Ladies and gentlemen, good day and welcome to Senco Gold Limited's Q1 FY 2026 Earnings Conference Call hosted by Anand Rathi Shares and Stock Brokers Limited . As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Vaishnavi Manthanya from Anand Rathi Shares and Stock Brokers Limited and Stock Focus Limited. Thank you. Over to you, ma'am.
Thank you. Good morning, everyone. On behalf of Anand Rathi Shares and Stock Brokers , it's our pleasure to host the 1Q FY 2026 earnings conference call for Senco Gold . From the management side today, we have Mr. Suvankar Sen, MD and CEO, and Mr. Sanjay Banka, the CFO. I will now hand over the call to the management for their opening remarks followed by a Q&A session.
Thank you. Thank you very much. Good morning, all my dear esteemed investors. Today, myself, Mr. Banka, and many of our team members, namely Mr. Dhaval Raja, who is heading our Sales, we are all joining for the conference call with all of you. Just to kind of update you that today I am joining from my home because I'm under the weather. My team is in the office. I'm at the home. There could be some coordination delays or any kind of thing. Kindly take note of it, and we shall otherwise continue with the call.
The good part is that as we begin this financial year and we look at the results and the numbers of quarter one, on behalf of Senco Gold & Diamond, we are extremely happy and extremely delighted to inform that overall, the performance of the company in terms of top line, in terms of bottom line, has been extremely robust and very, very encouraging. If you look at the particular quarter before we get into the numbers and we look at the overall macroeconomic scenario, we are all aware that this quarter, while there was the upsurge here and Paala Baishar, 10 New Years, and many, many gifts, which gave a very strong platform as an auspicious season for the consumers to come and buy.
At the same time, there are macroeconomic geopolitical tensions that we continue to see, and that has led to the increase of gold prices about 5% quarter on quarter and about 30% compared to the previous year's similar quarter. In spite of the increase in gold prices, we have seen that the consumers have continued to come and buy and purchase jewelry. In terms of the growth that we have seen, the revenue has been up for the retail side of the upward of 28%. The same-store sales growth, which is a very good indicator of the loyalty of the consumer, of the commitment and the effort that the teams are putting, has been upward of 19%.
Overall, if you look at the bottom line, the profitability, we have seen that we have seen last year's quarter to this year's quarter profit after tax growth of upwards of 100%, where we crossed the INR 100 crore PAT for this particular quarter. This reason of a very good PAT that we could achieve has been led by two to three reasons. We have seen that in terms of the diamond jewelry sales, there has been a very strong demand, and we have had a 35% year-on-year growth in terms of volume and about 50% in terms of value. Now, you know, there could be a lot of thought processes. We have all been hearing for the past financial year that, you know, the diamond prices have been on a downward trend and consumers are losing their faith and trust in diamonds.
That was the situation that we had seen in the previous financial year. If we look at it and see what we are seeing in quarter four of the previous financial year and quarter one of this year, with the gold prices going up so high, there has been a tendency of the consumers to buy diamond jewelry for their everyday wear basis or for their special occasion. Our SCAD ratio, which was on an average of 9% - 9.5% in the previous financial year, has moved up, crossing 11% for this particular financial year Q1, with such a high growth. That has been one of the major reasons why we could see that there has been a positive impact towards the profitability. At the same time, we have also seen that there were certain uncertainties in terms of the gold metal loan interest that the banks were charging.
Due to certain of the tariffs and certain of the policies that, you know, Mr. Trump was putting on the U.S. towards the gold loan, there was a short-term impact of increasing interest rates on the metal gold loan. As a proactive measure, what we had done is that in order to mitigate that high gold price, we were trying to mitigate it with increasing the making charges in certain categories so that those higher costs could be passed on. I think that those timely actions that we have taken by protecting our bottom line and by being extremely efficient with our planning have helped us in order to ensure that we can cover the costs. We have seen over a period of time that those interest rates that were increased at that point of time have gradually, over a period of time, come down.
That has been one of the major parts where we could continue enjoying the benefits of those little higher interest rates. Because as what we have seen is that this whole season, because of the high gold rate, we had to continue to give discounts, to give offers, whether it be for Raksha Tetya, whether it be for Ratha Yatra, which was in the month of June, or the necklace festival that we did. Because of those management of the making charges, I think that there was a lot of intelligent action that we had taken that could help us in increasing our profitability. Also, one thing that we have done for this particular quarter is that usually, we have been, last financial year, maintaining a hedging ratio of about 75 %- 80%.
In this particular quarter, in order to maintain the liquidity, in order to maintain that, yes, we could continue to focus on our business and not get impacted with the increase in gold price, giving a higher amount of money towards margin, we had kept our hedging ratios about 55 %- 60%. I think that that has also worked in favor of the company and helped us to ensure that the liquidity continued to remain strong and the profitability also continues to remain strong. One very important thing is the focus on efficiency. For the last six to eight months, we have appointed a particular consultant and a tool and a software on which we are continuously working on driving efficiency at the core level.
Investing in which stock, which design, which is what is moving at what score, and especially so more because with the increasing gold prices, we are seeing that the average ticket size and the weight range that we are selling to the consumer has been on a downward trend. The ability of the consumer to buy jewelry of higher quantity is getting impacted. We are proactively looking at the rate ranges that are getting sold and accordingly fulfilling those kinds of designs and products at the core level. I think that that has also worked in our favor on the efficient planning and has led to a higher increase in terms of the margins. Now, what we could see in terms of certain good achievements for this particular quarter is that our focus on designing has continued to remain very strong.
We have created more than 11,000 designs for this particular quarter. I think that our design team, our merchandising team, are continuously working towards this. We are very much conscious that with this high gold price, 18K, 14K, 9K, these are the future. We need to focus, whether it be in diamond jewelry or plain gold jewelry, so that we can continue to have the younger generation coming and buying from Senco or people who have a lower ticket size can come and buy from our brand, because we have always stood for design and we have stood for creating jewelry that could be afforded and bought by everyone and anyone. We will continue with that pursuit and focus on the same. In terms of the bridal, which is some kind of a purchase, no matter what the gold price is, consumers will buy.
