Khazanchi Jewellers Limited ($543953)

Ladies and gentlemen, good day, and welcome to the Khazanchi Jewellers Limited H2 FY '26 and FY '26 Results Conference Call. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Mr. Harshil Ghanshyani, Kirin Advisors. Thank you, and over to you, sir.

Yes. Thank you. On behalf of Kirin Advisors, I welcome on the Q4 FY '26 and FY '26 conference call of Khazanchi Jewellers. From the management team, we have Mr. Rajesh Mehta, Chairman and Joint Managing Director. We have Mr. Vikas Mehta, Chief Financial Officer. With that, now I hand over the call to Mr. Rajesh Mehta. Over to you, sir. Thank you.

Thank you so much, Harshil. Thank you. A very good afternoon, everyone, and thank you for joining us today. It's a pleasure to welcome you to discuss our performance for the second half and full year ended FY '26. For those joining us for the first time, Khazanchi Jewellers is a legacy jewelry companies with over 5 decades of experience operating across both wholesale and retail segments. We offer a diversified spanning gold, diamond and precious stone jewelry supported by a strong design library and asset-light manufacturing model and growing retail presence. Our focus remains on combining traditional craft with modern design, while maintaining strict quality and hallmarking standards. FY '26 has been a landmark year for the company, reflecting strong growth momentum, improved operating efficiency and successful execution of our strategic priorities. The second half of the year was particularly encouraging supported by sustained festival and building demand, improved realization and a better product mix across both our segments, wholesale and retail. Our integrated business model and disciplined approach to cost and inventory management has enabled us to deliver consistent and profitable growth. On the B2B front, we continue to strengthen our relationship with a growing network of over 1,000 clients across India. Our ability to cater through large volume orders with design differentiation and timely execution remains a key driver of our scale and stability. In the B2C segment, FY '26 marks a significant step forward with the successful launch and scaling of our large format flagship showroom in Chennai. This expansion not only enhances our brand visibility, but also position us strongly to capture higher margin opportunities and improve overall realization. Furthermore, our strategic focus on premiumization, particularly through our diamond jewelry segment under the brand Vajraa Diamond is gaining traction. The positive response from customers and -- I'm sorry, the positive response from customers and trade channels reinforces our confidence in driving value-led growth through design innovation and category expansion. At the same time, we remain highly confident about the long-term outlook for the jewelry industry. Gold is not nearly a commodity in India, it is deeply embedded in our culture, tradition, wedding and festivals. Recently, PM Modiji, our Prime Minister, has urged citizen to stop gold purchases for a year to help manage the current account deficit and currency pressures. Completely stopping gold buying is unlikely in India, many customs and ceremonies and -- are considered incomplete without gold. Gold serves a dual purpose. It is not only essential for tradition and wedding, but also acts as a secure long-term asset and financial safety net. Although consumers may temporarily reduce purchases, the long-term demand and emotional values attached to gold are expected to remain strong. The government and industry stakeholders are working on policies to bring a large portion of household golds in the formal financial systems. Initiatives such as expanding the gold monetization ecosystem and granting license to eligible entities for gold collection, recycling and monetization are aimed at mobilizing idle gold holdings. This could help reduce India's dependence on gold imports, improve the current account deficit and create a more sustainable domestic gold supply chain. Now let me brief touch upon our financial performance. During FY '26, we reported healthy improvement in overall financial performance with total income increasing by 15.71% year-on-year to INR 2,051.02 crores. EBITDA stood at INR 126.99 crores, reflecting a year-on-year growth of 95.69%, while EBITDA margin improved by 253 basis points year-on-year to [ 6.9%, ] profit after tax stood at INR 89.42 crores, registered a growth of 98.87% year-on-year, while PAT margin improved by 182 basis points year-on-year to 4.36%. Our EPS has increased by 98.57% year-on-year to INR 36.10. For H2 FY '26, total income stood at INR 1,098.26 crores, reflecting a year-on-year growth of 8.1%. EBITDA stood at INR 73.21 crores, registering a growth of 102.79% year-on-year, while EBITDA margins improved by 312 basis points year-on-year to 6.67%. Profit after tax stood at INR 50.72 crores, reflecting a year-on-year growth of 103.6% while PAT margin improved by 217 basis points year-on-year to 4.62%. EPS for the half year stood at 20.46, registered a growth of 13.8% year-on-year over the corresponding period last year. This performance reflects our company's strong revenue growth, margin resilience and continuous focus on operational discipline. Looking ahead with these strategic initiatives, we are building a strong foundation for sustainable growth by creating a well-balanced revenue mix across B2B, B2C and e-commerce channel in near future. Our increasing focus on gold, diamond and premium silver jewelry in the B2C segment is expected to enhance margins, while our omnichannel strategy, expanding showroom network and strong B2B presence will help us strengthen our brand and establish a true pan-India footprint. With a strong foundation, improving brand positioning and a clear strategic road map, we are confident in sustaining our 25% to 30% growth trajectory and creating long-term value for all our stakeholders. With these remarks, I now open the floor for questioning. Thank you so much.

