Kalyan Jewellers India Limited (KALYANKJIL.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of Kalyan Jewellers India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Agarwal. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and thank you for joining us on Kalyan Jewellers India Limited's Q1 FY '26 Earnings Conference Call. Today on the call, we have with us Mr. Ramesh Kalyanaraman, Executive Director; Mr. Sanjay Raghuraman, CEO; Mr. V. -- Viswanathan Swaminathan CFO; Mr. Sanjay Mehrottra, Head of Strategy and Corporate Affairs; and Mr. Abraham George, Head of Investor Relations and Treasury. I hope everyone had a chance to view our financial results and investor presentation, which were recently posted on company's website and stock exchanges. We will begin the call with opening remarks from management, followed by an open forum for question-and-answer session. Both -- before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking, as a disclaimer to that effect was included in the earnings presentation. I would now like to invite Mr. Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers India Limited to give his opening remarks. Thank you, and over to you, sir.

Thank you. Good evening, and let me welcome everyone to the call. I'm extremely satisfied with our performance in the recently concluded quarter, while the consolidated revenue and PAT growth for the quarter have been approximately 31% and 49%, respectively. Stand-alone business recorded revenue growth of 31% and PAT growth of 55%. Let me take some time to reflect on the targets that we had set around the key objectives of revenue growth, improvement in cash flow, return on capital and rewarding shareholders. Over the last 3 years, we have opened more than 160 Kalyan showrooms in India, predominantly through the capital-light FOCO model. Share of FOCO revenue has grown to 43% as on June 30, 2025. Our revenue CAGR for the last 3 years have been approximately 37% for India and 35% consol. We have also been able to substantially reduce our non-GML working capital loans over the last 2 years. And as you are aware, we also have realized cash via sale of movable noncore assets. All of these have helped improving the return profile meaningfully. Now the key focus areas going forward will be realize and monetization of real estate collaterals presently with the banks. Secondly, creation of retail formats beyond Kalyan Jewellers and Candere and supply side restructuring to drive meaningful improvement in the margin profile of Kalyan Jewellers. We have already done considerable work on some of the areas that I just mentioned. We have started documentation with the banks for the release of collaterals worth INR 200 crores. Given this development, we have decided to put a pause on further debt reduction till we get the release of the first tranche collaterals. Over the last 12 to 18 months, we have also been giving shape to our plans to expand distribution network beyond the mainstream Kalyan Jewellers. Candere was identified as a second format with predominant focus on lightweight lifestyle jewelry. And as you are aware, we added more than 70 Candere showrooms in the last 18 months. We launched the brand campaign for Candere during the current financial year and plan to add 80 Candere showrooms in India this year. Footfalls at the showrooms and conversions have shown more than 75% increase since launch of the brand campaign. Candere should end PAT positive neutral by the end of the current financial year. With Candere stabilizing, we have decided to launch the third format, which will essentially be an entity that will house regional brands offering exclusively localized jewelry, competing with strong regional brands. We have drawn up plans to launch the first regional brand under this entity during this calendar year. Apart from changes in the merchandising, go-to-market strategy, we have also adopted a key change in the procurement plan for the new format by focusing on a lean credit period, ensuring better cost efficiencies. Even though the strategy will be fully implemented in the new format from day 1, we have already successfully completed a pilot project with this strategy in Kalyan Jewellers. We are exploring ways to implement it fully as a lever for significant margin improvement in the main format Kalyan Jewellers in this financial year itself. And now talking about the ongoing quarter, we have started off well despite continuing volatility in gold prices and we are at a higher base. We are upbeat about the upcoming festive season across the country and are gearing up for the launch of fresh collections and campaigns. Thank you, and I will hand over to Sanjay. He will take you through the numbers.