We had launched our Kushlo Kizi, the legacy tradition and the legacy collection, focusing on an ad campaign that the grandmother, the mother, and the daughter, or rather the granddaughter, is buying the jewelry from Senco, which we stand for. I think that has kind of connected with the hearts of the consumer, and they have continued to stay and buy for the wedding also. One very important thing that we have seen is the all-gold exchange, which has become 40% of the total transaction that we are doing. The fact that we are conscious that people might be having lesser liquidity and lesser ability to spend money on cash, we have seen that the all-gold exchange was about 25% of the overall business, maybe two to two and a half, three years back.
That has become almost 40% of the overall transaction that we are doing and is helping the consumer to keep on coming back to the store. This particular quarter, we have been able to open 10 stores, including one Sennes store. I think that our overall aim for the financial year is to open 20 stores. We are very much in the journey of opening 20 stores. Our hope is that we might open one or two more stores, more than 20, but surely our expected numbers of 18 to 20 stores will be achieved.
If we look at the overall guidance in terms of the numbers that we want to achieve over the period of full year, in spite of the fact that, yes, this particular quarter we have grown by more than 30%, as a guidance, we will continue to guide all of you that, yes, 18%- 20% growth for the whole financial year shall continue to remain as we cross quarter two, move on to quarter three, have the Dhanteras season, experience it and see how consumers are behaving on it. We will be in a better position to upward up our guidance. For now, I think that we should all aim for looking at a guided number of a 20% growth. At the same time, if we look at the EBITDA numbers, Mr. Banka shall further on explain to you with all the details.
I think you have initially guided about 6.8% - 7.2% EBITDA for the whole year. This particular quarter, we have been able to perform and achieve very good numbers. I think that 7% EBITDA should be a conservative way of looking at the full year guidance. As we progress with the year, we will keep on updating you. Before I give my closing remarks, what we want to tell you is that this particular quarter, quarter two, if you look back to the previous year, particularly this quarter, we had experienced the duty cuts by the government on gold. That had led to a kind of a robust sale in the end of July and August. This year, we do not have such an incident of any kind of duty cut unless we see the gold prices coming down.
I think that the growth compared to last Q2, this particular Q2 will again remain in the range of 18% - 20%, maybe 16% - 18% as on date if you look at it. Going forward, we are all planning for Q3. We have the Durga Puja, the festivities starting from September. Everything has come ahead. Currently, as we speak, we just finished off with Rasi. Now the Independence Day offers and a collection of chains have been launched for this particular Independence Day offer period. I think the focus on the new collection for the bridals, for the men's jewelry, for every light, everyday wear. Also, we have seen that the silver and fashion jewelry has also had a lot of traction and has a growth of upwards of 50% -6 0%.
In this high gold price, I think that this thing for your love and year and year one fashion, these will all become very, very critical. All aspects of the business have to be looked at. Obviously, in order to ensure that the profitability remains, diamond jewelry will continue to remain our focus. We are coming up with new collections in the field of diamond, whether it be necklace or small items. With that full planning, this quarter two will be more towards gearing up for planning, for customer relationship building, and for the fact that we all get ourselves fully prepared for the festive season that is coming up in the first part of quarter three.
With this, we would like to sincerely extend our gratitude to all of you for being a part of our team, for being our well-wisher, and gratitude to the whole team of Senco for giving their hard work and effort for these wonderful achievements and the wonderful numbers of quarter one for financial year 2025-2026. Thank you very, very much.
Yes, sir. Thank you. Building on what our MD says, two incremental points. One is that you've seen that the growth has been quite satisfactory, with 30% growth on top line, and EBITDA has grown by 68.8%. EBIT has grown by 78.3%, and PAT has grown by 104%. Similarly, the EBITDA margin has grown from 7.7% to 10.1%. If you look at quarter four, it has moved from 9.2% to 10.1%.
Similarly, the EBIT margin, while year-on-year has moved up from 7.3% to 10.1%, on Q on Q, it has moved from 8.9% to 10.1%. PAT has come in the range of 5.7%. While these are the qualitative factors, as we have guided that on a sustainable basis, we are looking at 6.8% to 7.3%. It can be 7.3% or 7.4%. We will see these numbers with a particular quarter perspective. I'm also happy to announce to you that in the month of April, we achieved a top line of almost INR 1,000 crore. In the entire history of the last five years, only last year, October, was around INR 1,100 crore. This superior achievement is clearly reflected due to our consistent focus on hyperlocal jewelry, the new stores we have launched, and the Pan-India story. That is point one.
Secondly, it's important to understand that, as you said earlier, we don't sell any bullion. In our case, it's only coin sale. Coin sale out of the total sale is only around 5%. That's why we don't see any dilutions in our gross margins. If you look at other factors, within the growth, if you look at the growth prism, the value growth in diamonds is around 54% and volume growth is 36%. We are seeing a consistent momentum in the diamond sale. I also understand that a few mines have closed abroad, two to three mines have closed, and the prices are likely to increase. This is going to be a major stimulant for increasing the prices. When the prices will increase, you will see an improved relation.
What you've seen is getting reflected in our superior gross margin for this quarter, which is partially ascribed to the making charge increase, the better relation and pricing on the diamond, and a certain impact of higher gold price. We have also stated that our growth, which has come from home store and franchisee store, the growth from both are slightly different. Overall, we are looking at this growth and we are confident that we achieve around 20 %- 21% growth. We are also happy to announce that ICRA has confirmed our credit rating for top-performing custom requirements at ICRA A2+. Similarly, our investment in inventory is consistently increasing. If you look at the balance sheet numbers, which we have published, it has increased to INR 35,358 crore. Again, INR 3,300 crore in March 2025 and INR 2,457 crore in March 2024.
