D. P. Abhushan Limited (DPABHUSHAN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the D. P. Abhushan Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [ Mr. Ajit Sharma ] from Ernst & Young. Thank you, and over to you, sir.

Good evening. Thank you for joining the call. I'm Ajit Mishra from Ernst & Young Investor Relations. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risks that could cause future results, performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. Please note that the press release, investor presentation, financial results have been circulated via mail and are available on the stock exchanges as well as company's website. In case anyone has not received the documents, please feel free to reach out to us, and we'll be happy to share them. To take you through the Q1 FY '27 results and business performance today, we have with us senior management team of D. P. Abhushan Limited, Mr. Anil Kataria, Whole-Time Director; Mr. Santosh Kataria, Chairman and Managing Director; Mr. Vikas Kataria, Promoter; and Mr. Manish Laddha, CFO. We'll begin the call with the management's opening remarks on the company's performance for the quarter, followed by a question-and-answer session. With that said, I will now like to hand over the call to Mr. Anil sir. Over to you, sir. Thank you.

Thank you. Good evening, everyone, and thank you for joining us on quarter 1 financial year '27 earning call. [Foreign Language].

Thank you. Thank you everyone. [Foreign Language] Thank you.

Good evening, everyone. I will now take you through the financial performance of D. P. Abhushan Limited for the first quarter fiscal year '27. See, we have started the year on a strong financial note with a healthy growth revenue across all the segments, whether it is operating profitability as well as the net profit. During quarter 1 '27, our total revenue stood at INR 853.63 crores as compared to INR 541 crores in quarter 1 FY '26, registering a strong growth of 58% year-on-year. This growth was supported by strong customer demand during the summer wedding season, festive-led purchases and healthy traction across our operating markets. At operating level, EBITDA increased by 70% year-on-year to INR 93.99 crores in Q1 '27 as compared to INR 55 crores in Q1 '26. EBITDA margin expanded by 80 basis points year-on-year to 11.01% as compared to 10.21% in the corresponding quarter of the previous year. The improvement in the operating profitability was driven by higher revenue scale, better operating leverages, disciplined cost management and favorable sales mix during the quarter. Profit after tax also witnessed a strong growth during the quarter. PAT increased by 77% year-on-year to INR 64 crores in Q1 '27 as compared to INR 36 crores in Q1 '26. PAT margin expanded to 7.55%, up 82 basis points year-on-year, reflecting strong profitability growth and sustained efficiency across the businesses. Coming to the revenue mix by category. Gold continued to remain the largest contributor to our overall revenue. Gold revenue increased from INR 491 crores in Q1 FY '26 to INR 781 crores in Q1 FY '27. This is reflecting a growth of 59% year-on-year. Silver, one of the segment which is growing drastically, it has grown as compared to Q1 '26, where we were having INR 16 crores to INR 40 crores in Q1 '27, registering a strong growth of 150% year-on-year. Diamond revenue stood at INR 29 crores in Q1 '27 as compared to INR 31 crores in Q1 FY '26. In terms of product category mix, wedding-related purchases remained the largest contributor, accounting for 62% of the sales during the quarter. Festive and lightweight jewelry contributed 18%, while the other segment, other categories, gift articles contributed 20%. This reflects the continued strength of wedding-led demand, along with the healthy traction in the festive and regular use of the jewelry categories. Operationally, the company continued to maintain healthy customer engagement across all the stores. Our same-store sales growth stood at 52% on an overall basis. We also continue to follow the disciplined approach towards gold procurement, inventory management and working capital efficiency. The company continues to leverage exchange-led procurement of gold, gold metal loan and hedging mechanisms on the commodity exchange platform to mitigate gold price volatility, support margin stability and improve working capital efficiency. We believe that our focus on disciplined execution, efficient inventory management, strong customer trust and sustained demand across key categories will continue to support our financial performance going forward. With this, I would like to thank you all for your continued interest and support in our company. We can now open the floor for the question-and-answer session. Thank you.

Thank you very much. We'll now begin the question-and-answer session. [Operator Instructions] We take the first question from the line of [ Praveen Jayaram ] from Avendus Spark Institutional Equities.

So I have two questions. The first one is on our DP Swarn Plus program. How big is this program? Like in the presentation, we saw that this is a leading factor of our revenues for the upcoming year. So can you give a color on how big this DP Swarn Plus program is?

