Ladies and gentlemen, good day and welcome to Senco Gold Limited's conference call, hosted by Emkay Global Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devanshu Bansal from Emkay Global Financial Services Limited. Thank you, and over to you, Mr. Bansal.
Yes, hi. Good morning, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Suvankar Sen, Managing Director and Chief Executive Officer, and Sanjay Banka, Chief Financial Officer. I shall now hand over the call to the management team for the opening remarks. Over to you, sir.
Thank you, Devanshu. Good morning, everyone. Today is 14th of February, so wishing all of you a very happy Valentine's Day. Just to inform all of you that yesterday we had our board meeting. We announced the numbers and in terms of the achievements and in terms of the growth of the company, we are very happy to inform all of you in terms of the revenue growth and in terms of the top line, we have been able to grow by about 27% in consolidated numbers for Q3 and 22% for nine months in a consolidated manner. And if we look and deeply analyze in terms of the growth that we have seen in YTD December for the retail revenue growth, we have grown by about 19% and for particularly Q3, we have grown by about 22%.
So in terms of performances, we can proudly say that we have crossed INR 2,100 crore as a company in Q3 and had the best-ever performance in a particular quarter. But yes, along with the fact that in top line and revenue, we've had such a great performance, there have been certain impacts in terms of the consumer behavior, in terms of the market forces, the duty cuts, the fact that consumers have not been so keen to buy more of diamond jewelry, but they were more interested and keen to buy gold jewelry. So as a result, what we have seen is that in spite of the fact that the top line growth has happened, but the stud ratio, which is how much of the percentage of sales we had of diamond jewelry, has not been able to grow.
In absolute numbers and terms, we have seen that the sales of diamond has almost been the same as it was in the previous financial year, but since the overall numbers grew, plus we see that gold prices moving up. In a piece of diamond jewelry, if there is a part of diamond and there is a part of gold and making charges, it's because of the gold value, the gold prices and the ratio of gold in the diamond jewelry goes up, which is not compensated by the diamond component of the jewelry. So in totality, we have seen that the stud ratio has come down. And as a result, it has led its own impact on the EBITDA, on the profit. So that was one.
In terms of the adjusted EBITDA and adjusted PAT, what we have seen is that we have taken into account approximately INR 58 crore-INR 60 crore of duty cut impact on the overall numbers. And what we see in Q3 is that compared to the previous financial year, Q3, where we have seen a much higher performance in terms of EBITDA and PAT in the previous financial year, this particular financial year, we have seen an EBITDA of 4.8% vs 7% and a PAT of 2.8% vs a higher PAT of the previous financial year for Q3. But as a company, if we analyze what had happened in Q1 and Q2, if we go back to the past, we will see that in Q1, the numbers were looking at a much higher growth compared to the Q1 of previous year.
We were of the continuous thought and effort that, yes, over a period of time in the financial year, we will see a 7%-8% EBITDA and about 3.5%-4% PAT. What happens in a particular quarter of Q1 and Q2 gets normalized in Q3. If we're coming to the situation that we are seeing in Q4, there are certain good actions that are happening at the ground level. One is that we are seeing that the diamond sales, which had been slow and low in the first half of the year, have started picking up from the festive season post-Dhanteras, December, January, February.
If you look at the sale of diamonds that is happening right now, it is about 59% growth year- on- year that we are seeing in the last three months, which will have its positive impact in the coming quarter as we see Q4 coming in. We are also expecting that the wedding season continues to be very strong in February, March, up to April. Akshaya Tritiya season is in April. So the robust demand of consumers in spite of the gold prices that has been at all-time high at INR 8,800 per gram. But continuously, we see that the volume impact due to this price increase also has been quite low as we see today. There has only been a very minimum - 1% volume impact in gold in YTD in spite of the high gold prices.
In terms of diamonds, what it was in the first half of the year or even to the extent of nine months, the volume of diamonds were at a negative percentage of about - 3%. But once we have crossed December and we are moving into January and now we are in the peak season, the volume growth of diamonds has also been on the higher side. We have covered up for the degrowth that was there. We are now in a positive 2-3% growth in diamond value as well. It is all about we always believe that the numbers that while the top lines are something which is driven by sales, the number of invoices for us till YTD, nine months had grown by 4.5%. We have seen that the ATV has gone up by 14.5%.
We have seen the ASP has gone up by 15.5%. So there have been positive signals in terms of the growth of the sales. Even though there has been an increase in prices, our endeavor has been to open about 18-20 stores for the financial year where we were of the expectation that there will be 8-10 owned stores and 8-10 franchisees, and we have opened about 14 odd stores till now. And in the coming quarter, for the remaining February and March, there are five to six stores that are in the pipeline. There are about 2-3 company-owned company operated stores and two to three franchisees, so that will allow us to open the target of 18-20 stores for the coming quarter and end the financial year with the target of 20 stores that we intend to open.
Then going forward, for the new financial year, we will continue to endeavor to open about 20-odd stores, 8-10 company-owned company-operated stores, and 8-10 franchisees. So these were the broad numbers with which we have seen in the nine months. The ratio of old gold of the overall sale has continued to be at about 38%. So that has been a way that the consumers have come back and exchanged and taken the new jewelry that they had to buy. In terms of the achievements, we have been launching and had a great Dhanteras with INR 1,000 crore sales in the month of October. In terms of the brands, company formation, we had formed Sennes Fashion in the particular quarter as a company. Then gradually under Senco, we will be opening 3-4 lab-grown diamonds, leather bags, and perfume stores.
Those initiatives with the long-term perspective will continue to happen. And all in all, I would say that, yes, in the nine months, and especially for the particular Q3, in the last three years, if we analyze, usually Q1, Q2 remains a muted quarter, and Q3 remains a very quarter with much higher growth and higher performance, not only in terms of top line but in terms of bottom line. But in this particular financial year, due to the price movement, due to the duty cut, due to the way we have seen that the sales of diamond as a ratio and a proportion of the overall sales has not grown to that extent. So Q1 and Q2, this particular financial year has been a much more robust quarter compared to Q3. So that has its own impact on the overall nine-month performance or the Q3 performance.
But once again, I would like to reiterate that we of the firm believe that Q4, which continues to be a robust quarter, shall continue. And what we are expecting is that in terms of EBITDA, as we end the year, we will be about 7%-7.5% EBITDA. In terms of top line numbers, we have already crossed INR 5,000 crores in the nine months. So we should be crossing INR 6,200 odd crores as we end the year. And with that positive growth and positive expectations, we will continue to perform. And the team has been giving their best efforts. And I'm sure that much like the 18%-20% growth year- on- year that we continue to project and continue to work towards, and we will be doing it in this financial year.
We will continue to give our best efforts and continue to grow at 18%-20% in the next financial year as well. Now, I would just request Mr. Banka to share his thoughts and his numbers.
Thanks. Since you've already covered business, finance, sales, EBITDA, management, everything, I think that without getting into any more introduction, we can open the call for Q&A. I want to inform the investors that we have listened to you. We have rescheduled the timing considering a lot of queries which we received. We have sent the press release today morning, and we have uploaded the presentation, so we had received a few queries yesterday night regarding the variance in the gross margin, so while Sir had spoken on that, I will once again take you through on the same which we have explained through our presentation and also the press release, so in the presentation on slide number 42, we have explained very clearly that our quality, the quality of our gross margin does not change quarter-o n- quarter.