Thank you, Ramesh. Good afternoon, everybody. I'm really happy to be talking to you after this great quarter that we had. Our company reported a consolidated revenue of INR 7,268 crores in the just concluded quarter, a 31% growth over the corresponding quarter of the previous year. Consolidated EBITDA came in at INR 508 crores versus INR 368 crores in the corresponding quarter of the previous year. And consolidated profit after tax came in at INR 264 crores versus INR 178 crores in the corresponding quarter of the previous year. Moving now to talk about the breakup of the numbers between India and the Middle East, starting with India. India revenue came in at INR 6,142 crores for the quarter versus INR 4,681 crores in the corresponding quarter of the previous year. And India EBITDA for the quarter came in at INR 434 crores versus INR 309 crores when compared with the corresponding quarter of the previous year. India profit after tax was INR 256 crores compared to INR 165 crores in the corresponding quarter of the previous year. Talking now about the Middle East business. Revenues in the Middle East for the quarter came in at INR 1,026 crores versus INR 809 crores compared to the quarter -- corresponding quarter in the previous year. And EBITDA in the Middle East came in at INR 73 crores versus INR 62 crores for the same quarter of the previous year. The Middle East business posted a profit of INR 22 crores in the quarter compared to INR 19 crores in the corresponding quarter of the previous year. Lastly, talking about Candere, our e-commerce business, we posted a revenue of INR 66 crores in the quarter versus INR 39 crores in the corresponding quarter of the previous year. Candere recorded a INR 10 crore loss in the quarter versus a loss of INR 2 crores in the corresponding quarter of the last year. With this, we are done with the summary of the financials and the numbers, and we now open the floor for questions. Thank you.

[Operator Instructions] We take the first question from the line of Gaurav Jogani from JM Financial.

Yes. Congratulations on a strong set of numbers. Sir, my first question is with regards to this new pilot that you have mentioned regarding this procurement plan with a leaner credit from the vendors. If you can, sir, elaborate more on this? And how much of this benefit during this quarter in the gross margin was because of this pilot project that you did?

Yes. So there has been a margin improvement and predominantly major reason like what you said is because of this pilot project, tough to quantify. But yes, there has been some improvement because of that. And the margin improvement, we should not give full credit only for that pilot project, which was implemented. There has been revenue from platinum, silver, et cetera, where the margins were on a higher side, predominantly because of the metal price. Silver and platinum revenue comes approximately about 2%, 2.5% of our revenue, wherein the margins were higher. So that plus the pilot which we did, both together actually helped to increase our margins. And of course, EBITDA margins, if you are mentioning, some operating leverage also was there at EBITDA level.

No, Ramesh, I just wanted to know that because you have done this pilot, how are you planning to take this ahead? And how is the impact of this would be on the overall working capital cycle? Because if we are planning to pay the vendors a bit earlier in lieu of some discounts, so how this can have an impact on the overall working capital cycle for us?

Yes. So this pilot was actually done because we wanted to implement this from day 1 in the regional brand, which we are going to launch shortly, maybe before this calendar year because we want to go in that direction in terms of procurement for the regional brand. The pilot was also done to exactly know the savings, cost efficiencies, which can happen if we do a leaner credit arrangement with the vendors, which was successfully done. Now to make it implemented in Kalyan Jewellers fully, it is again a big project. And we will -- we were just trying to plan how to implement it at Kalyan Jewellers. And if that is implemented, yes, there is going to be meaningful increase in the gross margin, and that is what we are trying to target for.

Ramesh, any time line that you...

The pilot project that we ran, the ROCE for the capital that we allocated for the project was actually higher than the corporate ROCE as of now.

Okay. Okay. Okay. And any time lines you would like to share that by what time this project can be implemented at the Kalyan Jewellers level?

No, first, we will do it from day 1 in the regional brand. The regional brand launch is where we are going to do it from day 1 fully, and that should come before the calendar year. And during that time, we will give you a overview about how we are going to do with the Kalyan and the time lines, et cetera.

Sure. And Ramesh, my second question...

The pilot which we did will continue. So you can have some margin improvement because of that for the full year. But to expand that pilot project, we will need to give you -- you will need to give me some more time because we will have to implement that in the regional brand, which we are going to launch and then start implementing at Kalyan. It's a big project. So we'll have to give me some more time for us to come back on the time line.