Hi, Praveen. This is Manish here. So this Swarn Plus scheme is basically introduced in April only. The idea was to introduce this is to protect every customer from this gold fluctuation, which is happening across the world. So every contributor, whoever would like to contribute in the form of SIP. The minimum ticket price we have kept is INR 5,000, which may go even in lakhs also. So the person will contribute per month on SIP basis. And whenever they will make payment on the same day, at the same time, we will provide them an appropriate gold weight at relevant point of price available at that time. So basis that across the 10 months or 11 months, whenever that scheme will go and continue, the customer will every month get certain amount of gold in the pocket, which will be lying with the DP. And post that completion of that particular scheme at the redemption, customer may take bullion as well as can get it redeemed against jewelry. So in case any jewelry they purchase and the final sales, which comes up as compared to the others, the lying with that particular scheme, then the remaining amount will only be charged from that customer. And actually, customer will get arbitrage of price protection also irrespective of any price available at the point of sales. So by this way, see, this is a beautiful way to protect from the price fluctuation, and we found a wonderful response also. Even above INR 1 lakh, almost 50 customers have been added, which are contributing like more than INR 1 lakh per month per scheme. So -- and that is not restricted to a particular geography. It is across all the showrooms.

So that's what I want to know, sir, the attraction for this, like we understood what the policy is. So you have started around April. How the traction has been in this policy and whether we actually started seeing contribution coming to our sales on this policy. So as it started in April and it runs for 10 months, we might see post January, February would be the correct observation?

Yes.

Okay. My second question is on the FOCO model operated store in Jabalpur. So how are we planning this? So this would be our first foray into FOCO model. So how are we structuring this? And what would be the plan ahead, like not only on Jabalpur side, in the total expansion, what would be the FOCO versus COCO going forward?

So, Praveen, basically, this is the first pilot model, which we have started after a long period. Basically, it is, you can say, fully controlled showroom that will be driven by entirely from top to bottom by our team only. We will bear all the expenses. And this is basically a revenue sharing model, which we are doing with that franchisee, whereby franchisee will get a good amount of return and as well as this gold gain will also be received by them. So this is a pilot model. Our format of showrooms are quite high. It is not INR 5 crores, INR 10 crores of showroom which we are running in. And we are not looking drastically about too much of franchisee. Yes, we will keep this continued momentum wherever our presence will not be required. We may look for the franchisee. And the markets are so open that a lot of jewelers or a lot of investors are getting into this in the franchisee mode. So the return on investment has to make an attraction for them. So this FOCO model we have created with the consensus with that franchisee, whereby they will get good amount of return. And the entire control, operating procedures, management, SOPs will be of D.P. And this pilot run, we will continue for next four, five years also with the idea of that every year, we may look for two to three franchisees by this model only. And when the things will settle and the market will also understand about our mechanism, we may look for further enhancement also.

Right. I have one more question. So this would be from my side. In terms of the stores with different maturity levels, the stores which are more than six years, stores which are three years plus or stores which are very new zero to three years, how would the revenue be different here? And what would be the like inside metrics which should be different there, in terms of zero to three years or three to six years. So we heard in the previous commentary like within two to three years, we might reach this INR 300 crores plus top line on stores getting mature. So like what format stores which we are referring to, whether it's a 3,000 square feet or a bigger, longer format, 5,000 square feet plus.

Okay. So broadly, we cover two formats. One is small to medium that is catering 3,000 to 5,000 square feet. And the second one is the larger format where about 8,000 to 10,000 square feet. So that 3,000 square feet or even 8,000 square feet, whenever we open any showroom, we have a certain strategy as well as study to catch the market audience, the size, the customer base our presence, our brand awareness. All these parameters takes place, then we open store room at any of the places. When we open these showrooms, our past trend says that whenever we have opened almost after two to three years, they reach to the 3 turnover of our inventory. And after four to five years, they reach to the optimum level what we desire of 4.5x to 5x. And beyond that, if suppose a showroom reaches after six years or seven years of their opening, some of the showrooms are even providing 8x to 9x of their inventory. Okay. So far as breakeven is concerned, we generally receive between six to nine months only the breakeven about our CapEx and rest all the inventory. We have always taken that the large showroom of 8,000 to 10,000 square feet will provide a turnover of INR 350 crores to INR 400 crores once it reaches to three to four years. And by smaller between INR 150 crores to INR 200 crores. This is the idea which we are taking.

We take the next question from the line of [ Kanishk Gupta ] from [indiscernible] Family Office.

My question would be, sir, in the last con call, management had mentioned the target of reaching 51 stores by FY '30. But during the same discussion, it was also indicated that the company plans to add three to four stores annually, which implies approximately 16 to 20 new stores over the next four years. So considering the current base of 12 stores, so this would roughly translate to the total of 28 to 32 stores by FY '30. So how do you plan to bridge the gap between the target of 51 stores and the approximate number of 28 to 32 stores? So can we expect the FOCO model stores to come in play in the later years?