So what we have been guiding the market is that our gross margin is in the range of 14%-15%, and our EBITDA is 7%-8%. In the past quarter- on- quarter, there have been some variations. So let's say we have given you a trend of last 11 quarters. So FY 2023, quarter one was 5.5%, quarter two was 3.6%, quarter three was 12.1%. But I must add here that there was no qualitative change in the margins. In quarter three, our volumes are high. So this is primarily due to the price variations. And the price variations are not same. They are unique for every year. So in FY 2024 also, incidentally, the trend was same. 5.2%, 3.4%, and 11.1%. So somehow it appears that the market expected that in Q3, we will make 11%.
But we have been consistently guiding that the gross margin and EBITDA have to be seen over two to three quarters. And those three quarters may not fall within the same financial year. It may be Q4, Q1, Q2, or it can be Q2, Q3, Q4. So when we look at the current year, the reported EBITDA margin was 7.8% for the first quarter as against 5.2%. But nothing has changed. And similarly, for quarter two, it was 3.8%, where we had said that there is an adverse impact of customs duty around 29 crore. And in quarter three, we've reported 3.9%. So we have reported and adjusted EBITDA, whereby we have taken the total impact of 57 crore in YTD. And at a high level, we have taken a number of 41. So my adjusted EBITDA for Q1, Q2, and Q3 is 7.8%, 5.9%, and 5.3%.
My YTD, my nine-month adjusted EBITDA is 6.2% as against last two years' EBITDA of nine months for 7.1%, or in March 2023, it was 7.7%. So basically, as against 7.1%, it is 6.2%, 90 basis points gap. So we have analyzed the same. It is primarily due to two reasons. One is the stud ratio. So we have said that there is margin pressure on the diamond jewelry. And the pressure is more on those who sell solitaire. In our case, we have almost 90% of our diamond jewelry is 1.1 carats and below. So there is lower sales of diamond jewelry stud ratio. That impact is around INR 15 crore. And the export sale is slightly higher this year, which has also impacted by INR 4 crore-INR 5 crore.
So net net, we are of the view that our adjusted EBITDA margin, which is 6.2% and is in line with the market trend, and so this is one. In slide number 45, we have given some more details once again for the 11 quarters, and we have explained that we are following hedge accounting. The Indian hedge accounting, that is Ind AS 109, is in line with the global standards. We are audited by a reputed statutory auditor, so for the last 10 years, we were audited by KPMG, that is Big Four company, and now we are audited by Walker Chandiok, which is called in common parlance, Grant Thornton. So the hedging which we do, we have also informed that we are doing almost 80% + hedging, so in Q1 and Q2, it was 95% and 85%, and overall, we have said it is 80% +.
So you are aware that we all know that the gold price will rise. But being a responsible jewelry company, we could have made enough decent money by not hedging our position. But we have taken a very concerted call to keep our position hedged. And we have explained that hedging we do by way of keeping the gold, the GML, and MCX. And we take sales position on MCX future. Due to MCX future position, we had a loss on account of hedge position. Technically, we can't call it loss. We call it cost of the hedging. And the total impact in Q1 was around INR 95 crore. Overall, INR 100 crore-INR 95 crore has been the impact in Q1, Q2, and Q3 all taken together. So this entire loss on account of hedging. And similarly, gold metal loan also, a major part of that we keep unpicked.
That all cost is loaded on the inventory. While there will be a realization gain on account of increase in the gold prices, it is countered by the loss on account of hedge position. Net net, due to the netting of impact, the hedge accounting impact, and hedge accounting does not give you a perfect result within the same quarter. What I'm trying to explain is that due to hedge accounting, due to price variations, due to the hedge percentages, the result in the quarter cannot be net net zero. Even if I hedge 100%, the result cannot be zero. While I understand that other jewelers may not have a major variance, but we are explaining our position of variance. We have given two numbers in slide number 32.
One is the hedging loss, which was INR 94 crore in quarter one, INR 2 crore in quarter two, and INR 6.5 crore again, INR 89 crore, and then there is customs duty impact in Q2 and Q3, so these two unique events, the margins of the current year are not in line with the past, we once again say in future also, the margin may not be exactly same with the previous quarter because the events are entirely different, but over 3-4 quarters, you will always find 14%-15% gross margin and 7%-8% EBITDA, so having said that, while our adjusted gross margin for nine months is 6.1%, which we have explained the reason, we feel that the customs duty impact is always back, the market is good. Despite the rising prices, consumers continue to be interested.
We hope and confident that in Q4, we will deliver 7%-7.5% gross margin. Demand is picking up, and with the same confidence, 7.5% EBITDA margin I'm saying, and then with that confidence, we will look at delivering similar gross margin in EBITDA in future as well, and one more point which we want to say is that the growth which we have achieved in the current year, which we reported at 27% in Q3 and 22% value by nine months, that growth has been achieved in all the segments. So like in gold jewelry, the growth is 21%. In the diamond jewelry, it has grown by 9%. So even though the stud ratio has come down, but since the absolute volume, the total base is increasing, that's why optically the stud ratio is looking down. 3 5%+ growth has happened in silver jewelry.
Even our costume jewelry range, which is for the youngsters and Gen Z, that has also grown by 18%. So we are very happy with the business. Yes, the business cannot be looked from one quarter to other. So we assure you that we are conducting the business with the best of our efforts. And the management team is fully committed. Hedging is fully done. And then we request that keep a faith and trust in us. And if you have any query, we will be very much pleased to address your query, particularly on the gross margin variance or EBITDA variance. Thank you very much.
Sir, should we open the floor for the Q&A session now?
Yes, please. Yes, please.
Thank you very much. We will now begin with the question- and- answer session. Anyone who wishes to ask questions may press star and one on the touch-tone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use the handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Praveen Kumar, an individual investor. Please go ahead.
Hi. Can you hear me?
Yes, sir. You're audible.
Yes. Good morning, sir. Sir, my question is on your Q3 update vs the current results. And in the Q3 update, you mentioned it is a 22% growth, and now you're saying 27% growth. And why is this confusion, and why is this deviation? Can you help me understand, please? And my second question is on the—yeah, my second question is on your press release. And you said you have new startups and subsidiaries. But when I dig deeper, you have only Sennes Fashion as the only subsidiary. What are those extra subsidiaries? Please help me understand. Thank you.
Right. So, thank you very much, sir, to answer the first part of the question, the 22% growth has been the retail sales growth that we have announced in the press release after the quarter ended. But the 27% growth that we are seeing is because it's consolidated. So we have our multiple companies, the mother company, Sennes Fashion , the Dubai company. We have a subsidiary called Senco Artisan, which is running two factories. So all put together, it is 27% growth. That is the reason why in the press release, after ending the particular quarter, we said 22%, which is mostly retail. That's what we tried to mention. And 27% is consolidated. The second part is the opening of the company, which is Sennes Fashion .
That is the new subsidiary company that has opened in this particular quarter that I have been speaking about. That is it. So this is to answer to your query, sir. Okay. So my quick comment on your first question.
But what we just heard, we have already lost the Senco Gold brand.
We had opened four stores also in Calcutta. So the objective was to keep it as a separate legal entity and have a more focused operation. So we have a very long-term plan for our lifestyle business. And with that objective, this entity has been created, which will house our aspiration for lifestyle business.
So you were saying something about the first point?
