Kalyan Jewellers India Limited (KALYANKJIL) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kalyan Jewellers India Limited Q3 FY '26 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Agarwal for his opening remarks. Thank you, and over to you, sir.

Yes. Thank you. Good evening, everyone, and thank you for joining us on Kalyan Jewellers India Limited Q3 and 9M FY '26 Earnings Conference Call. We have with us Mr. Ramesh Kalyanaraman, Executive Director; Mr. Sanjay Raghuraman, CEO; Mr. V. 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 review our financial results and investor presentation, which were recently posted on the company's website and stock exchanges. We will begin the call with opening remarks from management, followed by an open forum for question and answers. Before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking. 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.

Good evening. We had an excellent all-around performance during the recently concluded quarter. Momentum on the ground remained robust for most part of the quarter with the festive period growth meaningfully higher than the rest of the quarter. As previously communicated, same-store sales growth for the 30-day period ending Diwali was in excess of 30% on a like-for-like basis. Over the last couple of years, we have been focused on transforming Candere into an omnichannel platform. And as you are aware, we have 110 Candere stores now. Candere recorded revenue growth of 117% for the 9 months ended 31st December. And more importantly, Candere has turned PAT positive during the recently concluded quarter with revenue growth of 144 percentage. Going forward, in addition to new showroom launches, our efforts in Candere would also be on adding more inventory in the already launched showrooms and drive higher same-store sales growth. Talking about the ongoing quarter, we have started off well despite continuing volatility in gold prices. We are upbeat about the ongoing wedding season across the country and expect to end the financial year on a very strong note. I'll now hand over to Sanjay. He will take you through the numbers in detail. Thank you.

Thank you, Ramesh, and good afternoon, everybody. I'm really happy to be talking to you all again. In the just concluded quarter, we reported a consolidated revenue of INR 10,343 crores, a growth of 42% over the corresponding quarter of the previous year. Consolidated profit before tax was INR 560 crores versus INR 294 crores in the corresponding quarter of the previous year. This is after the impact of changes in the Labour Code, an amount of INR 41.5 crores has been provided under exceptional items for the quarter. Consolidated profit after tax was INR 416 crores versus INR 219 crores in the corresponding quarter of the previous year, a growth of 90% for the corresponding quarter of the previous year. Talking now about the numbers for the 9 months ending December 2025. We recorded a revenue of INR 25,468 crores on a consolidated basis versus INR 18,860 crores in the same period of the previous year, a 35% growth. Consolidated profit before tax for the 9-month period stood at INR 1,263 crores versus INR 709 crores in the same period of the previous year, a 78% growth. And consolidated profit after tax for the 9 months was INR 941 crores versus INR 527 crores in the corresponding 9 months of the previous year, a 79% growth. Out of the free cash generated from operations, nearly INR 300 crores was used for our Candere expansion and pilot showrooms in the U.S. and the U.K. and another INR 300 crores was used for debt reduction and dividend payments. Now I shall give you the breakup between the quarterly performance between India, the Middle East and Candere, starting with the India numbers. India revenue was INR 9,048 crores versus INR 6,386 crores in the corresponding quarter of the previous year. And India profit before tax was INR 541 crores versus INR 292 crores in Q3 of the previous year. India PAT was INR 401 crores compared to INR 218 crores in Q3 of the previous year and an 84% growth. Moving now to the Middle East business. Revenues in the Middle East came in at INR 1,073 crores versus INR 838 crores. Profit before tax in the Middle East was INR 26 crores versus INR 18 crores in the same period. The Middle East business posted a profit of INR 24 crores for the quarter compared to a profit of INR 15 crores for the corresponding period in the previous year. Lastly, our e-commerce business, Candere posted revenues of INR 135 crores versus INR 55 crores in the corresponding period of the previous year. And the quarter recorded a profit of INR 3 crores versus a small loss of INR 7 crores in the corresponding previous year period. We are now done with the summary of the financials and would like to open the floor for questions. Thank you.

We will now begin with the question-and-answer session. [Operator Instructions] The first question comes from the line of Gaurav Jogani JM Financial.

Yes. So sir, my first question is with regards to the volatility in the gold prices because the gold price has almost risen by, I would say, almost near 100%. So in this context, how is this impacting the new franchise addition for you given that the newer guys would now almost require 80% or 90% higher amount to put up the same kind of tonnage. So how are you navigating this? What are -- are you seeing any changes in your franchise store addition plans because of this?