From INR 2,457 core in March 2024, within this 15 months, it has increased almost by 40 %- 50%. This clearly shows that we have a commitment to growth. We have adequate working capital available to us, and we will continue to grow in the range we guided. With that, I close my remarks and thank you all, and then we can start the Q&A session.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nehit Shah from Nomura. Please go ahead.
Hi, sir. Thank you for taking my question. Congrats on a good set of numbers. I wanted to check on how someone thinks about the impact of revenue if contribution of lightweight jewelry goes up. Can it impact the overall revenue growth as the value of gold will be much lower for 9K, 14K, and 18K? You know, what % of the sales are now coming from lightweight for you? Also, a follow-up is if you can also state are margins in your lightweight jewelry very different from your 22K and 18K? That's my first question.
Thank you, Nehit. Mr. Banka, am I audible?
Yes. Yes, sir, you are audible.
Okay. There's an echo happening, but what I want to answer to the question, maybe I'll give a few, give a guidance, and you all can support with the data that our average ticket size overall, whether it be the lightweight or heavyweight jewelry all put together, is in the range of INR 70,000 - INR 72,000. The good part for us and our product that we are selling to our consumer base is 60% - 70% of the products are below, I would say, INR 7,000- INR 8,000. With an average ticket size of INR 50,000, INR 60,000.
It is not really the lower purity of products that then becomes a risk of the ticket sizes going down because there is a range of INR 10,000- INR 20,000 products, which is of the lower ticket size of 9K and 14K, which is in demand for the young generation consumer. In general, even if we look at a housewife who is across the age of 30, 35, 40, and we look at her purchasing power and the ticket sizes that she would be looking at, it would be in the range of INR 40,000 to INR 55,000, INR 60,000 for in the form of an earring or a pendant or a chain. It is only that the form or the design of the product is changing for the purpose of fitting into the budget of the consumer.
Just by making it 9K, 14K, or 18K, I do not see it as a big risk that the overall ticket sizes will come down because consumers' budgets over a period of time, because the gold prices have gone up by almost 30% year on year, the consumer budget can get adjusted by maybe 8% to 10% depending on the growth of the economy, the income levels of the consumer growing. We are all confident of the India growth story. Over a period of time, the consumer shall have her increased budget. The budget, even with the lower ticket size in terms of weight, has gone up over the past year.
Just to give an earlier concern that I do not see much of a risk, rather, it is only going to be a solution that we will provide to the consumer by providing jewelry, as most of it is western and modern design, in 9K, 14K, or 18K. When it comes to bridal shopping, where the consumers, irrespective of whether it's 22K or 18K, people go for a higher ticket size item, where it can be about INR 150,000 to INR 200,000, INR 300,000, upwards INR 400,000, INR 500,000, INR 600,000, INR 700,000. It goes on like that. I think the ability of the consumer for a wedding is that yes, a part of it will be given with their own gold. A part of it will be given with their, you know, whatever, cash, credit card, and all of that.
We will see a 10%-15% downward trend in terms of volume for that kind of bridal jewelry. There again, 22K, 18K will be the main focus area. That's how it is. I do not see that much of impact happening on the overall volume. We need to increase the number of consumers also as a part of the growth story with the opening of new stores or even the same-store sales growth of 19%. Even if the stores can gain maturity, we are encouraging the stores to acquire fewer and fewer consumers. That is one. In terms of the margin, I think that if it is plain gold jewelry, whether it's 14K or 18K, it is of a smaller quantity. There is not much impact in margin. What we have seen is that most of the 14K jewelry or 18K or 9K is covered with either diamonds or other stones.
Just the way diamond jewelry has a higher margin, this 14K or 18K jewelry will have marginally higher margins than plain gold jewelry. This is two answers you are testing. Mr. Banka, Dhaval if anything you want to add, please.
If you may, as Sarah explained, if you look at our AST, AST has moved up from INR 48,000 to around INR 52,000. AST has increased by almost 10%. While the gold prices have increased 30% year-over-year and 5% Q on Q, customer has to make purchases. He slightly moved up his wallet size and balance. He looked at either reducing the type of jewelry or goes to lower prices. Similarly, ACG has also moved up from INR 73,000 to INR 79,400. Your question was, what is a lightweight jewelry? This amount is still the lightweight jewelry, INR 52,000 or INR 79,000.
Now, this should have blended AST for gold, diamonds, platinum, and silver. If you look at AST of silver, that is around INR 2,800. If you look at AST of gold, if I give you a ballpark number, around 61% of jewelry in terms of count are in the range of INR 25,000. So 61% of jewelry, INR 25,000, that is a piece size. Similar would be the number in the diamond jewelry as well. In terms of value, you can take a number of 33, 33, 33. In terms of quantity, this 61% is around INR 25,000. That is our key strength on which we have built a strong moat around our digits. I hope that answered your question. Dhaval, you want to add something?
Yes, I see on an average, our AST itself is INR 55,000. We are enjoying that dominance in the lighter space. Average selling 60 odd grams itself is a lightweight jewelry. Introduction of 9K or 14K or 18K will further add to the overall buying pattern of the consumers. Right now, per se, the business that we are driving is driving through the lightweight jewelry that we have. Thank you. Thank you.
Understood. Thanks, Nehit. That clarifies. Secondly, I wanted to send.
Sorry to interrupt. We have several participants waiting. We request you to please come back in the queue for a follow-up. Thank you. The next question is from the line of Devanshu Bensu from MK Global. Please go ahead.
Hi, sir. Good morning. Thanks for taking my question. Congratulations on Good Food of Mumbai and Suvankar Sen. Suvankar, definitely, we are seeing that the franchisee interest is definitely picking up with the sixth edition coming in FY 2026 days. How is the pipeline looking for you for the rest of the year? Can we expect higher than, say, 70 editions that we have planned? That too with a higher mix of franchisees for the current year?