Sure. And second on this regional brand strategy, if you can elaborate more? Will this be under the Kalyan Jewellers brand or the brands in each of the regions would be different? How the strategy would be here?

So here, the target is to be completely regional. So there will be a new company which will be formed, which will be having multiple brands, and each brand will be in a particular state, and it will be very regionalized by its name, by its inventory, by its campaigning, positioning, et cetera. And that is how we are going to do it. In this new subsidiary where we will have multiple regional brands, the first regional brand, we will be launching before this calendar year. And we will launch the other regional brands only once this gets stabilized. So for this year, we have plans only to launch one regional brand in a particular state. Post that getting stabilized, then only we will go to the next region.

Ramesh, just one thing here. Would this brand will be purchased or I mean, you will be creating this in-house?

We will not -- it's not inorganic, we will create the brand.

Okay. Okay. And just lastly, you also mentioned in your opening remarks about the pause for debt reduction. So the debt reduction pause would be largely because of the funds that will be utilized in this pilot project or the project towards the new brand as well as on the improvement -- gross margin improvement initiatives. That is the reason there?

The reasons are mainly because we were looking at a situation where we want to start the documentation with the banks to bring out the collaterals for the reduced loan, which we have already done, which is now on track. So now we want to take a pause so that we will -- we can wait for that collateral to come out. In between, we will use the cash generated in this financial year, predominantly for the pilot project, which we have done, we have implemented already. We have used the -- all available resources for this pilot project. And future also for the new brand, it will be a multiple of what you call, it will be equity also, it will be debt also. We might raise some debt also for that company in the subsidiary.

The next question is from the line of Nihal Mahesh Jham from HSBC Securities.

Yes, sir. Congratulations on strong performance. Sir, I had a first question on this adjusted term that you're speaking. So just to understand right, we are implementing this first in Kalyan. And if it works right, then we plan to roll it out with the regional brands. And only after it works with the regional brands, do we plan to take the entire Kalyan model on this leaner credit period? Is that the right understanding of the time lines?

The pilot project, it's already implemented at Kalyan. So we already started by maybe March last year, okay? And full quarter -- this full quarter, April, May, June, we actually did the pilot project at Kalyan. Now we will implement it fully from day 1 in the new regional brand. Once that is launched, then we will take initiatives to launch it fully at Kalyan Jewellers.

So in this quarter, I'm guessing approximately, say, a small proportion of our procurement in Kalyan would have been done via the leaner credit model. Is that the right understanding?

Correct. Correct. Correct. Yes. Yes. Correct.

And would it be possible to share what was the ballpark proportion of the procurement that was done in this model?

Yes. So the capital allocated for this pilot project, okay, the ROCEs were actually higher than our corporate ROCEs. As I said, all the resources available with us actually we utilized for this pilot project.

Got that. And as you said that the implementation of this model will lead to an improvement in the overall ROCE profile because generally, sometimes we have seen that while margins improve by extending period, paying off here, but eventually, it seems to be a ROCE drag with some other companies who have implemented this. In our case, we are saying that the ROCEs will also improve despite the increase in working capital.

Yes. So the ROCEs actually for the pilot project, which we invested was higher than our corporate ROCE.

Understood that. And because, sir, the balance sheet for this quarter is not visible that if we had to implement this across the entire Kalyan network, what would be the increase in working capital or fund that would be required?

So lean credit means it's not completely out of credit, okay? So…

Open payable days, so which would then automatically...

Yes. Yes. So it will be in the range -- this might need around INR 1,500 crores to INR 2,000 crores.

INR 1,500 crores to INR 2,000 crores. Sure.

Yes. Yes. So whether it can be done on phases, whether it can be done together, the structure of how to bring in the capital, et cetera, that's why I wanted to take some time, and then we are still working on it from day 1, but we will adapt this in our new format.