So the franchise sign-ups, meaning it has been very strong. And again, the 80%, 90% is like 1 year difference which you are talking about. And we don't sign up franchise 1 year before with all the amounts, what we call finalized. We always say that the volume at the store should be in this range, and you will have to be prepared for XYZ amount. So we don't see anything majorly changing for them because everyone knows about how a jewelry store investment comes in. And next year also, everything is finalized franchise.

Sure. So Ramesh, what I meant was that because initially when they would have signed the agreements last year maybe, so the prices would have been lower to that extent. So then would there be a recalibration in the tonnage that would probably be kept in the store while the value could remain the same? I mean, how are you -- what are the changes that you would need to make because of this sharp rise in gold prices?

So 2 things here. One is that our franchisee have the financial ability to take multiple showrooms and we give them only one store and ask them to start the journey with Kalyan and then later, we might give them a couple of stores more. So I have told you earlier that our objective is to create a good base of franchisee partners rather than only opening stores. That is point number one. Point number two is, yes, every market has a size. So if that market size is maybe INR 60 crores, INR 70 crores, with a stock turn of around 2, 2.5 in the first 3 years, the inventory amount will not change too much because then that market cannot absorb that kind of revenue. So it is a mix wherein our inventory levels, 18 carat percentage, we will increase a bit so that the volume does not get hurt too much. We also keep a buffer of some inventory. When we tell the franchisee itself, we would have told them at least to keep 30% more than what is required. So it is a mix of things wherein we also know that these kind of situations can surely come.

Sure, sure. So one more thing, you also keep certain inventory at your end for your existing FOCO stores as well as some backup inventory that you need to keep for the upcoming franchises as well. And given the prices have increased, would that mean that the debt or rather the -- any changes rather because of this in your debt reduction plan that you might have because of this volatility in gold prices?

So in our own showroom also, we cannot keep the same volume of jewelry when the price is going up. We will have to trim the volume, not directly to the percentage of the price increase, but to some extent to manage our inventory because our turns will also go bad otherwise. So there is no -- what you call -- there is no major change in our cash flow planning for the year. And those showrooms do not need the level of inventory at such rates. So that is how we plan our cash flow.

Okay. Sure. And just lastly, on the initiative that you were supposed to launch in Q4, the -- I mean the third brand that is, where are we on that? What stages are you? Is it launched? If not, the planning stages, et cetera, some color you can give on that?

It is yet to launch, but the regional brand will be launched in the running quarter. And as I had mentioned previously, it is in one state in India at go, wherein there will be only -- the regional brand will come only in one state.

[Operator Instructions] The next question is from the line of Yash Sonthaliya from Edelweiss Public Alternatives.

Yes. So my first question was on GML, like with all the stress going on, on global economy or politics and the current rally in the gold prices, are we seeing any headwind or any risk of this GML going out of the books for us or maybe the interest cost on this increasing going ahead?

Nothing remains very consistent as we speak.

Got it. Got it. And also needed one clarity, like for Candere, we were growing through FOCO model, right? So where we use INR 300 crores for the expansion of Candere?

Could you repeat the question again?

So my understanding was for Candere, we were broadly growing through FOCO model. So I wanted to understand where we spent INR 300 crores on the same brand, like it was more on advertisement of COCO stores or something else?

No, no, no. So Candere, it's a mix of FOCO and COCO. It is not only FOCO. So that is where this INR 300 crore amount investment is required. Not only for what you call -- it's not only for Candere again. If you are asking about the INR 300 crores, which Sanjay was mentioning in his speech, it is including the pilot stores, which we opened in U.K. and U.S.

Makes sense. Makes sense. And one last clarity like with this gold price going up, our studded mix has increased. Ideally, what our understanding was with increasing prices, there will be some headwinds on the studded mix. Are we seeing the same in the upcoming quarters or the months?

No. So studded has an organic growth also these days because of the social media and because of the campaigns which we do, because of the youngsters who do a lot of research before buying jewelry, there is an organic growth for studded jewelry. And it becomes actually relatively easier for us to upsell also during high gold prices because the product looks bigger than the plain gold jewelry, and it also comes in 18 carat.

The next question is from the line of Srinivas from [indiscernible].

My question is from last Q1, Q2 and Q3 and continuously following the share. So even though it has extremely good results, then why still it's underperforming, sir?

Underperforming in the sense?

Means actually, it's undervalue, means the value -- the results were good and what are the things -- everything is good. Even the stock was continuously downfall for past months.

So our job is to keep focused on execution and delivering numbers on the ground and rest will not be our criteria to comment on.

Yes, I understood.

It's not under our control also.

Okay. Somewhere I feel like there is no proper update from management side so that's what investors suggest a panic [indiscernible]

No. So there is -- meaning if there is anything relating to the company, then we give constant updates for everything.