Thank you, Devanshu, for your wishes. Our plan as we began the year was 20 stores, 10 own stores, and 10 franchisees. While internally, our effort and plan is that we should try to open more franchisees rather than your own stores to have a better performance overall. We have already opened five franchisee stores, and I can tell you that we have more than five franchisees in the pipeline. Hopefully, instead of 10, we shall be able to open maybe 11 or 12 franchisees. That is how it is. 20 stores is something that we will keep guiding you right now. Maybe after end of quarter two, we can update you more further on it. Our efforts are towards opening more and more franchisees.
Understood. Suvankar, any specific initiative that we have taken which is helping us gain more franchisees in the non-West Bengal region? Earlier, we were very few in terms of West Bengal, but now we are seeing evidences of franchisees in Maharashtra, Uttar Pradesh, Bihar. Any initiatives that we have taken which are helping us here?
I think that it's more of a brand awareness that is very, very critical. Our investment into marketing and brand building continues to remain. As brand ambassadors, most of them are national celebrities. I think that the visibility is growing up. Awareness is growing up. Along with that, our team, there is a dedicated team who are connecting with the potential franchisees. I think that for the industry per se, it's not just us, but all our fellow jewelers who are in this particular business, it is an opportunity. We have all seen that gold is a good asset to invest for any kind of investor along with real estate and other investments. It is all about building the brand and building the relationship. There are potential franchisees who are willing to open a store of Senco.
What is very important is our manufacturing strength and ability, being from the geographic zone that we are, gives us that flexibility. I think that we are there in the business of franchisee for more than 20 years. With all our experience, we are giving our best to keep on connecting with the franchisees. That is what we feel is from our side. Thank you.
Understood. Sir, credit growth has picked up significantly. This is almost a 35% growth in Q1. Versus last year, we did about 5% of growth. When compared with larger tiers also, the credit growth is only 10%-11%, right? What is sort of helping us here because different segments where our credit score is very low? How are we sort of trying to increase our credit score?
I think that, you know, two things majorly. One is that designing, where, you know, if you look at our numbers, we have done more than 11,000 designs overall, gold and diamond put together. A lot of design development under our Everlight collection is happening. Also, in terms of our pricing, though we don't want to get into any kind of, you know, price competition with others, overall, I think that we've been able to manage our costs better and have been giving our competitive rates to our customers. There is a continuous effort by the team in terms of offerings, in terms of schemes.
I think when a consumer is coming to the store and then looking at it, especially with the gold prices going up, if you want to buy INR 40,000 worth of gold jewelry and what you are getting with diamond jewelry, the design attraction is much better. We are being able to convert this in a much easier manner. I think all put together, this is where we are taking results. Last financial year, sometimes the overall situation is such that even with your best efforts, you might not get the results, right? Last fiscal year, when the gold price was moving up from INR 60,000 to INR 70,000 to INR 80,000 even when we were offering diamond jewelry to the consumer, they were not in a mood to buy. They were like, no, no, we will buy gold jewelry only.
What we have seen from Q4 of last year and this year is consumers are open to, you know, try and convert 0.10 from gold to diamond jewelry. I think our efforts and consumer requirements both are helping in the gold and diamond jewelry.
I remember, that's very encouraging. Thank you for taking my question.
Thank you.
Thank you.
Participants are requested to restrict their question to two per participant and come back in the queue for a follow-up. Thank you. The next question is from the line of Videesha Sheth from Ambit Capitals. Please go ahead.
Yes, hi. Thanks. My first question was on the margins. You talked about the three to four levers which drove 230 basis points of margin expansion. If you can help us out as to which of the breakdown, which lever contributed to what % of the margin expansion and how much of it is sustainable going forward?
Vidisha, as you have said earlier, we have talked about a sustainable margin of 6.8% - 7.3%. What we can do is survey that it can be in the range of about 7%. On an extremely aggressive side, we can take from 7.2% - 7.5%, but that is on the higher side. Sustainable EBITDA margin, we are looking at it in a range-bound manner only, not what has come in quarter one. The question is what margin, even complex result of multiple efforts, which have been taken from time to time. If I try to pinpoint it to two or three reasons, one is making charges. We have increased our making charges with the expected gold price rise, and when the gold price is coming back to original level, we have not reduced our making sales.
You are saying that with the brand positioning, we are able to sell via better pricing. That is one. I'm not putting a number to it. Secondly, diamond price. Since we have built our inventory base of diamonds when the prices were lower last year, and as we told that some diamond prices are moving up and some mines have closed and customers are coming back to the natural diamonds, we are able to rely on better prices for diamonds. Third is what we already said about hedging. While we are doing the daily hedging regularly and hedging in the range of 65% - 67% on an average, due to lesser hedging also, we have been able to realize the gain on the gold price effectively.
These three are the major reasons which we can say have contributed to the higher gross margin and the resulting higher EBITDA margin since quarter one.
The hedging ratio would remain at 16 or how should we think about hedging ratio going forward? Both policies, we understand it's more than half.
Hedging is a very dynamic thing. It will depend upon the risk scenario, the global geopolitics, how the entire demand-supply thing is happening. We are committed to maintain a very robust and dynamic risk management policy. We are confident that we found the research is a very dynamic and a robust hedging policy. It will always be above 50%. That is the bold norm. On a daily basis, we are almost doing 100% hedging. At an inventory level, since our inventory is only for six months, that's why six months inventory, 50% for three months, volatility around. It will be in the range of 50% - 80% depending upon the risk perception.
Okay. The second question was on the competitive landscape. How do you see that evolving and how does it impact industry making charges going forward? Will it further come down or what are your thoughts on the competitive landscape, please?
I think that when it comes to competition, I do not see that making charges would be going down much further. Yes, based on the situation, there could be continuous offerings and special incentives and special schemes. I think that we have reached almost the kind of the best possible situation of competition. It's better now. I think we all, the jewelry industry players, are looking at focusing on design, focusing on brand building, focusing on any kind of innovation in the market rather than just play on the part of price. I think that's how we are looking at it.
That's helpful. Thank you. All the best.
Thank you. The next question is from the line of Akasha Shah from Dhamikshar Capitals. Please go ahead.