Yeah, yeah. Sure. Sir, if it was clearly mentioned as a retail growth of 22%, we could have been well aligned with your thoughts as well. But now that led to confusion, 22% vs 27%. I request you not to maintain this kind of confusion going forward. My humble request.
Okay. Yes, sir. Thank you. Thank you.
Thank you.
Thank you, sir.
Sure.
Participants, you may please press star and one to ask questions. The next question is from the line of Javid, an individual investor. Please go ahead. Okay. Javid, I have unmuted your line. Please proceed with your question. As the current participant is not answering, we will move on to the next question, which is from the line of Moksh Ranka from Aurum Capital. Please go ahead.
Hello. My question was on the competitive aspect of the business. What we have observed is that a lot of branded jewelry players have done QIPs and IPOs, and they are using that money to open express stores. And when you open a new store, what you have to do is you have to offer discounts. And is that something which is affecting margins as an industry-wide? And is this a temporary phenomenon, and it should subside in the future? So that's my question.
So thank you for your question. It all depends on whichever company it is applicable, that in which part of the country you are opening a new store. If you are opening a new store in an existing market, which is your strong market, there is already a sense of loyalty and a customer base, then your new store does make you give some offer or discount, but not to that extent on a continuous basis to attract footfalls and customers. If you open a new store in a market in which you are going there as a challenger brand and you want to capture more market share in that particular market, then you will need to give a higher discount and offer and keep your prices lower to attract the consumers and have a market share. It is dependent on that.
As a strategy, what we at Senco are trying to do is that in terms of our expansion, we have always been saying that East India is our strength and North India is our focus market in terms of the future growth potential. Therefore, 60%-70% of our new stores, we will continue to focus on growing in East India, and 20% odd, we will grow in North India, and remaining 10% in West and South. So with that strategy in mind, for example, in this particular quarter, which is quarter four, which is running, we have opened two stores in an emerging kind of a suburb of Kolkata. Just to give you an example, we have seen that the numbers of those stores, even though they are new stores, the first day sales have crossed INR 1 crore or INR 50 lakhs, INR 60 lakhs in another store.
So therefore, the consumers feel happy that, yes, the brand has come closer to their house and in their locality, and that will allow them not to go to another competitive store but visit that particular store. So this is what we see when we open in a strong market area. And at the same time, when you open, we've opened a store in Dehradun. And that is a market which is new for us, our entry into the hill area. So that we are having to spend on marketing, brand building, reaching out to customers, giving them offers, discounts, talking about the brand. And that is taking a little more energy, but it will give us returns in the future. This is how the balancing out is happening.
Okay. My next question was on the pricing scenario for natural diamond and lab-grown diamonds. And also, we plan to be present in both if we plan to be present in natural as well as lab-grown. So don't we think it would cannibalize in a way? And also, the falling diamond prices, could you help me understand the impact on the consumer behavior? Because essentially, a consumer is buying a natural diamond for a store of value.
Right. So buying of natural diamond as a store of value is mostly done for the purpose through solitaire, one carat and above. And what we have seen in the last one year is that the prices of solitaires have come down to a large extent, falling almost 25%-30%, if not more. And that is what is impacting the consumer and their faith on diamond solitaires as a store of value has gone down for the short term, while their faith on gold as a store of value and an asset has gone up to a certain extent. And therefore, a large number of customers at the ground level, when they have been asked to buy diamonds, they have not; everyone is getting convinced.
That is the reason why we are seeing that while the overall growth is happening, the growth of diamonds has not happened to the same extent as the growth of overall business and gold in terms of value. But our business, 90% of it is diamonds, which is below $0.50 or below $0.30 . So it is the smaller size diamonds. And while this consumer sentiment of emotional kind of attachment more towards gold has happened in the last one year, and rightly so. But the diamond pickup has started happening now that the gold price has gone to all-time high. People are preferring 14-carat, 18-carat jewelry started. And this is the kind of behavior we had seen in 2021, 2022, 2023, where the diamond jewelry sales growth was about 20%-25%.
For the first, I would say half of the year, H1, and to a certain extent in Q3, it was not happening in that manner, but from end of Q3 and now what we see in Q4. As I again said, that we are seeing that the shift of consumers towards diamond jewelry is gradually happening more and more because gold prices have gone very, very high now. So this is what is happening on the consumer side. And if you ask me as a consumer, with the diamond solitaire prices have come down to a large extent, now that there are talks of the Russia-Ukraine war to be kind of stopped in the coming months, it will might have an impact of gradually the diamond prices will stabilize and move upward.
Now, coming to your lab-grown diamond question, we maintain a risk register, and we kind of list out all the various risks and the future, any kind of events, black swan events, or what could happen in the future. And on that, we have very much consciously noted that these lab-grown diamonds will be a stone in the studded share that will continue to gain more traction, especially in terms of fashion kind of jewelry. They will not be considered as investment, but more as a fashion and adornment. And it will have a share of the overall stud ratio. So people who will want to invest for the future, for the value and asset, will continue to invest in natural diamonds. And that in the overall market is around 15%-20% of the share.
For Senco, it is about 10%-11% share, which we intend to take it towards 14%-15%. And we are taking steps towards that. But over a period of time, though the value of lab-grown diamonds is almost one-third or one-fourth of the value of natural in terms of sending prices to consumers, but it will also gradually take about 2%-3% share of the overall sales over a period of time. So this is how we see it. And as a company to hedge our own risk, we are creating a separate identity, separate store, separate entity, and trying to provide any kind of option, whatever the consumers want, in terms of either be natural or lab-grown. So this is how we would want to look at it.
Those are my only two questions. Thank you for your comments.
Thank you, sir. We'll take the next question from the line of Naveen Trivedi from Motilal Oswal. Please go ahead.
Hi, good morning, everyone. Could you please explain a bit more on the gross margin side? I know that you explained about the customs duty impact also was there. Even if you address the same, even the gross margins are around 700 down vs YoY. Even the sequentially, where we typically see quarter two to quarter three, most seasonally, gross margins are accurate. We have seen sequentially also it is down. While our stud ratio sequentially was similar in YoY, it still has seen expansion. So stud ratio actually has become most favorable YoY. So if you can just explain the same.
Hi, Naveen, thank you very much for asking this question. That's why we have uploaded this slide on slide number 45. See, gross margin is the sum total of for the jewelry industry, sum total of primarily making charge. That's a major contributor for the gross margin. And then diamond, in our case, the margin on diamond, then there will be margin on platinum, silver, etc., so on. And then margin on gold, if any. So seeing the competitive scenario today, when we are seeing that the competitors are offering huge discount on the gold price, and we don't understand how the competitor is offering discount on the gold. So effectively, there may not be any margin on the gold metal as such. Now, overlay of that, due to price volatility, as you said earlier, if you keep your position unhedged, then you can make money.
It depends upon how a jeweler hedges his position. But we have been hedging our position more than 80%, so there is no scope for upside on the gold price rise. And depending upon the hedge accounting, we have said earlier also, there can be INR 15 crore-INR 20 crore plus or minus on account of gold metal loan due to the gold hedging and the price volatility. Now we are left with making charge and diamond. If you look at our presentation today in slide number, just one minute, the slide one. Making charge percentage we have given would be around 10%-11% on total basis. When we talk about the balance of, let's say, 4.5%-5%, that comes from diamond, platinum, silver, and so on. Your point was that it has been volatile.