[Operator Instructions] The first question comes from the line of Manoj Sha with U.S. Ventures.

Am I audible?

Yes.

Sir, I just have a couple of questions. So like the EBITDA margins are expanding like with the price, just at gold prices remain same in this range. So do we expect the margin to sustain in this range over the medium term?

Yes, that's what we have shifted from a lower-margin segments to a higher-margin segment. And we have come up with all the designers jewelry, and we have improved our share of higher-margin items in the overall top line. So our margins have improved, and we are improving on that on a constrained and sustainable basis. So in the near future also the margins will surely improve. The bottom line will surely improve.

Okay. And sir, as the retail contribution increases like 25%. So what intend do you believe that will have on margins...

That's what on the longer run, when we are -- we have already defined that in upcoming 2 financial years, we would be reaching at least 25% of the total sale as retail contribution. In that, we have surely higher-margin bracket that is somewhere around 10% to 12%. So it is going to add up an additional bottom line improvement.

[Operator Instructions] The next question comes from the line of Mayur Parek with Dane Capital.

Yes. Can you hear me?

Yes, sir.

Yes. So I just wanted to know like the jewelry industry is highly competitive with several organized and reginal players. So like what differentiates Khazanchi Jewellers from its peers and how do you sustain your competitive advantage?

That's what, as you know, our company has been operating as -- having a long legacy of more than 5 decades and we have been producing our own business. It has been widely accepted, and it has been -- on the longer run, we have been creators of the, what do you say, later design with the market requirement. And we have been expertising that for a very long time. That makes a difference from the all other competitive players. And we have been sustainably understanding the market requirement and the manufacturing products according to the need of the consumers. We are first to analyze the correct market scenario and the manufacturing those goods which are in high demand. So that makes us Khazanchi at the different level from all other competitors.

Okay. Okay. Got it. Can you also walk us through the entire value chain, from gold procurement to the final customer purchase? Can you just highlight where Khazanchi creates the most value?

That's what, as we are procuring gold volume from the direct sources there we have a proportionate of margins, when we hand over the designing part we design in our designing. And we manufacturing in such a fashion that we get the lowest cost manufacturer. And primarily, we deal in handmade jewelry. So it has an additional value to that. So that makes our work unique of all other competitors and that our high margins come from.

Okay. Okay. And can you also highlight like where do you envision Khazanchi Jewellers in terms of revenue scale, from a retail footprint and brand position over the next 3 to 5 years?

That's what as from the date of listing, Khazanchi has sustainable growth, you could go through that. And as at the level, we always defined that we will be growing at the pace of 25% to 30%, but we have always delivered better returns and better growth. And as we have [indiscernible] opening up of a new showroom in the retail segment, there the margins are high. So it is once again going to add up an additional increment.

Okay. Okay. And historically, the company has been a wholesale driven. So what execution risks do you foresee in transitioning towards higher retail mix?

That's what, since I have told you that our founders have been working in the industry and we have a legacy of more than 5 decades. And in that decades, in such a long period of time, we have been into B2B and B2C segment, both the segments parallelly. Now we are planning to expand to see also so that we can improve our bottom line and match with the conditions of B2B also. So in that case, this what they say having into B2C market is not new for the company, it is a long legacy and it is very forward.

The next question comes from the line of Raj Shah with Shah Ventures.

Yes. I have some couple of questions. What is the current working capital cycle in terms of inventory days, receivable days and payable days.

That's what, the average inventory cycle for the current year is 62 days.

Okay. What is...

Sorry, even to cycle around 70 to 75 days. And overall, the working capital cycle is 52 days. Since we have entered an additional stock for our retail store now, the inventory turnover cycle has been a little increase, some have increased.

Okay. So far, inventory days is 70, 72 days. And for days, how much?

That's what overall working capital days are 52, but the data and all, we see a week.

Okay. Okay. And what is your target over the next 3 years also, sir?

That's what, in the coming years, we are targeting a growth of at least 25% to 30%. And in that, we are going to improve the overall share of our retail presentation. That we are going to -- planning to improve it from 10% to 25%. So it is going to give a strong bottom line. So our profit, our PAT margins would be weak, may be at a very improved state.

Okay. So if you be much more higher growth in retail segment as well. Can you also give some lime light on what is the average ticket size in wholesale and retail segment, sir?

Wholesale, we cannot define as the ticket size because it differs upon from client to client and there are clients who are purchasing a very small quantity from us, which are a small jewelry because we have a diversified range of lines. None of our clients is more than 5% of the total volume. In that case, that ticket size cannot be defined exactly. But yes, for the retail segment, the average invoice size is somewhere around 1.5 lakhs to 1.7 lakhs.