Hello, sir. Thank you for providing this opportunity. I would like to ask you, in your gross margins, what is the share of jewelry due to higher gold sales? That is my first question. My second question would be, what is the value of inventory as on June 30th?
June 30, inventory is, we have given the balance sheet as well. The June 30 inventory is INR 3,568 crores. Add against March 31. March 31 was INR 3,299 crores, which has increased to INR 3,558 crores. This inventory clearly includes the gold, diamonds, platinum, silver, etc. Let's say diamonds should be around INR 450 crores. INR 100 crores should be silver, platinum, stones. Balance is all gold. The inventory is the number, is the cost or net realizable value. There were some newspaper reports also where I am taking this opportunity to voluntarily clarify that we have been following the weighted average cost method for almost 10, 15 years. The inventory reported is a weighted average cost and cost or net realizable value will be altered consistently. That is one. Your second question was, this inventory, you have to look at it from the inventory spend perspective.
Let's say, as you said, on a whole year, the total spend would be around INR 6,500 crore -INR 7,000 crore depending upon how the prices fall out. That means in one quarter, it will be around INR 1,500 crore or INR 1,600 crore. Two quarter inventory will be around INR 3,000 crore. Those are the broad numbers. Your other question was, how much is the impact of lower hedging? See, very complex process of hedging. I would suggest that you look at the document which we published in quarter three regarding the hedge accounting, impact of fair value hedge and cash flow hedge. Broadly, as I explained earlier, it should be around 100 or 120 basis points impact, which has flow into the gross margin. It is purely temporary for quarter one. We are not saying that it will happen every quarter.
If the volatility increases tremendously, we will go back to the 18% level of hedging immediately. These gains will not flow. That's why we are saying 6.8% to 7.3% as a sustainable level of EBITDA margin.
Okay, sir. Thank you.
Thank you. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Brocking Limited. Please go ahead.
Yeah, hi. Thanks for the opportunity. A couple of questions. My first question is regarding hedging only. Sir, at what point do you decide to increase? If the price point is more than 10%, we decide to increase that hedging by 10%. Is there some metric that we internally look at and throw some light on that? That is my first question.
See, however, I felt that our team has a very robust risk management policy, and we are very committed to our goals and benefits.
Sorry to interrupt.
Thank you, Indira. We would request Babya sir to please leave your line while the management is answering, as there is a lot of background noise.
Yeah, thank you. We have a very robust risk management policy and framework in our company. We've got advice and guidance from an income expert from hedging as well. We have an internal safety committee. Based upon the entire framework, the company is committed to maintain a robust risk management framework. That's all I can say. The level of hedging, the percentage of hedging is very dynamic. It is also subject to the working capital availability at a particular moment of time. The bold policy is clearly staying within 50% hedging. We've always said that hedging will be between 50% - 80%. Last year, it many times got up to 88%, 89%, and even 100% hedging.
Fair enough. Sir, another question is regarding, is there any arithmetic correlation between stock ratio? If suppose 1% increase in the stock ratio, what impact will it have on the EBITDA margin? If you can throw some light on that as well.
There is no direct correlation. Yes. What we've said is that we want to take the stock ratio to 15%. If the ratio slightly increases to, let's say, 1% more, I think 30 basis points to 40 basis points improvement will happen in the EBITDA margin. Once again, as we grow, we'll have other pressures as well. I don't think that we can take more than 20 basis points to 30 basis points increase in the EBITDA margin based on the highest stock ratio.
Got it. Is it possible to say the secondary sales number for the quarter and the GTR as well?
Secondary sales, you are saying at the franchisee level. What we are reporting, the total growth, is at the primary level, which we have reported at 30% YOY and 32% quarter on quarter. What we've said is that the own store growth was 25% and franchisee growth was 34%. We've also said that the SSG was own store 21%, franchisee 16%, rental 19%. The primary sale, the secondary sale would be around 85% of the primary sales. I think that is a ballpark. Around 85% will be the secondary sales. Let's say the franchisee growth is 34%.
Secondary is 24%.
24%. The secondary growth, while the primary growth in the franchise model sale is 34%, secondary is 24%, which effectively is the same, around the, which I said, 80%, 85%.
Being used to primary is more.
Yeah. What I was clarifying is that since, and you would see this phenomenon in other tiers as well, if you open more franchisees, obviously your primary will be high. Let's say this year we've already opened five franchisees. To that extent, the primary is more. We have a primary of 34% in the franchisee channel in Q1, which is a growth. We opened five stores, five new stores. By virtue of opening new stores, we have more primary, whereas the secondary growth in the franchisee channel stands at 24%.
Fair enough. That is really helpful. Okay. Yeah, sir, it's okay. I'll get back in details. Thank you so much.
Thank you. The next question is from the line of Rupesh Sathya from Sri Ram's Managers. Please go ahead.
Hello, sir. Thank you. Thank you for the opportunity. Before starting my question, I have one clarification on the opening remarks. Did you say that for Q2 to Q2, Q2 last year to Q2 this year, we can still expect 16 to 18% growth despite the deferment of demand from Q1 to Q2 last year because of the impact? Is that right?
Yes, you are right.
Okay. That's good. My first question or sort of observation, Suvankar, is, I mean, you are in the business of providing solutions to your customers. You are doing so many designs. You're coming up with so many formats. This quarter, if I heard right, you were able to increase your making charges. You are in the jewelry business. Why play around with this hedging and, you know, try to gain some commodity movement? I think you, my humble submission is that you should review your hedging policies and get them closer to the market leaders. You should probably study Titan or Callahan or maybe some other global brands. You should get it closer to that. You are in the business of selling aspirations. You do that. Don't do commodity hedging and try to gain out of it. This is my humble submission to you.
Thank you. No, no, I totally take your submission. What is happening is that the liquidity consumes that we get because when you are taking hedging, one, there are two parts to it, right? One is 100% hedging as whatever you are selling, you are buying. That is, you know, something that is anyway automatically 100%. When it comes to taking a sell side on NTX or, you know, when there is a gold loan that you take from the bank and the prices are on the upward trend, then because of the liquidity constraint, you are unable to hold on to your position. You, you know, think of reducing it from an 80% to a 60%. It is not about gaining profit, but it is about protecting liquidity also.