Yes, sir. And one more thing is, if the gold prices are still more up, is there anything like -- is there any buying prices or anything will be compared to our competitors, there will be anything added for the persons like employees or anyone who in the marriage season, they have a lot of plans to buy the gold for marriage season. Due to the higher prices, is there any Kalyan can do anything for them like...

It's a very retail question wherein we have constant promotions at the store level, which will happen season -- season, off-season drivers, exchange offers, et cetera, which is a constant driver for revenue at stores.

[Operator Instructions] The next question is from the line of Devanshu Bansal from Emkay Global.

Sir, a bit on a conceptual line in a high gold price environment, where we are noticing that players are pushing on installment schemes as well as gold exchange programs, right? So I just wanted to check how are we placed there in terms of mix, if you can share some data around the revenue from installment schemes or through gold exchange programs? What is it trending currently? And how was it like a year before?

Our gold savings schemes are very active over the last many years, and we still continue to see traction on gold savings scheme at the store level. And it is -- it gives the customer an opportunity to fix the price on a monthly basis. And again, it will be easier for them to purchase jewelry also because they don't feel the pinch of spending money at a go. And regarding the exchange of jewelry, old gold exchange, we have seen a bit more traction in Q3 when compared to last Q3. And that's also a constant driver for revenue. We have not done any specific activations around exchange because SSDs were strong. We might do it in the future. But as we speak for the full financial year for the 9 months, we have not done something very specific around exchange.

Yes, that was what I was intending because we have seen players sort of marketing both these things very aggressively. Our performance has no doubt been very strong. But maybe if you could just comment our sales from these 2 mix perspective, what is it trending as of now? And what was it like a year before would be helpful.

Gold savings -- the exchange gold usually is in the range of 30% plus, and it has been in that range. It has been 1% or 2% more in Q3 when compared to last year. Again, gold savings scheme usually is in the range of 18% to 20%, which remains the same.

Understood. Understood. And sir, secondly, I wanted to check the players or maybe the -- because of this gold price increase, there is higher adoption of 18 carat, 14 carat and even 9 carat now. I wanted to check from our inventory perspective, when -- are we at a level which rightly represent the consumer preference as of now? Or we need to do some more work to sort of maybe introduce more these lower caratage inventories in line with the consumer [indiscernible]

So some states have already accepted 18 carat. And in most of the other markets, we are slowly gradually increasing the share of 18-carat products. Customers are accepting 18 carat jewelry as it enables them more choice within their brands. So 2, 3 states which are predominantly 18 carat market still continue to be strong.

By when can we sort of expect that all the stores will be at this optimum level of reduced caratage inventory?

Again, it's a process, meaning I told you 2, 3 states are very 18 carat friendly, where we have increased our inventory for 18 carat more than last year. But there are certain states, especially South India, where 18-carat acceptance will be much slower than outside South markets, where we have launched many collections in 18 carat, which is attractive so that people start trying out 18 carat. So it's a process, and it cannot be done overnight, but we are doing this because customers will also be happier enough for 18 carat because the products can be bigger than a 22 carat. It will be customer friendly. So we are in that journey...

I understand, but there is some religious perspectives as well, right? So are we seeing a change in consumer behavior towards more acceptability for these lower carat agents? Or maybe if you could share some regional growth perspective here since South is more 22 carat, is it like seeing relatively slower growth, maybe the other regions are performing better? If you could just share some perspective here?

No, growth numbers will be very high because the base would have -- is very low, right, 18 carat. So the growth rate will be higher in 18 carat than in 22 carat. That is because the base is very low. So that will go -- it will take you in the wrong direction, which is not the right way to do it. Acceptance is slower in South. North markets acceptance is much faster. And studded jewelry, 18-carat acceptance is much higher than plain gold jewelry. And within studded, we are now focusing on launching 14 carat as well and 9 carat.

Got it. Got it. And lastly, sir, the space -- LGD space is seeing a lot of investments. Even some of the leading players have already announced plans and open stores. What is your view from investing into that space?

No, we continue to watch the space very closely. But as of now, we don't have any immediate plans for a lab-grown brand. It will not be appropriate for me to comment on what the competition which you mentioned is doing. But as of now, we don't have any immediate plans.

Fair enough. Sir, just last one, you can avoid answering if you have already answered. I joined the call late. Any color on how the trends have been so far in January? Have they improved or maybe because Q3 saw a very strong pickup towards festive in October. So has that sort of trend sustained in Q4 as well?

Yes, Q4 so far has been good. Customer traction has been strong. Even with this volatile gold prices, the customer walk-ins, footfalls, the momentum at the store is running strong.