Okay. But why do centers continue buying from Khazanchi instead of sourcing directly from manufacturers?

That's what Khazanchi, since we have a good stock product, and we have been into designing of jewelry from a very long period of time and we have on designers and our manufacturing units spread across all over India, from where we get our goods manufactured. So that gives a different product to them. And that is the base that makes us different from all other please.

Okay. Can you also tell us that what is the impact of Modiji request of not purchasing the gold for a year. So even though they are confident, but what is the impact now and how it will improve?

Yes. That is a statement given by our Prime Minister Modiji, because he has requested people to stop buying of gold. But that is -- that would be a short-term impact. They have increased the duties also, but the duties have been increasing, decreasing, it has been happening in the trade from a very long period of time when there is a deposit of CAD and trade deficit, I mean that period has been already -- various times has been revised by the government authorities. And it is -- what they say quarter period of time, it has a little impact of the business. On a longer run, it is going to get as usual. And since there is a huge quantity of household golds already. So if you have certain percentage of gold also comes into circulation, then there would be no impact because in India, no occasion is without gold. So obviously, people have their own alternatives, their own resources, their own savings to invest in gold and do their all requirements fulfilled. So we do not see much impact. Maybe yes, for a shorter period of time, they say, 1 or 2 months, there are a clear idea about how things are operating on the recyclable household golds.

Okay. So in this -- currently, do you see any decline in margins as well in this quarter, sir, due to this impact of Modiji?

So, there is no decline in margins at all. Yes, that is a possibility that for a certain period of time, smaller period of time, yes, the top line maybe sales may reduced, but even then, the consumers are ready to exchange their gold. And that exchange recycling of household gold will add up business only, and there are no impacts on margin.

Okay. Okay. So management deliberation sacrificing margins in B2B to acquire customers who may become a partner or...

It is not that we are compromising with the margins, always B2B as and when there are demands and that system of working defers and product to product when we introduce a new product, the margins are generally higher. Whenever there is a competitive product alternative available in the market, then we reduce 13% of margin to have our clients and overall portfolio of our business intact. So it is not that -- it is not new that, that is happening. It is B2B margins are already -- since we have been into the designing and requirement of the clients and upgrading our all production strategies each and every time. So we add up new products. So it is a blend of existing product range with the new product. Value product is a higher margin and existing product has their own margin segment. So it is a blend of all. So there is no compromise in the margins much. And once again, we have been expanding into the retail segment, where we have an additional margin. And we have been introducing various other brands, and we have also entered into a higher-margin segment for both type of B2C and B2B businesses. So in that case, margins have also been improving. These are the reasons that last year and also our bottom line has improved so much. And we have been working on increasing our margins with creating lots of new designs, unique designs with higher value additions.

Okay. Okay. That's great, sir. Coming to the inventory part. So inventory is nearing INR 408 crores, right? So how much of this inventory is fast moving versus slowing moving?

Generally, since we are into both the segments, B2B and B2C, our rolling cycle is fast only. And since we have added an additional stock for our retail stores recently, we have opened the store just 2 months back only, so in that case, we have added additionally. So there is an impact in the number of days of inventories now currently, if you could see. But overall, the -- there is nothing like a slow moving or fast moving. The ratio between fast moving and slow moving may be 90-10 only because we have been focusing on the design, and we have been eliminating all these design every time.

Okay. Okay. That's great. Inventory has also been substantially in [ FY '26 ]. So how so the investors do with inventory requirements as the retail business falls up.

No, we have a suffice inventory for the current scale of business, even if you have a -- because we have opened the stores with us 2 months back only. So in the books, you have seen the inventory for the -- what we have put out for the current store. So this store revenue has already been defined that we are going to achieve somewhere around INR 450 crores to INR 500 crores in the store in the retail segment. So this inventory alone will give an additional rolling cycle. And this inventory will be suffice for the current -- what they say current retail business.

Okay. Okay. So from the gold prices fall from [ 15% ] to 20%, what would be the impact on inventory value and profitability?

As we have an already, what I say, inventory management and pricing policies at all and we have a very vast experience of managing all those. So it will may not have much impact because everywhere when it is -- whatever we sell, we buy it back, and we have an inventory management system. So whatever the price correction happens, it is not going to impact our margins at our business.

Okay. Okay. Sir, as you said that inventory inventories INR 408 crores, right? So it will be increased to INR 440 crores, INR 450 crores. So almost it will be 10% jump right correct?

I could not understand you. Currently, large our inventory is valued at somewhere around INR 40-odd crores, correct. That's correct.

The next question comes from the line of RS Agarwal with SMIFS Limited.

I have 2 questions. So given the relativity, mature nature of the jeweler industry. So what are the structural factors that enable the company to sustain growth significantly above the industry average?

