3. Just one question from my end. I just wanted to sort of check on making charge. So a few anecdotal checks sort of indicated that we have taken some increase in our making charges. So wanted to confirm if this is true as a strategy?
So what are you asking? Did we increase our making charges? Are you trying to ask for that?
Yes. Yeah. Yes, sir.
No. No. Making charge. What we do, again, the making charge of a product. A brand only cannot decide. The market also has to decide the making charge of a particular product. So when we enter into a new market, we will have certain staple products where making charges has to be competitive with the local player there. We will not be able to play around too much with the making charge for a staple product. We will take products which are non-staple in that particular market. We will enjoy some premium for a period of time for these products. Slowly, those products will be introduced by some local players. So the margins come down there. So we have to replace that product with some other product where we can again have a premium on making charges.
Tactical changes, tactical campaigns, working around the making charge, it is a constant process. If you ask me, "Have you increased making charge for a particular product?" I will be able to tell yes and no. It cannot be a direct answer.
Okay. Understood. So just to confirm, as in from a difference between the leader or maybe the other listed player, and so has that reduced, increased, remained stable across the portfolio? So the typical shares on what there in terms of making charge?
So, making charges. I told you for staple products, our making charge. We compete that with regional players and local players. For non-staple products, the making charges will be very similar to national players.
Understood, sir. Thank you. That's it from my end. Thanks for the chat.
Thank you. A reminder to all participants, you may press star and one to ask question. The next question is from the line of Prolin Nandu from Edelweiss Public Alternatives. Please go ahead.
Yeah. Hi, Ramesh and team. Thank you for giving me this opportunity. A few questions from my side. Just to pick up from where you left in terms of the EBITDA margin, right, when it will start growing. So the larger question as to this focus on our own stores, you said once the debt is repaid, at that time, you will again come back to the COCO kind of model. Is it fair that your focus on COCO will start sometime in FY 2027? Is that understanding correct? And from there on, the percentage of COCO should increase in the overall store that we add every year?
Yeah. Yeah. So that's a fair assumption. Looking at the debt repayment, I think from 2027, we should start doing COCO as well. So if you look at the 50%-50% revenue share between COCO, COCO, the EBITDA will be in the range of 6.5.
Ideally, going ahead, that revenue share should be in favor of COCO, right, once the debt repayment happens. Is that also fair to think about?
So there, I think, because even if the debt repayment phase is over, okay, the number of the market is so huge wherein you can open what, 90, 100 showrooms a year. Franchisee demand is still in place. Huge demand from franchisee partners. Markets are also opening. Every year, new markets are getting open, right? We cannot cap our expansion with the cash we have. We will only look at expansion wherein our expansions will be funded either by franchisee partners or by our own capital. Even if in 2027 plus, wherein we might not be able to open as many as showrooms COCO when compared to FOCO.
Understood. Right. So that's more to do with the EBITDA.
But you will see a margin growth from 2027 in terms of EBITDA because we will start opening COCO showrooms.
I get your point. Yeah. Yeah.
So then EBITDA from the new COCO will be in double digits, right?
Right. So most of the larger question that I wanted to understand was, are there some market where opening a COCO store is very, very difficult, right, in terms of operations also on and so forth as to how do we run the store for safety purpose or understanding the competitive intensity? Is that how you see the market, or it would be more of the question of demand for COCO stores coming from a region and focusing on that? So how will you decide? I understand there is a lot of demand, new market opening, but are there some markets where COCO cannot operate, only COCO can operate?
So here, FOCO and COCO operations point of view, there is nothing which can change because the FOCO franchisee partners are only sleeping partners where they are like investors. They don't come to the store. There is no difference between a FOCO and COCO in terms of operation per se. That is not the reason. But once we have excess cash with us, we will have to use it somewhere wherein we will start opening our COCO. So maybe a very large showroom in a metro market, okay, we might do a COCO. Such showrooms are ideal case for a COCO.
I get your point. Right. So as you said, right, your franchisee partners are investors, right? And investors go through their own pain, right? Some of the equity investors are also going through their own pain. So do we do some kind of stress test to understand what is the leverage of, let's say, our franchisee partner? Because their health will determine how we do going forward, right? So do we do some kind of periodic stress test on them? And also to think from a perspective of there could be years where gold price could see a decline, right, which could impact our returns as well as the franchisee partner returns. So how do we think about or how do we predict or how do we model for their behavioral change when, let's say, gold prices would hypothetically see a decline in a year, right?
How would they behave in that scenario? Because they are knowing as to what they will do is quite important for us. So any thoughts on how you think from a business perspective on these aspects?
Yeah. So again, two or three questions you have asked. One is the check which we have on a franchisee capability, right? But we have a policy to restrict the number of showrooms per franchise. Also, we do check the financial capacity of a franchisee before onboarding them. And if they are able to open, say, five showrooms, we give them two. And that is how our intention also for the next couple of years is not only to open many showrooms. It is to expand the base of the number of franchisee partners so that maybe from 2027, we can only open new stores through our existing franchisee partners. So that is our intention more than simply opening stores with our existing franchisee partners. And to your gold price decline, I mean, it is a daily refilling inventory system which we have.
So if they sell 100 grams today, 100 grams will be refilled from our head office, and we invoice them, and they pay them. So even if price goes up or comes down, they will have to maintain the volume at the store level. And these investors are not like investors who see six months, nine months. They are all long-term, three to five-year period. So they don't only look at a gold price one year, two years. It's a five-year, six-year call which they take, right? And they are all HNIs who already have gold as an asset class with them, which is now giving them return also.
I understand, Ramesh. Thank you so much. Just one last question, right? So if we leave aside the impact on margin of this COCO and FOFO, right, but as we grow, our brand becomes more and more visible, right? How should one think about operating leverage from, let's say, employee cost point of view, A&P point of view, and also from the point of view of how much at what rate do we get gold metal loans? How much do we pay to our vendors for some of the outsourcing work that we do, right, for the metal piece itself, right? So how should one think about all these benefits coming in as the brand becomes lot more apparent across India, right? What are your thoughts on that, Ramesh?
So operating leverage, you are right. We should expect meaningful operating leverage going forward if the SSGs keep growing at the rate we see now, okay? But of course, SSGs, it's unheard-of SSGs which we are seeing for the past many quarters now. But if the SSGs keep growing at the rate which we see now, we should see meaningful operating leverage going forward, okay? And add corporate overheads. As you rightly pointed out, we are repaying debt also. So interest rate is also coming down. So there, everywhere you will be able to see operating leverage. But if you look at our what do you call the craftsmen who do jewelry for us, most of the craftsmen, our suppliers, vendors are like family for us, okay? Wherein they are with us right from our first showroom, second showroom. They are all in and around our place mostly here.
Or wherever we open store, we would have what do you call created that so-called ecosystem. So we don't squeeze them too much to earn a 0.25%, 0.35%, 0.15% margin. It is more for us for them to stay in the business, to make money, to bring their younger generation also into this business because we need them for our growth. It is not about saving 0.1%, 0.2% from them. That's not the intention which we have.
Understood, Ramesh. That's it from my side. Thanks a lot and all the very best.
Thank you. A reminder to all participants, you may press star and one to ask question. Is there any further questions from the participants? I now hand the conference over to the management for closing comments. Over to you, sir.
Hi. I would like to thank all of you. We will meet again very shortly. Thank you very much.
Thank you.
You all stood with us on our tough times. Thank you very much.
Thank you. On behalf of Kalyan Jewellers India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.