Got that. The second question was on the new subsidiary that we are launching. So there also, as you said that the first pilot will be one state this year and depending on how that progresses, you will move to the next state. So is there any thought on what could be, say, the requirement of capital, how many ballpark stores we are thinking of launching in each state? Just want to understand that along with this in terms of the capital requirement for the next few years. That is where the question is going to.

Yes, I understand. So for that, what we are trying to do is that we will be opening only in 1 state for the next 12 months. And we will open only 5 showrooms. That is the target for the next 12 months. Initial, we might need about INR 300 crores of working capital. But post that expansion for that format is again FOCO. So we don't need additional capital there.

Understood. So it will be the initial model and then you move to the FOCO model like in Kalyan?

Exactly. Exactly.

Got it. Sure. Sir, last question, I'll come back on the queue that we've obviously managed to deliver a strong SSG this quarter despite gold prices being elevated at least for the most part of June. Now for the month of July also, we've seen that gold has not seen any sort of cool off. So if you could just comment on how the demand trends there have been? And is there a case being built that in case there is a reduction in gold prices, you feel there's a lot of pent-up demand where you can see a strong comeback in growth in the ensuing quarters in case gold corrects?

Yes. So again, last, even when the gold prices were high, our SSGs were, what, 18% last -- in the last quarter, okay? So there is no pilot demand wherein because we were at 18% SSG in the last quarter, okay? That's what we have to understand. The revenue moves from week-to-week or month-to-month depending upon the volatility in gold prices. So when the gold price is too high and when it is very volatile, people take a pause and see where it gets settled down and then come back to shop, right? And marriages cannot be postponed because the price were high. So there is no pent-up demand which can come because the gold price comes down, okay? And if you talk about July, July started up good, okay, first 2, 3 weeks are good. And last week, August, 1st week and July last week, it is not actually comparable to last year because there was a higher base in the last financial year because of the customs duty reduction. So footfalls are still strong, like July, first week, second week. But the only thing is July last week and August 1st week when compared to last year, the base is very high in the last year. But we think that quarter should be okay because this year, we should get around what, 9, 10 days of festive demand, Navaratri, because Navaratri starts in this quarter itself this year.

The next question is from the line of Harsh Shah from Bandhan AMC.

Yes. Sorry, I just joined a bit late in the call. With this -- sir, I wanted to understand this pilot -- this new pilot a bit more. Are we essentially saying that we are also going into backward integration? I mean, will we also, I mean, replace the likes of Emerald also or how does it work basically in terms of this localized -- whether we -- from that point of view?

No. So backward integration. So just actually, if I want to make it very clear, it is a 3 step, okay? Step #1 is to do this leaner credit period kind of planning for our vendors. That is the step number one. Step number two, what we have -- what we will ideally do is actually make a hub for all our contract manufacturers. It's like a jewelry park, which already we have procured land in our hometown Thrissur, Kerala from the Kerala government. Kerala government has allocated land for us, where we will actually bring in all our South contract manufacturers. There it will not be a margin driver, but more of efficiency driver. And again, younger generation to come in, et cetera, because facilities will be there. There will be a -- meaning it will be -- have more infrastructure facilities where youngsters will also be motivated to come and join their, what you call, family business, et cetera. Third step is what you are telling is manufacturing. That will be the third step, which will -- meaning it's not going to be in the near future. So our near future will be lean credit period, cost efficiency, margin increase.

So in the second step, sir, which you mentioned as in the land which you purchased and the jewelry park, which you are intending to set up there. So there basically you are saying that whatever contract manufacturer guys you work, they -- you would want them to kind of have probably work in there.

Because -- yes, we will facilitate them to come and work at our infrastructure so that the facilities are good, okay? They can also grow more along with us. It will be an inspiration for the younger generation also to join them. And it is actually an initiative for them to grow their business again along with us because they don't have to invest on infrastructure, they don't have to invest on IT, they don't have to invest on anything else, okay? We will identify such vendors who want to grow with us, and then we will park them in our hub.

Okay. So this hub, sir, will cater the requirements of one state or the South market initially?