What we have explained to you that as far as the making charge is concerned, we have seen it is consistent over the last 11 quarters. I can get into more, let's say, last 20, 30 quarters, but given the past gross margin trend, it is in the range of 10%-10.5%. Now, stud ratio has been also standard. What you are seeing, the variance is primarily on account of price volatility, hedging position, unwinding of hedging position, the mark to market of the future position, and the timing effect which comes due to index. Our gross margins are fairly stable. That's what we say. Now, in a particular quarter, the sales volume will increase, and the gross margin absolute amount will increase.
But we don't. We have never guided that our gross margin % will increase or EBITDA margin % will increase. EBITDA margin % will increase due to operating leverage, but not due to pricing where the competition is intense.
Yeah, but I'm just trying to understand. I can understand about the gold price which is there. So is it that now you also explained about the making charges are also stable? So I'm assuming that there is no added consumer offers which you have done this quarter while you are seeing the competition is doing it. So it still doesn't explain about the gross margin dip both on the YoY side and the sequentially you're seeing. Is there any hedging cost which you had spent during the quarter which was higher than 2% or something last year?
See, hedging cost, hedging cost. We had a hedging cost book loss of around INR 95 crore in quarter one, INR 2 crore in quarter two, and INR 6 crore gain in quarter three. Effectively, INR 90 crore impact which has come. So in quarter three, there is no loss, there is a gain, right? Customs duty impact is there. So the major reason for difference in this quarter and last quarter is the customs duty impact. So we have taken a hit of INR 29 crore in Q2 and 27 crore in Q3. That has probably distorted the difference. But the question is that the Q3 con call which we explained in the starting line, that the Q3 of 2023 and 2024 has been 12% and 11%. But that is only incidental, coincidental.
There is no event in our business. When we make the business plan, we keep the gross margin consistent over every month and all the quarters. So this is just an impact of the Ind AS accounting and price volatility. So comparing this 3.9%, the reported number or 5.3% adjusted vs 11.1% may not be a correct indication.
Okay. So we actually what I understood is that the larger part of the gross margin impact is because of the gold price inflation. Is that understanding right?
Absolutely.
What gives you confidence that in quarter four, your margin will return to normalized level? Considering we are still seeing the gold inflation is on the rise, inflation is there. So what gives you confidence that your Q4 numbers will be at a normalized level?
See, we are at a hedging of 80% +. Okay. So let's say if the gold price rises from here, so we don't foresee that the gold price will rise from this INR 2,950 level, which is already too very high now. It may not touch beyond INR 3,000. And if it falls, then the hit, whatever hit will be there, that will be covered by our hedging position because we invest a lot of time and money as our risk management strategy. So that gives us comfort. Our gold closely monitors our hedging practices. So these are the two reasons. And as far as the we don't give random discounts on the gold metal. So we don't come under competitive pressure and don't enter into any tough competition, even if we lose sales sometime. And making charges, we generally remain intact.
We don't run discount offer in a very severe race. And we try to rather spend the money on marketing and brand building so that the customers would see our brand as a premium and should not see our product as a discount brand.
So just to add to Mr. Banka, our making charge income percentage has continued to remain at the same level. That is what gives us confidence. Our diamond income from the margin in diamond part of the diamond jewelry also remains at the same level in terms of overall percentage. It is just that as we have grown, the growth in gold jewelry in terms of value terms has been higher than in diamond jewelry, for which the stud ratio is looking down. And now that we are seeing that January, February, the diamond jewelry sales have gone up and diamond stud ratio is marginally going up also. So that is also giving us the confidence that nothing in the quality of business changes. The only thing as we are reiterating is for all of you to look at the numbers, not quarter- on- quarter.
Look at the numbers over the last three, four quarters. Look at the previous years, full three quarters, the year before that full three quarters, and this full three quarters because gold price movement impact of hedging. When we take gold metal loans from the banks that we take in August, September to build up the inventory for the Dhanteras festive season. Then we kind of fix the rate for those flexible gold loans in October and November for Dhanteras. We have what we call the value differences, the price fixing, the impact of that on the inventory, which is nothing but the hedging processes that we do, which will give certain movement. So again, maybe I'm reiterating it again and again, but when the numbers of Q1 was looking extremely good, it was the election quarter. The markets were challenging.
But because of the similar situation, the numbers, the growth percentage looked much higher. We were all very happy that yes. But we tried to guide everyone that over a period of the whole year, we are still expecting EBITDA 7%-8%. And the PAT as it is, and the top line will be 18%-20% growth. And we are continuously, with the firm belief, telling all of you that yes, the EBITDA will be around 7%-8%. We are putting our best effort to increase the diamond jewelry sale, which is going to impact directly on the EBITDA. And I'm sure this normalization of overall numbers is going to happen. So this is our guidance. But at the same time, let us also talk about certain of the risks that we see that we must be conscious of and take action upon.
And one is that the gold metal loans that we are taking as a process of hedging due to the tariff initiatives by the U.S., the banks are increasing their interest rate, which for us was approximately 2.5%-3% by 3 further more percent, 3%, 3.5% . So the interest on gold loan that for till about, I would say January, which we were enjoying, stay at about an average of 3%. Going forward in February and March, we are having to take into account that that metal gold loan interest will move up to about 6%-7%, depending from bank to bank, which means that for these two months, we will have a higher cost of kind of funding, 5.5% or so, which is going to have an impact of approximately INR 7 crore-INR 8 crore on the overall numbers.
We need to either have actions in terms of making charges or higher stud ratio and whichever to compensate for the same. So that is one situation which will impact in the coming two months and even for the whole year. But again, it all depends how we look at the whole year. Will this higher interest rate for metal gold loan continue for the whole of next year, or it will be it is only a temporary phenomenon of three, four months, and then it kind of again normalizes back to 3%-3.5%. We have to keep on observing and taking updates quarter- on- quarter on the situation. So these are certain things that we would like to also inform all of you about. Yeah. Yeah.
Thank you so much, sir.
Thank you. We'll take the next question from the line of Chinmay Gandre from Canara HSBC Life Insurance. Please go ahead.
Yeah. Thank you for taking my question, sir. Also, a few questions from my side. So I'll start with, sir, what was the studded mix in Q3 of this year vs the studded mix of Q3 for this year vs maybe last year?
Q3. As of Q3, the number is we reported the number here. 10.5% is there as of Q3 end.
YTD nine months.
That's what you said.
YTD nine months.
Okay. Quarter to quarter.
YTD was 11.5%.
I know you were not clear. Can you just repeat the last line, please?
Right. So our 9 months stud ratio was 10.5%, and our Q3 stud ratio has been about 11%. Just Q3 has been about 11%. And we are seeing that this 10.5%, which was the 9 months stud ratio, as we like February 15th, that 10.5% is moving up to 10.7, 10.8%. So the stud ratio, as we are moving and we are seeing this whole diamond season and Valentine's Day, it is moving up towards 7.7%, but 9 months is 10.5%. The stud ratio for H1 was lower. So Q3 kind of picked up in terms of the stud ratio to close to 11%, but 9 months, 10.5%, Q3, what was it?
Last time in Q3, this 11%, I feel like was how much?
We'll just look at the last quarter. We'll get that.