Like last two years, you know, it is a fact that almost INR 100 crore while, you know, the profits have come, everything has gone. Because of, say, hedging, INR 100 crore of liquidity also kind of got, you know, out of the system. This time we are also trying to maintain the liquidity along with the, you know, business growth and cost. I totally take your point. Whenever, you know, we don't, we are not in the business of kind of taking and making money out of it. Let me assure you on that part. We will keep your advice in mind.
Okay. Thank you. The second question, sir, is how is Q3 looking from festive season? From wedding days? I know it's maybe a little bit too early to talk about it. I mean, seasonally, Q3 is strong. How is the preparation? What is the expectation in the market? There is this, you know, tax cut. I think benefit will start flowing into the hands of consumers. Any early outlook you can give us Q3, please?
No. If you ask from an outlook perspective, I think we are being very positive in terms of our planning, in terms of ensuring that the night's inventory comes at the store before the Diwali Hunt season festive season starts. All the plans are in place. What we have seen is that in Q1 or even in Q2, compared to other years, this time the number of wedding dates has been lesser. Most of the wedding dates now will majorly be in Q3 and Q4. If I'm talking to my consumers also, I think that everyone is in a mood that the moment either liquidity comes in their hands or they feel that the gold price is the right price to buy, the wedding demand will come in a big way.
Yes, Q2 will be a little, you know, not so, I would say, robust because of lack of auspicious season. It is more of the beginning of the auspicious season. Q3 will be a very good Q3. We should be all ready for the season to become strong any moment.
Okay. Okay. I'll move on to the last one. What about lab-grown diamond jewelry revenue in this quarter? Any guidance on lab-grown diamond jewelry revenue for a quarter?
LGD revenue has been very, you know, it has been in the, I would say, a single-digit, lower, high, low double-digit, you know, the single-digit. LGD is still in the phase of we have six to seven stores. We are not selling LGD to all our stores. We are creating a separate brand. Consumers are building up the awareness. We are very clear that when it comes to the wedding, people are not, you know, buying LGD. It is more from a fashion perspective. When it comes to weddings, such occasions where emotions are strongly attached and it's once in a lifetime, people are preferring the natural diamond. When it comes to fashion, some kind of impulse purchase, people are going for LGD. That is how it is. Over a period of time, maybe in four or five years, LGD will keep picking up more.
Till now, it is still natural diamond that is holding the force.
Will it cross INR 50 crore in FY 2026?
FY 2026 I do not see from our side of it. I do not see.
Okay. I have no clarity. I'll come back in the Q3.
Thank you. The next question is from the line of Akash Shah from Anand Rathi Shares and Stock Brokers Limited. Please go ahead.
Hi, sir. Congrats for a great set of numbers. First of all, I want to understand early consumer response to our 9K jewelry as well as the margin per gram compared to 14K and 18K.
The consumer response has been, I would say, positive because on the 9K jewelry, it is coming to around INR 3,500 to INR 3,800 per gram. If it is like a 1 g or 2 g lightweight everyday wear, then if the budget is anything below INR 10,000 or below INR 15,000, it is allowing the consumer to kind of buy it within the budget. We are also taking, I would say, measured steps. It is not like we can convert all our inventory into 9K. Especially because in the studies sector, it will not be much in the traditional designs that people will buy 9K. It will be in the modern Western design that people will buy 9K. In diamond jewelry and in lightweight jewelry, we are, say, introducing synthesis collections and testing the markets. Consumers are being positive.
I must say that it is the young consumers who are more open to the idea in terms of buying 9K. I think that once the wedding season will be in full force, even when people will have to give gifts to their near and dear family members and friends, then also, I think a 9K will become a very important tool to give a gift item to your loved ones. That's how I'm looking at it. If you ask me that is it a positive response, I would say yes. The initial responses are positive.
One question related to this, sir. How do you see the organized jewelry sector's market share changing over the next two, three years due to this 9K hallmarking becoming mandatory?
I think the organized sector is in a growth trajectory. As we look at it, what we have seen in the last 10 years is that the organized sector is growing at a higher rate and capturing more market share. Whether it's the 9K, it just opens up the opportunity for the industry to provide jewelry, especially for the studied jewelry within the budget of the consumer. Just like diamond jewelry, even lab-grown diamonds, gemstones, these all will come together along with this 9K, 14K will become a product for the consumers to buy. The margins also will be strong for the companies. I think it will help the organized sales to grow. Anyway, I think unorganized sales are finding it difficult to survive in an unorganized manner. They are still getting either organized or getting out of the system. That's how we are looking at it.
Okay, sir. One last question, sir. Out of the planned 20 stores, you have already opened around 10 in Q1. What would be the trigger for you to consider increasing the total store opening target for this year?
I will still, you know, as of now, we'll continue to guide all of you with 20 stores. When we are closer to the number 20, then we can review on the guidance. As of now, we will keep guiding on 20.
All right. Thank you all. Thank you.
Thank you. The next question is from the line of Medun Jain from Moth PMS. Please go ahead.
Thank you for the opportunity. Am I audible?
Yes, sir.
Yes.
Yes. My question is, sir, I could not get your name. Sorry, I thought.
My name is Mitchell James. I represent Moth PMS.
Okay, thank you.
Yeah. My first question is more of a slightly strategic long-term question. What do you think is your right to win in this market against the likes of the bigger competitors like, say, Titan? The reason why I'm asking this question is, if I understand it right, our story is a story of premiumization of maybe advantages of Eastern India category. When your competitors are sort of planning for starting 70, 80 stores this year, we are still having a moderate plan of about 20 store additions. Despite that, we have a very good same-store growth rate of about 19%. You are not very aptly represented in the southern part of India, which has got about 40% of the entire gold consumption plan in India. That is where I'm coming from. Can you please respond to that?