So what idea we have taken is that for fiscal year '26, '27, on an overall basis, we are looking for six stores, whereby 1 or at the end, second franchisee may come in this year. And in FY '27, '28, six to eight more stores will open and the same persistently going on up to fiscal year 2030. So by this way, we will achieve this 51, which is our vision also. In that 51, we may have some FOCO model also and some COCO model also. So whenever we will go to any market, as I said that in the last conversation in the last earnings call also, I guess you were there at that time. So whenever we are opening these stores, we always look into the consideration of our peers, our competitor also, whether we would like to keep our presence or in the form of franchisee. Basis that we always take call. Wherever our brand awareness is already there, then there is no point that we may look for our showroom. We may look for franchisee also.

Okay. So sir, what would be your ideal mix you want to achieve internally of the 51 that you [indiscernible]...

I guess between six to seven will be COCO and we will target between one to two will be FOCO.

So sir, you are upgrading the targets from three to four COCO model to six to seven annually?

See, the current year was something different so far because in the month of May, a lot of things were happening. But however, that traction has already gone over and things are now almost near to settlement. But still -- see, this industry runs on a lot of factors. But yes, we will continue with our vision of 51 stores. There is no doubt. It may be that in year 1, it may be instead of eight, it will be six. But in the year 2 and year 3, it will be compensated accordingly.

So, sir, no internal mix you want to achieve, how much would be COCO out of 51 stores?

Almost five to seven will be FOCO and remaining will be COCO only.

Okay, sir. Santosh ji, would you like to add something to this?

[Foreign Language]

Okay, sir. Okay. And sir, the second question would be why you are currently pursuing multistate expansion instead of fully penetrating Tier 2 and Tier 3 markets in Rajasthan and Madhya Pradesh, where brand awareness and store density appear to be significant for growth opportunities as I can also see that you have very healthy footfall in Indore, Kota as well.

[Foreign Language]

Sir, my next question would be for Santosh ji, with the larger organized jewelry players increasingly expanding in Tier 2 and Tier 3 markets. So how does you assess its competitive positioning within core geographies? And what differentiating factors help sustain customer loyalty and conversion rate and market share against the stronger national brands?

Am I audible?

Yes, sir. Yes, sir.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] So, why should I choose D.P.?

[Foreign Language]

We take the next question from the line of Aanchal Maheshwari from Naredi Investments Private Limited.

Yes, sir. So I understand that we are moving ahead. And as we move ahead, there is increasing demand for silver as well as gold. Sir, I wanted to understand how are we planning to hedge both silver and gold in the next three, four years as we increase our core base.

So, Aanchal, let us understand first how we are doing this entire cinema for over the years. There are certain models of hedging. The first and foremost in the preference order comes as real-time replenishment. This is a shared methodology which we have been following for years. How it happens like whenever we do any sales at our showroom, we take 3x to 4x minimum a day booking with our vendors with the same price so as to avoid any kind of fluctuation. This is the first and foremost which we have been following. Second one, I believe over the years, this exchange business will be growing gradually. And this is also one of the segment whereby you can do naturally hedge. How it happens that if a customer brings their own old jewelry, get it melted and against that, they redeem with the new jewelry. There is no price which comes and play an important role to the extent of the material supplied by them. So this is the second model which we are following. These are the models whereby we are getting the replenishment. Now if suppose over and above our strategy which is going on and the years to come whereby we will keep additional inventory. This additional inventory will be 100% be backed by GML, which is one of the products providing by the banks and nominated agencies. This GML generally provides and keeping the things like price and commodity both open. So once those showrooms will start and the customer will come on new showrooms, they will fix the prices of the product. Correspondingly, we will also book our rates with those banks and nominated agencies. This is the third model. The fourth model, as everybody is aware about, the MCX platform. So we are also doing hedging. Whenever situation gives us the idea, the research team, the analyst, whoever we have empaneled they provide us feed what to do under what scenario basis that we always keep position at MCX. And this is how we will be following over the years also.

Right. And I have another question. Sir, over the next three, four years, so I'm personally -- I am from Bhilwara. And here, we are very fond of D.P.'s diamond jewelry. So I would like to know like over the next three, four years, how much of the studded ratio are we expecting to go up?

So definitely, it is also in our DNA to increase that studded ratio, and we have taken this as a target also. As of now, our business is growing like between 6% to 7% of the studded mix. And we have targeted by March '28, we would like to increase up to 12% to 15% on an overall basis. But see, this -- we should not look at from that perspective, whereby that if the 100 is the sales, then the 12% or 15% will be the diamond. The diamond itself is a separate division, which has to grow at its own path. So we have targeted that those cities, like, as you said, Bhilwara, whether it is Udaipur, Bhopal, Ujjain or upcoming big larger cities, we will keep this particular segment on a little higher side at our stores also. So the higher inventory exposure may give better results, better conversion and better help in our EBITDA also. So, for March '28, our target is to take it to at least 2x to 3x of what we have today of diamond segment.