See, broadly, I mean, what I want to say that you basically mentioned that stud ratio was weaker in Q3 vs previous year, right? Because so more or less, it would be lower by 1%-2% at the best, right? Not beyond that. So maybe, I mean, that would have kind of at the max reduced your gross profit margins by around INR 10 crore-INR 15 crore, more or less. Okay. But still, then if I adjust for that also, it's like around 6.5% at best case you will reach for the Q3. So is the rest largely the explanation of the hedging part of it, where basically there is a timing difference which you kind of are pointing out towards, and that should kind of reverse in the Q4 is how the understanding should be?
Yes. Yes. Q4 and Q4 will have a reversal in terms of what we are seeing in Q3, and a little bit of it will flow into the Q1 of next financial also. And again, the stud ratio, so let me reiterate. And since we're having this discussion, one is that what is the diamond jewelry as a total sales of jewelry? Nine months was 11.6%, which is 10.5%. So this is just a comparison. The second thing what I would like to again state is even in the diamond jewelry, so the stud ratio is percentage of diamond jewelry in the overall sale. In a diamond jewelry, there is a diamond, there is the gold, there is a making charge. And the gold value is moving up. So the percentage share of the diamond in the diamond jewelry is also down.
So when we are defining and making a percentage profit or gross margin of diamond jewelry, then because the gold prices of the diamond jewelry have moved up higher than the diamond prices, therefore the margin on diamond jewelry itself is also not the way it was when the gold prices were lower and the share of diamond in the diamond jewelry was higher. So these are the two impacts. So our sale of diamond, just to kind of reiterate, last nine months was INR 143 crore or INR 142 crore, and this particular nine months is around INR 143 crore. So when we see and when we say that, oh, diamond jewelry sales have gone up by, see that what has been the increase of diamond in the overall diamond jewelry and what has been linked to the increase of gold in the gold price in the overall diamond jewelry.
The more and more diamond we sell, the margins will be higher. So I hope I could make myself clear.
Yeah. I got that, sir. So, but broadly, because the gold prices have moved further in Q4, then, like mentioned, the percentage of diamond value becomes lower in our diamond jewelry also, and hence the margins become lower because of the weighted average. So that will kind of continue in Q4 also.
So Q4 sales, Jan-Feb, we are growing 59% last quarter for now. It's a good number to talk about. Now, 59% looks very good, but we have to break it up. How much of that 59% is because of the gold price increase and how much of it is because of the volume increase, right? So volume increase of diamonds and overall volume increase in gold and volume increase due to the price increase. So to the extent that it is the volume increase of diamond, we will see that that will have its impact on the gross margin.
Okay. So but I mean, historically.
Mr., I'm sorry to interrupt. I will request you to rejoin the queue. There are others who are waiting for their turn. Thank you, sir.
Just one minute. Excuse me. Hello.
Yes, sir.
I have to. This will be very, and I'm trying to explain it voluntarily. So we have provided some explanation for the hedging variance, but I think it is not clear. I'm trying to explain it once again with reference to slide number 44. Just one minute. Very important point. If required, we will update this slide with more visibility. Slide number 45. Yes. So what we have explained in this slide, there is one more dimension to this slide. So basically, the gross margin which we have run is, let's say, it's INR 507 crore of making charges and the margin on diamond, platinum, etc., of around INR 165 crore. Total gross margin of INR 621 crore. There is a negative impact of hedging and customs duty. The net impact of the same is INR 515 crore. INR 551 crore.
So the total gross margin excluding the hedging impact, and I'm putting all these numbers on YoY basis, is INR 673 crore. That gives me adjusted gross margin of 13.7%. Now, this adjusted gross margin of 13.7% YoY is 13.7%. Q1, it was 13.5%. Q2, it was 12.9%, and Q3, it was 14.5%. The point is that explanation and detail we provide, the fact remains that there are minor movements in the gross margin quarter to quarter, and it cannot be exactly explained. So we'll try to add an additional slide as a part of addendum to what we have submitted to the stock exchanges today. That's all from my side, and I invite questions again. This new slide will be numbered as 45A. Thank you.
Thank you, sir.
Yeah. Hi, sir. Sorry, I'm not able to kind of reconcile all the numbers. So once again, I'll try and understand. So there are two effects. One is you're saying that the credit risk itself was lower by almost 60 basis points on a year-on-year basis. And the second effect is that within the diamond jewelry, there is a higher gold component because of the pricing change, and that's what has kind of led to dilution in margin on the diamond jewelry itself. Am I right? Is there any other effect that one should think of? I'm adjusting the impact of customs duty here. So any other effect one should think of?
So sorry, I missed your question.
So he's saying that the margin is one is because of the diamond stud ratio being lower. Even the margin is impacted because the gold component has gone up. Third is the customs duty. Any other reason for the margin to look lower, which is the hedging.
One is the hedging impact. That is hedging impact. So that I start at the beginning, I explained that one is the hedging impact, hedge accounting impact, customs duty, right? Now, what we explained is that my adjusted gross margin is 6.2% as against 7.1% last year for 9 months. That means it gives us a gap of around 90 basis points. So 90 basis points on, let's say, INR 4,900 crore, it gives you a gap of INR 45 crore, right? Roughly INR 5,000 crore into 90 basis points is around INR 45 crore. Now, we were trying to do a waterfall and trying to see what is the gap. So this gap is primarily by two reasons.
One is that the diamond sale, we explained that while diamond has grown by around just 1%, the diamond sale we have said it has grown by 9%, but still the stud ratio is lesser. So approximately on account of lower diamond sale, there's an impact of INR 15 crore-INR 16 crore. Similarly, in the total sale, export is higher. And due to export being higher, we have seen around INR 5 crore-INR 6 crore gross margin is lower due to higher export. Because in the export, the margin is lesser vis-à-vis what we sell at our own store. Now, these two are very clear reasons. Now, what are the other reasons due to which the margin is lower. The adjusted gross margin at 6.2% vs 7.1%, it can be due to the product mix. See, as the prices are rising, customers are going for lightweight jewelry.
Those customers who were going for a heavy diamond, where our margins are lesser, more than 35%, they are going for diamond jewelry with lesser diamond percentage. There are a mix of multiple reasons. Then when we talk about the bigger OpEx element also, in the current year, as the competitive intensity increased, we have to make investments in the marketing. We constantly have to make investment in our IT. We continuously have to make investment in our people. Because it is not, we don't run the business from quarter to quarter. We have a long-term vision of the company. We are a five-year-old company. We have a vision for the next 200, 300 years for the company. We spend money for the future. Hence, these are all investments. We don't consider this while from. I'm an accountant.
This can be an accounting concept. But these are investments for them which will yield long-term dividends for us.
Right. Okay. And sir, you also alluded to this aspect of higher competition, and there are certain players who are probably not hedging, and that's how they are kind of holding onto margins. From our perspective, I understand we have 80% hedge. The effect of that in terms of either giving customer incentives is fully reflected in the gross margin, or there is something in operating expenses also?
The duty impact, just to kind of.
No, not the duty impact, sir. Sorry. I was referring to any incentives or discounts you may have given because you mentioned about competitive intensity. Is that reflected in the gross margins for the 9-month period this year vs last year?
Yes. Yes. Because if we give any discounts or any offers, that is given on, say, as a percentage of making charges. So if that is given, then it will be reflected in the gross margin itself. But again, we want to reiterate that the making charge income from retail sales that we have gained in the nine months has continued to remain in the range of about 10.5%. So there has not been any major, major reduction due to the offers and discounts that we have given. Yes, the Dhanteras we had to give, or whenever there is an offer we give. But that has not impacted the margins.
