Concall Notes – Nov 2024
Financial Performance:
Total revenue for Q2 FY25 reached ₹1,005 crores, an 84% increase YoY from ₹546 crores.
EBITDA for the quarter was ₹38 crores, a 74% increase from ₹22 crores in Q2 FY24.
Profit surged by 89% to ₹25 crores compared to ₹13 crores in the previous year.
Ratlam flagship store reported a 56% YoY growth with revenue of ₹486 crores in H1 FY25.
New Ajmer showroom launched in September generated ₹4 crores in revenue for its first month.
Market Dynamics:
Robust demand for gold and diamond jewellery driven by rising consumer purchasing power and preferences in Central Indian markets.
Government’s reduction of import duties significantly boosted demand, particularly in June and July.
Anticipation of strong sales during the festive season, with expectations of celebrating multiple Diwalis due to high consumer enthusiasm.
Expansion Strategy:
Plans to expand retail footprint from 8 stores in FY25 to 20 by FY28, targeting emerging markets in Madhya Pradesh, Rajasthan, Chhattisgarh, and Gujarat.
Current FY25 plan includes opening three more showrooms, following the successful launch in Ajmer.
Focus on enhancing product mix, aiming to increase revenue share from diamond-studded jewellery from 6% to 15%.
Operational Insights:
EBITDA margins are expected to stabilize between 5.5% to 7% and PAT margins between 3% to 5%.
The management acknowledged a stable EBITDA margin in Q2 despite revenue doubling, attributing it to increased inventory levels and strategic operational decisions.
Market share in Ratlam is approximately 25% to 30%, with plans to open another store by January FY25.
Challenges and Competitive Landscape:
Competition exists from both national players (e.g., Malabar, Tanishq) and local jewellers.
Management highlighted that lab-grown diamonds are perceived as less desirable compared to natural diamonds, with a 10% growth in the natural diamond segment.
The company is strategically focused on volume growth rather than margin maximization, with an emphasis on customer relationships and service.
Capital Raising and Funding:
Recently raised approximately ₹70 crores through the issuance of preferential shares and warrants to close associates.
Future expansion plans are expected to be funded through internal accruals, with an annual free cash flow of around ₹100 crores.
Management is cautious about leveraging debt, preferring equity financing to ensure store profitability within six months of opening.
Product Development:
Implementation of a shop-in-shop model for wedding customers to enhance customer experience and increase sales of high-margin diamond-studded jewellery.
Current sales composition includes approximately 92% gold jewellery, with plans to shift focus towards increasing the share of studded jewellery over the next three years.
Overall Outlook:
Management expresses strong confidence in the growth potential of the jewellery industry and the company’s strategic initiatives.
Ongoing assessment of market opportunities and customer preferences to adapt and thrive in a competitive landscape.
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