So we are now planning for predominantly Kerala, but South market.

South. So basically, let's say, in 12 months' time, I mean, indicative 24 months' time, you would probably have the entire South market covered by this hub?

Not the entire, but yes, yes.

Majority, okay.

But South is what we target for, because South itself comes with the different products, like South, maybe the precious stone vendors might not come to Kerala. So it is not fully South, but predominantly South.

Okay. Okay. But when you are facilitating them in the infrastructure, et cetera, would you not kind of even cut down on the margins which you give to them, let's say, if you are at 6%, 8% margins, let's say, if you give to them, would you not kind of now come down to 4%, 5% there?

Yes, there will be an OpEx also there, no. So that will not be a major margin driver. Margin driver will be the #1 and 3, one being the first step which we will take. The primary focus is there, the leaner credit period. Then it will be the step 3 wherein we go to manufacturing. Step 2, more than margin efficiency, it will bring more efficiency on the turnaround of the inventory, et cetera. That will be the focus there.

Okay. But when would you go to step 3, sir, in terms of manufacturing? Because at one side, you are calling your partners and asking them to work with you and then your next step is basically to take their own business, right?

No. So step 2 is for contract manufacturers who are very small today, wherein they will have only 5 workers, 10 workers, et cetera, okay? Those products, they are making for us in our premise, okay? We already are dealing with them as contract manufacturers only.

Got it. Got it. Got it. Got it.

The step 3 is for manufacturing products, which we are now procuring from wholesalers or manufacturers.

Okay. Okay. Step 3 is basically where the likes of Emerald, et cetera, where you kind of work with is you kind of take it in-house?

I didn't get you there. Can you repeat the question?

So step 3 is basically where you work with vendors like -- big vendors like Emerald, et cetera, is what you want to take in-house?

Yes, yes, I don't want to name anybody. But yes, the step 3 is where we will actually do something where we procure products from manufacturers/wholesalers. And our primary -- again, I repeat, the near future target is not that. Near future target is leaner credit period.

Okay. What -- could you -- I mean, sorry, I just joined a bit late. Could you explain this leaner credit period in detail again? It would -- can you kind of help me with that here?

Yes. Yes. So here, we -- you know that Kalyan, we have 2 formats today, Kalyan Jewellers and Candere.

Correct.

So we want to enter into the third format wherein it will house regional brands. The brands will be specifically created for that particular region. That is the third format which we want to create. And in that basket of brands, the first regional brand, we want to launch before this calendar year. So in between that, what we -- there the procurement pattern also need a leaner credit period in those regional brands for which we wanted to try a pilot in Kalyan Jewellers initially before bringing it to our new regional brands. So we started that pilot project by, say, Feb, March in the last financial year for Kalyan. Of course, this quarter, we got fully at Kalyan. And what we -- the takeaway is that the capital allocated for this pilot project, the ROCEs were actually higher than our corporate ROCE. So now the plan is to…

And how this plan compared to your India ROCE, sir? I mean, corporate would include both India and…

Yes, India corporate only. Yes, India corporate.

India corporate only. Okay, okay, got it.

Yes.

Sir, you're saying, and the plan is now?

The plan…

Sorry to interrupt, Mr. Harsh.

Yes, the plan is now to execute it full year at Kalyan. That's it. For which we will give a detailed -- it's a big plan, right? So we will come back with a solid plan as to how to implement at Kalyan.

[Operator Instructions] The next question is from the line of Ashish Kanodia from Citigroup.

Yes. Ramesh, the first question is on this lean credit period, right? How does it change the sourcing in terms of gold metal loan? Will -- once you kind of implement it across Kalyan Jewellers, will the gold metal loan contribution go down meaningfully from here?

No, no, no. So nothing -- does not what you call relate to gold metal loan at all. So you will -- you would have noticed that our payables are usually in the range of 30, 35 days, okay, payable days, which we will have to bring it down by at least by 1/3. That's what we did as a pilot. And we saw a very good margin increase. Cost efficiency was very high that we want to adapt at full in Kalyan Jewellers. This does not relate to gold metal loan. Gold metal loan, in fact, we have already taken it to the September levels.