Again, as Banka had said, that our margin, the income that we have received from making charges, which is the margin that is there, the income that we've received by selling diamonds, or the margin we received from platinum as a metal, that particular margin, if we look quarter- on- quarter, has remained in the similar range. It is only the hedging impact, the impact of gold price, where we are fixing the gold loan. And that move varies from quarter to quarter. So one quarter would look higher, and the other quarter would look lower. But if you look at nine months, it is normalized. So that is the impact that it has taken. And yet, in terms of percentages, because the share of diamond jewelry has come down, therefore, that has taken its own impact.
You see that from an EBITDA 1%, we are at the EBITDA 6% for nine months. And gradually, with higher and higher growth of diamond jewelry sales compared to overall jewelry sales, we will be taking this 6% EBITDA to closer to 7%-7.5%. So that will be our endeavor with higher diamond jewelry sales. And then in Q3, now, if we go below and we look at the other OpEx, marketing, branding, since it's the festive season, we have invested in branding and marketing in Q3. In Q4, obviously, that percentage expenditure towards branding and marketing will be lower. So those will have its the leverages will play out, and we will be having a bottom line which will be percentage-wise stronger. So this is how we are looking at it.
No, I think, sir, let me build on my answers. See, this INR 51 crore, which we said, is the impact of gold hedging and customs duty and so on, INR 51 crore. It was INR 52 crore gain in quarter one, INR 52 crore gain, INR 17 crore loss in quarter two, INR 55 crore loss in quarter three. That's why this INR 52 crore gain in quarter one, it gave you a higher gross margin in quarter one and EBITDA margin. In quarter two, it was a loss. It was lesser, and quarter three, there was a loss. But the point is that, sir, we are consistently explaining that we are not a hedge fund. Our business is not to enter into hedging position. We don't take a call on the gold. We don't do hedging as a business area. We do hedging purely to cover our risk as a risk management tool.
We don't decide the timing of this accounting of the number. Our job is to run the business. We do a proper accounting in ERP. We have got a very reputed auditor firm. It's not that we decide the timing that this will come in quarter two or this will come in quarter three. So I'm making it very clear on the earnings call, sir, that this timing of the impact of the hedging, when does it flow, it is not decided by the management of the company. It is decided by the Ind AS and by the statutory auditor. So that is where it is. Due to this timing gap, which you said, is that the gross margin is impacted optically, I will say. I want to use the word optically. This may not be a cash flow impact.
Statutorily, we are not required to provide the cash flow. But in our quarterly accounts, sorry, for the full year, when we provide the accounts, we'll provide a quarterly cash flow also to inspire the confidence and trust. That's all I can say. And once again, any other question, please?
Thank you, sir. We'll take the next question from the line of Sabyasachi Mukerji from Bajaj Finserv AMC. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Am I audible?
Yes, please proceed, sir.
Yeah. Hi, Suvankar. Hi, Sanjay. While there has been a lot of discussion on margins, I just have a question on the growth. So nine months, we have crossed INR 5,000 crores. And for the full year, we are guiding for INR 6,200 crores. That implies close to INR 1,200 crores in Q4, which is almost a very low, I mean, growth when compared to the Q4 of last year, close to 5%-6% of growth. Despite you calling out that there has been a 59% growth till date in Q4 in studded diamond, and there is a good wedding season lined up in February, March, and beyond, my question is, why are we looking for this very low growth in this scenario, in this environment?
So, we are seeing this. You are comparing to last year Q4 to this year Q4. And we see we have had a wonderful Q3 crossing INR 5,000 crores. And we are saying that we will be crossing INR 1,200 crores this particular Q4, taking it to INR 6,200 or INR 6,300. And the growth in diamond is higher than the growth in, say, gold jewelry. So that is a good sign in which we will see that the quality of business in terms of the higher stud ratio in Q4 will be impacting the bottom line. But then we also have to say that the gold price is at all-time high. And then that is where we will see that value-wise, we are growing. The wedding season is there. But obviously, there will be consumers that will kind of wait for the price to stabilize. So this is how it is.
So we are looking at 6-7% growth. And then maybe as we end February and we move towards March, that 6-7% growth can move up to 10% growth. But all in all, if you look at the overall numbers from last year, INR 5,200-6,200, we will be looking at 18%-20% growth YoY. So that is how it is. So maybe quarter four, currently, we are being 7%-8%. That is how we have to look at it.
So is there any slowness in demand that you are seeing in gold jewelry? I understand studded, I mean, diamond is growing fast. But is there any?
See, January sales were much higher. The demand was much more robust, and if we look at what has been happening in the last 7-10 days in terms of the demand for gold jewelry, obviously, because of the gold prices that have moved up so high in the last 7-10 days, there has been a little bit of slowness on demand of gold jewelry, but once this is a behavior of the consumer that we see all the time, then when there is a sudden jump in terms of pricing, consumers are in a wait-and-watch mode, and again, when the prices stabilize, the consumers will start buying again, so this is how we have to look at it.
Thank you. We'll take the next question from the line of Aliasgar Shakir from Motilal Oswal Mutual Fund. Please go ahead.
Yeah. Thanks a lot for the opportunity, sir. Good morning. And thank you for doing the call, sir, early in the morning. Sir, you've already given a lot of explanation on your gross margin. But I mean, I just have one observation, sir. So see, generally, the hedging is done basically to protect your gross margin. And what you've explained so far, of course, one is your impact on your making charge or probably your need of diamond being impacted. But the majority of the impact is always hedging. Now, ideally, your hedging should help you protect your gross margin. In your case, it's been so this is the second quarter in a row that we are seeing a very high fluctuation in gross margin. So I'm quite perplexed that actually your hedging strategy should have helped you in a volatile gold price environment.
Instead, on the other hand, it is actually hurting you more. Secondly, sir, I mean, if you look at the other listed companies who all have reported their numbers from one company like P.N. Gadgil, who has not yet fully reached its 100% hedge position, or to the other like a Titan or a Kalyan who is 100% hedged, and they have also been able to have a normalized gross margin despite the same volatility in gold prices that you're talking about, so I heard you saying that, I mean, you are using the best accounting practices, and you have the best auditor. It's very much acceptable.
But the problem is, sir, as institutional investors, I mean, to be honest, the reason why we prefer gold companies which have a fully hedged gold situation inventory is so that you can have a normalized gross margin, and you don't run the risk of very big impacts on gross margin. But to be honest, that is not helping. So you've given a lot of explanation on your multiple slides, and the disclosures are very high. But there's something which I don't think I'm able to really get my head around the last two quarters that why the gross margin impact should be so high when others are able to manage it. So I don't know if this point explains my worry. But over to you, sir.
Help us to mitigate the risk. We are hedging not so multiple companies are talking hedging differently. But this public forum, I don't want to talk about the competition. Everybody is talking hedging in a different way. And kindly read through the statements. So how do you hedge? Let's say from the rain, you can use umbrella. So we hedge our inventory position. We kindly ask specific questions to others as to what are the hedging. We have an inventory exposure of, let's say, INR 2,800 crore-INR 2,900 crore in our balance sheet. If we exclude the diamonds, so when we say hedging, it's INR 2,400 crore-INR 2,500 crore of the gold position is to be hedged. And when we say 80% minimum, it means at least INR 2,000 crore hedging. That means the hedging position should protect me from this INR 2,000 crore position, right? And which is done.
