P N Gadgil Jewellers Ltd

Reasons for PNG Jewellers’ Lower Margins Compared to Listed Peers:

1. Geographic Concentration: PNG Jewellers’ primary market is concentrated in Maharashtra. While this region is lucrative, it limits their ability to benefit from economies of scale compared to peers like Kalyan Jewellers, which has a broader geographic footprint. As a result, PNG may face higher relative fixed costs, reducing margins .
2. Smaller Operational Scale: Compared to larger players like Kalyan Jewellers, PNG Jewellers has fewer stores and a smaller operational scale. Lower scale typically means higher per-unit costs for procurement, marketing, and operational overhead, negatively impacting margins .
3. Higher Making Charges: PNG Jewellers is known for its handcrafted jewelry, which often comes with higher making charges. These higher costs, while appealing to a specific customer base, can limit margin flexibility compared to more mass-market products .
4. IPO Costs and Expansion: Recent IPO expenses and ongoing expansion efforts, such as the opening of 12 new stores, could be contributing to lower margins in the short term as the company focuses on growth rather than immediate profitability .
5. Lower studded PF .

Future Margin Improvement Drivers for PNG Jewellers:

1. Economies of Scale Through Expansion: With the capital raised from the IPO, PNG Jewellers plans to open 12 new stores. As the company increases its store count and expands beyond Maharashtra, it can achieve better economies of scale, reducing per-unit costs for procurement and marketing, thereby improving margins .
2. Optimized Supply Chain: PNG has the opportunity to streamline its supply chain to reduce costs and improve operational efficiency. As the company scales, it can negotiate better terms with suppliers and reduce costs in raw materials procurement .
3. Digital Transformation: The company’s push toward e-commerce can drive higher-margin sales. E-commerce generally has lower overhead costs compared to physical stores, and by improving its digital presence, PNG can reach a wider audience with less investment in physical infrastructure .
4. Product Diversification: Moving beyond traditional gold and handcrafted jewelry to more modern, lower-cost designs could help PNG cater to a broader audience and drive higher margins through product diversification. Offering more diamond and platinum jewelry can also increase margins .
5. Focus on Higher Value-Added Services: PNG could focus more on value-added services such as customization, exclusive collections, and loyalty programs, which can allow for higher pricing power and margin improvement .
6. As they are guiding for >15% studded PF, margin will improve with it.