Yes, yes. Our focus has been more on Eastern India and Northern India. Our competitors from the southern part of the country have been very strong in that part of the country, and we wouldn't want to focus there for now. We will work towards getting deeper and deeper into the markets of Eastern and Northern India. That is one. The second part is that, yes, being from the eastern part of the country and closer to the manufacturing hub of Calcutta, we will try to create new designs, these lighter weight jewelry. Our competition is also working on design, but everyone to their own. They are increasing their market share by opening more stores. We will also open our number of stores in the markets in which we are strong, focus on the low-hanging fruit so that our return on capital remains strong.
The right to win is where I think that the market is big enough for everyone to live together. For a consumer, today in day and time, no consumer is very loyal. They are looking for new designs. They are looking for options. I can see myself that the same consumer that is with me is with, say, pretty more jewelry players. They are also trying out many types of jewelry. I think that as long as we can focus on fulfilling the needs of the consumer and creating the product that they need, consumers will continue to buy. Most importantly, for the jewelry industry per se, the unorganized jewelry that is happening is helping all the players, all of us together to capture more of the market. I think that's how one has to look at it.
Okay. Right, right. My second question is regarding the operating profit margin. This quarter, we have clocked about 10%.
Sorry to interrupt. We request you to please come back in the queue for a call-up.
That's my second question. I'll just ask this question also.
We'll give answer to you. This operating margin, as you have read earlier.
My question was this. Regarding the operating profit margin, if you look at the trend, the last three years in quarter two, it has been almost 4%, 5%. Is there some seasonality, some impact on operating profit margin in quarter two? That is the question. Please go ahead.
No, I will answer this question. See, we had a slightly aggression in the operating profit margin quarter on quarter. This was a major issue in quarter three as well. We have looked into our entire process, discussed all our accounting, we have discussed our hedge accounting as well. Then our quarter four number, we said we are confident about the reporting quarter one also. This sort of aggression which you've seen earlier, we are hopeful and confident that those aggressions will not happen. Aggressions cannot be more than 100 basis points. Because we don't reduce or increase our making charges from one quarter to other, there's no substantial change in the product mix. One can say that, okay, in the wedding season, wedding jewelry is there. Our understanding is that it will, the difference will not be more than 100 basis points to max 100 basis points.
100 basis points is the max variation which can happen if at all. For an entire year, for an entire year of 12 months, we will earn around 6.8% to 7.3% or maybe let's say 7.5%.
Okay, thank you.
Quarterly aggressions will reduce substantially. That is the key answer.
Sure.
Thank you. The next question is from the line of Suvankar from 3H Capital. Please go ahead.
Hello. I'm Arvind.
Yes, sir.
Hello. My first question is, how is the demand and food supplies seen in tier 3 and tier 4 market after this gold price go up?
Sorry, would you like to answer?
Yeah. We have seen in tier three, tier four towns, the footfalls are up. If you see the way we are moving, we are opening more and more stores in tier three and tier two towns through the franchise model. Business is up, the traction is good, and we are seeing a positive season ahead with the festive setting in. We are seeing Dhanteras and Diwali setting in. We are seeing a good number.
My second question, while your focus store growth is much better than COCO?
Sorry?
Sorry.
Yeah.
Why is your COCO store growth much better than COCO?
Why are COCO stores growth better than COCO stores?
Yeah.
No. If you see our numbers in like-to-like store growth, we have, in fact, our COCO is performing better in terms of same-store growth than the COCO stores. COCO is doing better. It's not that the COCO is not doing better. We are seeing good traction. In fact, all the metros that we have, including the Delhi NCR, we are seeing a good 34% growth in the Delhi NCR market. Our COCO are performing very good right now. Similarly, the franchise model stores are also having a good same-store growth of 17% to 18% right now.
See, just as to what happens with the franchisees, is that because they are in the smaller towns, they are being able to manage with lower inventory. In the bigger cities where our COCO stores are, you know, because of some competition and consumer choice, we need to keep growing and it's more important. That's where the franchisees also with the more, you know, lower level of inventory can manage to perform better. That is also one small part.
Oh, wonderful. Thank you.
Thank you. The next question is from the line of Bhavya Gandhi from Dalal & Barucha Stock Broking. Please go ahead.
Yeah. Hi. Thanks for the follow-up. Sir, just wanted to understand your view because we are slightly comparatively weak in terms of liquidity because you said it's just to marry hedging and liquidity. We are doing lesser hedging ratio. Why not focus fully on company-owned, company-operated stores and improve the liquidity position and the ROT matrix? That is what Kalyan did, and we can see how they've been expanding. Just what are your views there on this? We have seen conflicts of the craft. That is why our expansion and our strategy to the team is that most of the expansions should be with the focus on opening more franchisees. The offerings and the commission incentives that we are giving to the franchisees, we are also continuously working on that so that we can make it more easy for the franchisee to open more stores.
We are very much conscious of the fact that you're saying, and we are trying to strategize accordingly and do that. That's one. That happens in a very good way, in a faster way. As you rightly said, the liquidity challenges will not be there. Hopefully, in the coming years, next to our franchisee numbers will also be higher.
Sir, just a follow-up on this. Can you expect that the further store openings would be more on the franchise model side? If you can just guide for maybe FY 2027 store openings and what is our future plan beyond FY 2026, that would be really helpful.
I'll tell you, all as per the plans, we always believe in giving you a conservative, you know, estimate and an approach. From that perspective, we have always said that we want to open 18 to 20 stores every year, year after year, funded by the profits, funded by the equivalent amount of debt that we have. Like we always say, 50% franchisee and 50% owned stores. Our internal efforts are always that that 50/50 can become 65%, 70% franchisee and 25%, 30% owned store. This is how we would like to do it in the ideal state.
I just wanted to understand, is there any hurdle in terms of opening franchisees or getting franchisee partners on board? That is where the ratio seems to be slightly lower. Is it our choice that we are opening balance of both COCO as well as COCO?