So when we and I'm giving you a little ballpark number. So which means that almost INR 1,000 crore will be by their gold metal loan entries. And whereas INR 1,000 crore will be by MCX futures sale. So we have been able to protect our position by hedging. But incidentally, in the last three quarters, the price has been only going northward. So we have the gain on realization. So it's not that we've only suffered on account of hedging. We have a gain on realization, and we have a loss on the hedging position. Both have neutralized each other, but it is not in the perfect order. It's not a fully synchronous position, which we say that due to Ind AS accounting, due to the MCX position, realized gain, unrealized gain, mark-to-market, cash flow hedge. It will require one full day to explain. And I'm not that expert, actually.
So we have not lost on account of hedging. It has been countered by the hedging position, and we are very happy with our hedging strategy. But we could have made money by not hedging our position, but we'll never do that. And that's why you are seeing the result. That is how a conservative and stable company works. We don't want to show numbers for the sake of playing. We believe in corporate governance. And that's how sometimes the number, you may not like it. But in the long run, you will know which is a strong company.
Aliasgar, you look at the nine-month YTD, and you will then understand that whatever be the quarterly fluctuations that you are seeing from Q1 to Q2 and Q3, it is normalizing towards the expectation that we are moving towards. Kindly appreciate the effort that we are taking to explain all of this to all of you investors. This particular year, due to the duty rate cut that has happened, it has its own impact on pricing. You have already paid the duty for the gold loans that you have taken. When you are again selling those gold and you have taken the benefit, why did Banka say that the loss on Q2 was minimum? There was rather a gain from hedging it because we were in a hedged position.
That is why at one end, when the gold prices came down due to the duty cut, we could take some benefit of the hedging. But what duty paid out is paid out. So you get all of this has its impact. You all have to maybe have the faith and trust in us. We are doing our best to explain the situation. We are confident that we will be moving towards an EBITDA of 7% and to be 19%-20% year- on- year. As per our expectation, we will open 18-20 stores for the year, as we had told all of you. Next year also, lines are on, and we will continue to grow in the same manner of 18%-20% year- on- year. This is how we would like to assess.
Fair enough. 7% margin is what we can model for the full year, right? EBITDA margin and for the coming year FY 2026 as well.
Aliasgar, since we already have a reported EBITDA margin of 5% and adjusted or normalized EBITDA of 6.2%, so it cannot be fully recovered in Q4. What you said is that in Q4, it will be 7%-8%. Q4 standalone, sir, will be 7%-8%. Obviously, the 7%-8% with reported 5% will not give you 7%. But yeah, for next year and next to next year, we are consistently looking at and working at 7%-8% EBITDA margin. But this year, 2024, 2025, EBITDA margin will be lower. It's a fact. Other listed players have reported huge impact on account of customs duty. We are simply expecting that.
Thank you, sir. We'll take the next question from the line of Devanshu Bansal from Emkay Global Financial Services Limited. Please go ahead.
Yes, sir. Hi. Sir, there is some confusion. The numbers that you have spoken about are not visible in the PPT. I would just request you if you could provide the comparable gross margin numbers adjusted for customs duty impact and whatever hedging gain loss that we have seen over the last six, seven quarters, maybe from Q1 FY 2024 to Q3 FY 2025, if you could provide the adjusted gross margin number, that will sort of help us better understand because these numbers are not visible in the PPT, but you have sort of spoken about this in your commentary.
Also, Devanshu, we were concerned by the excessive disclosure. But yeah, we take your view with very high respect, and we will try to upload the revised slide, as I said, slide number 45A in the next 2-3 hours.
Understood. But sir, you did mention about 13.7%. So what exactly is that number? As in for nine months, this year it is 13.7%. What was this comparable number for last year nine months?
This is the adjusted gross margin adjusted for the hedging loss and customs duty. Last year, this number was 15% for full year, last full year. Let's do it for three years. So it was 15.2% and 14.7%. It will be approximately 15% last year adjusted gross margin. And the same number for 2022, 2023 also similar. So out of this adjusted gross margin of 13.7%, it is 13.5%, 12.9%, and 14.5%. The making charge is around 10.5%.
Understood. And this 130 basis points fall on a YoY basis is largely attributed to all these regions, right? Studded makes, exports, businesses.
Primarily export, product mix, stud ratio. These are the three fundamentals.
Understood, sir. Yeah. Thanks for taking my questions.
Thank you. We'll take the next question from the line of Videesha Sheth, an individual investor. Please go ahead.
Yeah. Hi. This is Videesha Sheth from Ambit Capital. Please accommodate with my questions that are repetitive in nature. But number one, on the growth aspect that you mentioned for fourth quarter, it being lower at 6%-7% on an implied basis. Can you just share what is the growth in the month of January, the YoY growth in the month of January?
See, YoY growth in the month of January is 19%-20%. Yes. It is too early to say. It's 19%-20%. But despite the gold price rise, the demand for the gold has not come down. Then the festive season continues.
Okay. So then what leads to this 6%-7% growth guidance?
We are talking of a YTD, the whole year growth of 19%-20%. Right now, January has been a growth of 21-22%. February, we have seen that this 21%-22% has taken a little hit because of the gold price increase. But we will still, the wedding season continues to play on. And we will see that in the whole year, we will achieve 18-20%. But with this price range, we are being expecting a 7%-8% if you see only Q4 to Q4. But YTD, we are at 18% to 19%, 20%. So you need to understand that YTD, we will be at 19%-20%. The Q4 to Q4, you will not see that 19%-20%. Yes.
Okay, so just to again double down on this, is this low growth assuming that footfalls don't come back? Because typically how customers behave is that if there's a sharp increase in gold prices, they eventually adjust to it, and the footfalls do come back because purchases can be postponed to a large extent.
Okay. So April, March, all of it will see that the people will be buying. People will be buying. And weddings cannot be postponed. Only personal purchases will be postponed. But let me assure you that this 19%-20% growth for the whole year. And in Q4, we will, while we say that at a lower range, there will be 7%-8% growth, but at a higher range, we will all expect that the 20% growth will continue to happen. So let me, I think, modify my statement as to exactly what we were trying to say is that in terms of value, we will grow by 20%. In terms of volume, that growth percentage will be in single digit. But in terms of value, we will continue to grow at 20%.
Understood. Okay. Now, coming to the margin front again, this is more of a clarification. On the MCX hedging gain and loss, which is impacting the COGS or the gross margin, is it also a function of the gold volume bought vs what was sold? And just in addition to that, is there going to be any dynamic reversal in the fourth quarter as well?
Yeah. It's a very complex, Videesha. This MCX position is, first of all, it will take a total inventory position. Now, out of total inventory, part is covered by the gold metal loan. Okay. Now, gold metal loan also you have to see across multiple banks, multiple expiries. So there is no fixed formula that how much I will do by. So we prefer to do hedging primarily by the gold position. And then second option is MCX. Now, MCX will depend upon if you do increase the frequency, like I tell you, trade in the share market. If you got a trading mentality, if you want to make money, once again, hedging is dependent upon whether you call it smart hedging or you call it a conservative hedging.