The next question is from the line of [indiscernible]

Sir, a couple of questions from my side. Firstly, just wanted some help with your current store structure. Are we also seeing franchisee expansion in the South market? And if that is the case, then what would be the count of franchisees currently operating in the southern market?

So Southern markets, -- the franchisee number of stores or the demand for South market franchisees when you compare to non-South is not as big as the non-South markets. And the number of South franchisees will be what minimal when compared to the non-South markets?

Right. Sir, the -- why I asked this question is because if I see your Y-o-Y growth, specifically on the South revenue side, specifically on this quarter, it has grown by around 34%. However, if I see your own store growth on the revenue side, that's only grown by 16%. So that's where I was trying to understand that possibly there are some franchisees which are also in the southern market, which is why that discrepancy in the number.

Yes. For that case, maybe there will be 30-plus showrooms in South. I am only telling you that you cannot compare the non-South number of FOCO showrooms are much, much higher. That's what I'm trying to say. And South, you know that the revenue -- the South also, the per store revenue is higher than the non-South. That's also there. Overall, we have 200-plus franchisee showrooms, okay? And out of which maybe 195, 200 out of which what 30-plus will be -- around 30 will be South.

Understood, sir. That's very helpful. Secondly, sir, in terms of our gross margin construct, given the policy of hedging we operate with and also the shift mix towards your franchisee stores, what drove this gross margin expansion? And second part to this question, if you could help me understand the gross margin, which say accrues to Kalyan from a franchisee versus an own store?

Yes. So margins have improved. Multiple factors have contributed. First being the encouraging improvement in our studded share across most of our markets, including South markets during the last quarter. Then, as I mentioned in my previous call, the margin improvement because of the procurement changes that we had made also have -- sees continuing to be benefiting on our side. Also, you would have noticed the share of franchisee revenue, it has been improving. And more importantly, the share of revenue from the new set of FOCO showrooms have increased, which is also a contributor, and it will keep growing. Again, while strong SSDs -- with the strong SSDs, maybe the operating leverage across COCO and FOCO is there.

Understood, sir. Just pressing here a bit, apologies, but you mentioned that incremental new franchisees contribution to the revenue. Are they coming on a different term structure, sir? Or they [Technical Difficulty] on the older structure?

No. So it's not immediately meaning we have changed our franchisee -- what you call the franchisee sharing, the margin sharing quite different a year before, if you remember. We have changed the terms on CapEx, expense sharing, et cetera. And the margin for Kalyan will be better in the range of 0.25 to 0.5 maybe a year before, we had changed? So that revenues also started coming now.

Understood. And sir, from the procurement changes part, that would be a sizable chunk in our own procurement process now or it is yet to materialize?

Procurement, we just -- meaning the pilot phase, which we started, we continue. We are not adding anything, but that's also a good contributor for the margin growth, gross margin growth.

And the hedging policy continues to remain like it was in the past quarter.

Yes, yes. So gold, we don't take any margin benefit or what you call -- we are fully protected. But yes, one more area where the margin driver, of course, not significant is some margin benefits due to the surge in silver and platinum prices in the last quarter when compared to Q3 of last year.

Understood. Just one last question on the cost structure, 9-month basis Y-o-Y, while absolute growth is more or less similar, our cost structures have become more efficient. I'm talking specifically on the A&P and the employee cost as a percentage of sales. So sir, how should one think about as we go ahead in the upcoming quarters? How will those trend?

Yes, exactly, the leverage on advertisement and employee and other operating expenses are really helping, and I think it should continue, except for the silver and platinum, which is not in our hand. Otherwise, all the margin growth should continue ideally.

Next question is from the line of Nihal Mahesh Jham from HSBC.

I had my first question on the land parcel that we were discussing that how are we progressing on the sale of that, that have we managed to liquidate some of it as we were mentioning about?

So we have appointed mediators for finding out interested buyers for the real estate, which we are planning to sell. Hopefully, should happen by H1 of the next financial year.

Got it. And the second question was that you mentioned that despite the increase in gold prices, you try looking at moderating the absolute inventory. So do we still say, target -- the asset turn of 2.5x? And if that is the case, then how do we optimize the quantity of gold? Do we end up letting go, slow-moving inventory in that phase when the prices of gold has increased in the store?

No, it cannot happen overnight. The optimization happens over a period of time and not immediately. So that's why I told you when the inventory price goes up by, say, x percent, we cannot bring down the inventory by the same x percent. So it will be, what, 30%, 40% of that x is where we reduce immediately so that our cash flow is taken care. And it cannot happen overnight. We will keep on monitoring. And again, 18 carat is also helping us to maintain the volume of jewelry there. So these kind of things we constantly do.