There are two, three things. One is that, you know, in East India and North India, there's focus. As a brand, as we are expanding nationally, obviously, people cross the various markets across the towns and cities. We want to grow in a concentrated manner, focusing on East India first, and the second priority is North India. I guess that it is about finding the right partner and getting the right footprint, the right location. Those are certain critical aspects. Even after finding the right partner, that partner needs to have the adequate capital to open a franchise model store. Banking is one. There are various methods to it. Getting the right partner with the adequate capital is one of the key factors, and then satisfying his needs and getting the right, you know, product in place. That is what it is.
I think the hurdle is about getting the right kind of people. Once that effort that we are putting is going on, we will be able to achieve what we are able to achieve. I know that you are being, you know, you're comparing with the other, you know, other competitors and the way they have been able to execute and have been able to grow at a faster rate. I think that it's a matter of time as and when, you know, our performance and our awareness will continue to grow. We'll also be able to do the same manners in the coming two, three years.
Fair enough. Just one last thing for the season on the Melora front. If you can provide some light, are we going to require any capital? What is the outlook there for the Melora front?
With the 9K hallmarking, 14K with the gold prices going up so high, we feel that to cater to the new generation, it is going to be an important tool and a method to reach out to the new generation customers. That is where from a brand perspective, we are looking at doing this collaboration. When it comes to acquiring Melora as a brand, most of it, the inventory part of it is not going to be a challenge at all because anyway, there is more than enough inventory that we have, be it gold or diamond. It is all about getting a platform to reach out to the new generation customers. I don't see part of a challenge. We are in the negotiation stage. As and when any kind of positive news comes out, we will be updating our investors and analysts.
Sure. Thank you. I really appreciate it. Yeah, that's it from mine. Thank you.
Thank you. The next question is from the line of Himanshu Sivare from NB Investments. Please go ahead.
Yes. Hi. Good afternoon. My question is, what is the company's philosophy in terms of corporate governance? Do you want to, does the company fight to be in terms of corporate governance in the league of your peers like Tanishq? If you could give me, what is the company doing in terms of related party transactions, in terms of independent directors, in terms of transparency to increase transparency among the shareholders? My second question is, if you could give me an insight on what percentage of its jewelry is generally just gold and how is it managed by the company? What is the overall company's philosophy in terms of managing the inventory in conjunction with the supply-demand supply dynamics? Thank you. That's from my side.
Thank you for the question.
Thank you.
Okay.
You take it. I will just say that in terms of the, you know, party, we have a lot of respect for the Tatas and Titan as a company, which, you know, how they have run their business. You know, Mr. Ratan Tata is one of my role models. I would like to, you know, follow his path and get. My
company forward. That is how I would like to look at it. We are doing our best in terms of various initiatives of corporate governance and the best practices. I request Mr. Banka to explain a few things that we are doing.
Sure.
Because building our office, and the journey of corporate governance in Senco, where I've gone five years back, I see this journey for more than 20 years. While the first private equity funding happened in the company in 2014, we, the company, the promoters, our Founder Chairman, like Senco had the vision to take the company to the highest level of corporate governance. The journey started with appointing independent directors, appointing KPMG as the secretarial auditor. KPMG completed two terms of highest stake. Then we appointed Grant Thornton, that is, Walker Sandy, as our secretarial auditor. The investors can look at our independent directors. It's a board-bound company. A very reputed independent director who has excellent experience in the respective fields. Mr. Hoster Sen, he's the Chairman of United Bank of India. Mr. Sange Haldar, he has been working with the top company, the CFO, Mr.
Kumar Kuntodatta, Mr. Kumar Varma. That is one. We have a strong set of rules and regulations, and we are following very strong governance papers as far as the ISP framework, risk control matrix, risk register, internal controls. The total organization is driven by ERP. We are one of the top customers of Microsoft ERP in India. Our entire organization, most of our activity runs on Microsoft ERP, workflows driven approvals. In most of our office committee meetings, we consistently work on financing. As you rightly said, I am also an admirer of Tata Group. I have been in a Tata Group company for three years. Whatever I've learned, we intend to implement all these corporate governance practices. Senco, this is the hallmark of our commitment for transparency, for speed, and for governance levels. That is a larger answer. The second question was on the hedging practices.
We have issued a detailed document in quarter three on our hedging practices. We continue to follow the same routes and norms. Our gold policy comes from a minimum 50% hedging of inventory. If you look at our inventory in the balance sheet at around INR 3,500 crore, the gold inventory will be around, let's say, INR 3,000 crore, INR 900 crore. 50% of that is always hedged. Last year, that number ranged up to even 95%, or average was almost 88%, which we said in quarter one is between 60% - 65%. Hedging is a very dynamic activity. We are cognizant of the risk, which is inherent in the business. We will follow a very dynamic policy to ensure that we are risk mitigated. First quarter, due to the extreme volatility and due to working person requirements, we have maintained a slightly lower hedging ratio.
Yes, and that has moved to the P&L. That's why we are still giving guidance of 6.8% - 7.3%. This automatically means and assumes that hedging can go over 80% again. I hope that this answers the questions.
Just a follow-up question. What is, at the moment, what is the hedging percentage? If you could give me a tentative figure, that'd be nice.
No, I don't want to give you a specific number. See, it should be around 60% - 65%.
All right.
This is.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference to Manish Singh for closing comments.
Thank you. Thank you very much. I would like to thank all of you for joining the call, listening to all of us. I hope that we have been able to answer as much as possible the queries that you have. Mr. Banka and our team are always available to answer any more of your queries. You will all get the updates on our website in terms of the numbers. One is that we have our official commercial website, which is sencogoldanddiamonds.com. We also have a corporate website, which is sencogold.com. A lot of information on our company and the updates you will be getting there as well. I look forward to meeting and talking to all of you once again. Happy Independence Day in advance. Hopefully, we'll have a good Q2 and at least preparations for the upcoming Q3 as well. Thank you very, very much.
Thank you. On behalf of Anand Rathi Shares and Stock Brokers Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Yes, thank you very much. Thank you.
Thank you.