Got it. And secondly, on the regional brand strategy, now within Kalyan, you already have been doing the hyperlocal strategy and we can see that in how you have expanded in the non-South region. So when you look at the launch of this regional brand, one, what is the rationale because you already have something which is doing a hyperlocal strategy? Second thing is, how should we also think about like the brand pool? Because currently, when you do marketing, branding, it's under one umbrella, one brand. So how do you create the brand pool, specifically when you are competing against a regional brand in most of this micro market, this regional brand have a very strong brand pool? And third question on -- related to the regional brand strategy, how should we think about the margins here? Because a lot of this regional brand basically cater to the staple product, which anyway is much lower gross margin product. So, yes, this three on the regional brand strategy?

Yes. So 3 things. One is, yes, we are a hyperlocal brand, where Kalyan, you know that 30% inventory, we keep hyperlocal products, okay? That is actually a way to drive what we call business to Kalyan, right? So we actually target customers who -- it's -- to people who are today with regional brand, but they are a bit aspirational. So it is an enabler. The 30% hyperlocal inventory is an enabler to target aspirational regional brands, okay, regional customers. So now coming to regional -- the 100% regional brand, it is only -- it will be only having those regional products, okay? It will talk to regional customers who are not aspirational. They are very happy with the regional player today, okay? They don't have any immediate aspirations to move up the ladder. And you know that even today, we have 60% revenue from the unorganized segment who are ramping up to organized players. And the first step will be to go to a regional player and then to people like Kalyan. So we wanted to be there, okay? That is about the strategy. And we see a huge vacuum also there, okay? So that is about the brand strategy. Now if you look at the margin, yes, you are right, the gross margins are lower. It will be almost what Kalyan was in, say, 2010, wherein we were actually a regional brand at that point in time. But the stock turns are higher. The ROCE for that business, I think will be about -- will be in the range of about 18%, 20%. That's how the model created.

Got it. And just last bit is on the EBITDA margin this quarter, right? I mean, given the FOCO model, normally, we should have seen a EBITDA margin contraction. But while gross margin has contracted, there is a decent bit of a EBITDA margin expansion, which we have seen this quarter. Now when you talk about the operating leverage part, if growth continues to remain broadly similar to what we have seen in this quarter, plus/minus here and there, is it fair to say that we should continue to see operating leverage given that the base is already becoming strong? And even if I look at the share of franchisee revenue, it's almost very similar to what it was last quarter. So from a EBITDA -- I understand gross margin may still remain kind of continue to go down. But on a EBITDA margin level, how should we think about on a full year basis?

Yes. So operating leverage will surely continue. And the margins have come down again, like you said, Y-o-Y. That is largely because of the higher share of franchisee revenue. But yes, the impact has been partially negated this quarter by margin gains from the pilot procurement project that I mentioned now, then the higher gross margins in platinum, silver, that's also there over and above the operating leverage when it comes to EBITDA level. So it should continue. Pilot will continue. Operating leverage will continue, but the revenue or the gross margin increase from platinum, silver, we are not sure. It depends upon where the price is.

Sure, Ramesh. That's helpful. Just last question was on the collateral part.

Sorry to interrupt Mr. Ashish, I would request you to go back to the queue as there are several participants waiting for their turn.

Sure.

[Operator Instructions] The next question is from the line of [ Subhanu from 38 Capital ].

Am I audible?

Yes, yes, loud and clear.

Am I audible?

Yes, yes. I can hear you.

My first question is, what is your demand expectation from upcoming festival? Can we expect a better performance than last year?

So demand expectation, I told you that, meaning July was good, first 2, 3 weeks, and now it's not comparable over the last 2 weeks because the base was very high. But we also have the festive days of 8, 9. Last year, it was -- there was no festive days because October 2nd only Shradh got ended. So I think partially the customs duty impact should be negated by that. So we are very upbeat and fully prepared.