Got it. Just one final question was that on the store additions, you've obviously given a target of around 84 stores for FY '26. For FY '27, are we looking at a similar number of store adds? Or just what is the sense there?

Yes. So the store count for the next couple of years will be in this range of 80 to 90 [indiscernible] India.

The next question is from the line of Naveen Trivedi from Motilal Oswal.

Sir, my first question is for our FOCO stores. So are we still seeing the mix expanding for our FOCO stores? And any sense on the gross margin side, are we still seeing gross margin expansion for our FOCO stores also given that the mix is expanding in our favor?

As the studded ratio has been growing across our markets when you compare to Q3 last year, and the margin has also improved in our own stores, South and non-South.

Okay. So typically, if you look at the franchisee stores, what are the studded mix in the franchise stores?

What are the?

Sir, what is the studded mix for the franchise store?

It should be in the range of 30% in the non-South markets as they are mostly in our own stores. There is no difference between owned and franchisee which you know.

Sure, sir. And my second question is on our Middle East business. This quarter revenue growth is close to 28%, while we added close to [indiscernible] stores. How should we look at the demand side there? And how should we look at the near-term trend in the Middle East side?

Yes. So Middle East is also strong. If you look at our revenue growth has been strong, very strong quarter and still continues.

Sure, sure. So any plan for the store expansion for another 6 months, 12 months' time frame?

So you know that franchisee ecosystem in Middle East has not turned up the way like what we did in India. So that is why we maintain overseas expansions in the range of about 6 to 7 showrooms a year. That should be the target for the next couple of years. If there is anything drastically which is going to change because of franchisee demand, we will get back to you. But the only change is that we are in active discussions with a few Arab investors for franchise and the interest level from Arab investors for our Kalyan franchise has now developed when compared to the recent past. If that materializes, then the growth can be much higher. But better, we only target for 6 to 7 showrooms in overseas.

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

Just on the FOCO stores in South, did I heard you correctly that there are 30 FOCO stores of Kalyan Jewellers in South? Because I think in last quarter, this number was around 8, 9 stores.

So it is 30. We have converted a few stores in the last, what you call, 2, 3 quarters.

Got it. And then when I look at your net store addition in 3Q also, it says 18 while the gross was 21. So what led to the 3 store closures in India?

It is not a closure, maybe wherein, for example, there has been stores where like Jaipur or South Ex where we have shifted from our old premise to a new premise in a hybrid franchise model. That is where you see the net and gross number different and one conversion of Kalyan to Candere also.

Got it. And in terms of debt repayment, what was the total debt repayment in third quarter? And what is the debt balance as of December end?

Debt, there is no major change from Q2 to Q3 because usually, we don't repay debt in Q1 and Q3. predominantly, we do it in Q2 and Q4 only. So it is in the same level.

Got it. And just last question is on the pledging. If you can highlight what was the total borrowing, which was taken for the purpose of pledge? And where are you in terms of the total outstanding balance?

Yes. So first of all, you know the pledge was done only for buyback of Kalyan shares. And again, this might not be the right platform to discuss this. But since you asked, we have reduced our loans meaningfully over the last 6 months to enable us to manage situations effectively. And we have also drawn up plans to reduce the pledges over the next 6 months.

The next question is from the line of Gaurav Jogani from JM Financial.

Just on the CapEx bid, if you can highlight the CapEx bid for India for this year and the next year and also for the Candere in the international market?

Can you repeat the question once more?

The CapEx plans, the amount of CapEx that would be spent in India as well as outside India, including the new venture also that you are planning to do?

So you're talking about this year, right?

Yes, '26 and '27, both sir, if you can.

This year should be in the range of what INR 175 crores for maintenance CapEx India. And the regional 5 showrooms might not come this year, it can come in the next financial year, maybe partly this year. And Candere around what, 30, 40 showrooms with around INR 2 crores, INR 2.5 crores of CapEx. That should be the ballpark number.

So Ramesh, for the regional 5 showrooms, how much CapEx would be required for next year?

So regional, we will open only 5 showrooms in the next 12 months. And the CapEx should be in the range of what INR 4 crores to INR 5 crores per store.

Ladies and gentlemen, due to time constraints, we'll take that as the last question for today. I now hand the conference over to the management for closing comments.

Yes. So thank you, everyone. And before I end the call, I just wanted to mention that this quarter has been started off very well, and we look for ending up this year on a very strong note. Thank you everyone.

Thank you, sir. On behalf of Kalyan Jewellers India Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.