So if a person starts trading into MCX on a daily basis and every day they use it every day, then they will earn money and the gross margin will increase. And they will say, "I'll do 80% hedging." On the other hand, there is a stable investor. You take a hedging position and you don't look at a hedging position and you try to match it with the full expiry. So we have nuances and nitty-gritties. And we can go on discussing these things. So if you get the hedging, it's a target company. If someone uses hedging at a treasury desk, then he will make money. His gross margin may be higher. I'm not making any comment against any of my respected fellow industry colleagues.
Understood. So if I were just to simplify the question, in the fourth quarter, how should we be looking at gross margins and EBITDA margins on a YoY basis?
Gross margin, as you said, Videesha, 14%-15% is the gross margin. Now, 14%-15%, once again, is a function of own store and franchisee store. Own store will be 19%-20%. Franchisee will be 6%-7%. It will depend upon what sort of product customers pick up in this market when the gold prices are at a higher. And then the export also we are increasing. But broadly, we've said 14%-15% gross margin, 7%-8% EBITDA. And we are working very clearly along those lines.
and Videesha, just to add to Banka, let me give you a number, updated number. But as of date, we have clocked a turnover of INR 5,700 crore as we speak to you, right? So if we look at in that aspect, so our expected revenue number for the whole of the year should be anywhere between INR 6,300 crore-INR 6,400 crore. So this is the confidence that we would like to give all of you that in terms of revenue numbers, we will be in the range of INR 6,300 crore-INR 6,400 crore. That is number one. Number two, again, at the cost of reiterating, December, January, until now, February, we have seen that the diamond jewelry sales growth has picked up to a large extent, which will have a positive impact on the gross margins and on all the numbers, EBITDA and that.
And that will, currently it is growing for January, February at 59% year- on- year for this date range, so we are again positive while our again, the guidance that we would like to give is that adjusted EBITDA is coming to 6% as of now, but due to the positive impact of higher diamond jewelry sales and the gold price hedging impact that Q3 has taken a hit, but the way in Q1 and Q2, the gains that were being made in Q3, it has taken a hit, but again, we believe that it will normalize in Q4 and that will make the EBITDA margins look much better than the adjusted EBITDA of 6% to closer to 7% due to these scenarios that we are seeing, and yet, the concerns are that gold is at all-time high, but the sales continue to happen for weddings.
Diamond jewelry stud ratio is on the rise, and Akshaya Tritiya is in the end of April, so our endeavor to reach out to the customers to ensure that we take the bookings will begin from March, and overall, I think the consumer sentiment for the short term due to the price rise has been a little slow in the last seven, eight days because of the sudden jump, but consumers inside their heart are happy that gold price is increasing. The old gold exchange that we usually talk about has been about 38%-39%, and once again, we say that 62% of that is non-Senco gold that comes to us, so this growth that we see, the same store sales growth for us has been in the range of 13%-14% in the overall growth of 19%-20%.
While these price movement of gold and hedging and duty cut and this lower diamond ratio in the overall sales have given this YTD adjusted EBITDA of 6% vs 7.1% of the last year for the nine months, but with the fundamentals to remain strong and with our marketing and branding and sales endeavor, we will continue to grow in the top line, and yet, these headwinds of duty cut or these interest rate changes in gold loan, these will have its short-term phenomenon, which will be adjusted over a period of time by controlling of expenses or any kind of moving into selling of more higher margin products and jewelry, so this is how we will continue to do our business.
Thanks. Is it possible to share the cash flow number for nine months FY 2025 vs nine months vs the base period?
So cash flow is not specifically required to be prepared for the Q3 numbers. So that we have to work separately. We just completed our audit. But yes, as far as customs duty is concerned, clearly there is a cash flow impact. And that we wrote in the presentation as well. That INR 57 crore is the stated customs duty impact. So what we perceive is that INR 115, we have sold at INR 106. So while INR 100 could have become INR 115, but the customs duty part is the clear loss. And ultimately, this is a foresight and it's a great tribute to government that they have taken this visionary statement. While definitely, the industry will be pained, we are pained. But long term for the Indian economy, it's a very positive moment that the government is taking steps to stop the unethical practices.
Net, net, these are good in the interest of Indian economy. Short-term pains are there, and we as an honest and responsible citizen have to bear the same.
Just the last question from my side on the studded portfolio. So for peers, the studded portfolio has grown although the mix would have impacted depending on the name. So what is the reason why it did not grow for Senco? Is it the geographical exposure or are there any other factors that have come into play?
It's how we have explained earlier that our expense ratio, the number, changes. One is the own store and franchisee store. So what we look at, 10.5%. In the own store, it is 14%. And we have said earlier that in the growth like Delhi NCR, it is 17%. So the expense ratio clearly has a potential to touch up to 17%. Yeah. You see, right? It is the existing business model. So the existing business model started with a focus on the gold. And yeah, we have been consistently giving. You are aware that in a diamond jewelry, the inventory term is just that. So one has to take care of all these things. And it is not that expense ratio in itself will give you the high dividend.
And it will show when you must have compared our financial with others. So while some players put expense ratio is higher and more than 25%-26%, but the gross margin is better than us.
I would just like to.
Videesha, sorry, one minute. I would just like to say that the growth of diamond jewelry in quarter three has been 18%. The growth of diamond jewelry has been 18%. It is just that the share or the ratio, stud ratio, which we mean to say is the share of diamond jewelry in the overall sales has not grown in the whole of year. I hope I could make myself clear in this, right?
Of course. That's all.
Q3 YTD diamond jewelry sale is 9%. Q3 diamond jewelry sales growth is 19%. In the Q1 and Q2, diamond jewelry sales were lower. Q3 onwards, diamond jewelry sales are growing at a higher rate. Q4, as we are moving through it, January, and now we are in the middle of February, again, to reiterate that the diamond jewelry sale is growing at 59% Q4 to Q4. Please try to understand that people in Q1 and Q2 did not buy much of diamond jewelry. Q3 and Q4 onwards, the sale is increasing.
Thank you, sir. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
So, thank you very much to all the partners and investors for being with Senco, having the faith. We understand that the movement of gold price, the duty cut, and its impact on the overall numbers. There are queries and there are thoughts in the mind that whether this particular fall in terms of margin, the Q3 vs Q3 numbers is something which will continue to happen in the future or not. But again, as we end the conversation, we would like to request all of you to look at a longer period of time. You see Q1, Q2, Q3, and you will see that the adjusted EBITDA and the adjusted PAT normalizes. The Q1 and Q2 numbers in terms of growth of EBITDA, growth of PAT had been much higher.
In Q3, due to the duty cut and the movement of gold price and the lower stud ratio, it has taken a hit, but again, Q4, the numbers are picking up. While in terms of top line, we are very proud and happy to say that we have performed across INR 2,000 crore, had a best-ever month of INR 1,000 crore + sales, and consumers continue to get added of, say, 4.5% more invoice, higher ATV, higher ASP. In terms of the overall numbers as we end the year, we will continue to see the way we are growing 18%-20%. We will continue to do that in terms of value. In terms of volume, it is going to be low single digit. In terms of value, we will end the year with 18%-20%.
And Q4 growth year- on- year also in terms of value will be 18%-20% minimum. And that will have its own positive impact on the EBITDA. And the overall numbers of adjusted EBITDA will move upwards. So thank you once again. Happy Valentine's Day. And wishing all of you a great next few months ahead. Yes.
Thank you, everybody. Thank you very much.
Thank you, members of the management. On behalf of Emkay Global Financial Services Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.