So primarily, if you take up the jewelry industry, the key point is that designing. People should like the variety, the range, the design, what you manufacture as the gold prices are increases, we have to focus on manufacturing lightweight jewelry. And even some low jewelry are also preferred. So we have been working on all these segments and management has a very vast experience of managing all those. So in that case, yes, we are very confident of growing at a pace of 25% to 30%. At the constrained level it. We are defining it and we always have delivered better. So that way, we are going to take the company in an upper stake.

Okay. So like what are the -- that management track internally to assess the future growth visibility?

That's what there are various key points, which we have been focusing on. As we have set up into the retailing segment, we have been primarily focusing on marketing strategies and that's expecting our brand value to -- by all and various marketing strategies and B2B segment, we have been working on the designing requirement of the clients. And as the prices have increased, we have already started manufacturing lots of light way products, which has been widely accepted. And for the margin that we have been focusing on the higher value, higher margin write-offs like we have been focusing on our brand Vajraa Diamonds which given an additional improvement in our bottom line. So we have been focusing all these type of key projects. We have been working on ERP so that we can analyze internally, which product is in higher demand and -- so that we can constantly change our stock handling things and variety --- stock variety. In that case, we have been working so that we will be constantly able to achieve or the top line what we define.

Okay. So is the company designed library and sourcing ecosystem, creating a measurable advantage in the customer acquisition or inventory turns or profitability?

See, everything has the own share. Actually, designing is also very much important and the stock is also very much important and market analysis each and every time what are the customer demands, that is also to be understood. And it is a routine cycle that the whole channel works on the growth scenario.

Okay. So what are the percentage of sale that has came from repeated customers?

As you know that we have a diversified customer range of B2B. We cater at least nearly more than 500 clients every year, B2B clients. So most of the clients are repeated and we cater all type of geographies not that the big dealers we cater, a small doers we cater even the chain stores who are having branches by India, who are having the additional business here locally and who have a legacy business in South India. So it is in what we say, a bundle of all type of segments of time. In that case, most of the clients are repeated. Yes at least you can define on percentage-wise, if you could say that, yes, 80% to 90% -- 80% of the clients are repeated clients. And we keep on adding clients out of 500 years, 40 to 50 clients we divert and we add up 100 clients additionally and all that goes along with the growth of the business.

Okay. Okay. So has that metric evolved over the last 5 years?

Yes, what I couldn't get you.

So the percentage of sales from the repeated customers, has that metric evolved over the last 5 years?

Yes, yes. The customer base has been improving and the repeated customers are also regularly being our clients, yes, that is happening.

Okay. Okay. One last question. So what are the sales per square feet, does the flagship showroom currently generates?

That's what since the flagship or of 10,000 square feet, we have a sales of around 6,800 square feet there. In that case, we cannot define perfectly immediately because only 2 months have gone with a new store. So that cannot be defined by the retail segment. And as for the B2B is concerned, it is -- it cannot be measured on square feet at all.

Okay. Okay. No, I am like only concerning about the flagship. So what is the like projected sales in next maybe a year or 2 years?

That's what, new store, we are -- we have defined targets of around INR 450 crores to INR 500 crores in the near future.

The next question comes from the line of Mayur Parek with Dane Capital.

I had some -- a couple of more questions. So I wanted to know like how does your asset-light manufacturing model has improving scalability and return ratios while minimizing the execution ratio?

So, we have been operating into an asset like manufacturing. As you know, our primary what we say base is designing the ante industry, the driver is decided, and we have spread over all over India, various factories, which have been working for us. So in that case, whatever these items are in demand, we get manufactured there and who are making the best thing we are getting it done from them. And it is when, what we say, mutual arrangement. We give our design also we collect design from times also, we make a blend of the various designs. We manufacture various accessories in various parts of India, and the fusion and make and finished product at the end stage. In that clear, that is the difference and that makes our product.

Okay. Got it. If you see the recent performance of the last few years...

Louder please, I couldn't hear you.

Can you hear me now?

Yes.

Yes. So what I was saying that in exponential growth in revenue, profitability and return ratios over the last few years, what gives you the confidence that this growth trajectory can continue sustainability without -- sustainably without compromising margin, OUr ROE working capital efficiency and balance sheet trend.

Yes, that's what, we have been working on the overall growth of the company because if you want to grow, we have to look into all the links and all the aspects. We have been working on marketing. We have been working on designing. We have been working on the customer requirement. As you know, the prices have been increasing. We have been working on the budgets also we have to fulfill the ticket size of the customer requirements. In that case, we have been working on the whole segment. And once again, I would define that in our company have been very good long legacy as long as experience we bring out to creating more designs and managing all those things. So we are very confident that we will be growing at the pace of at least 25% to 30%, which is at the constraint level what we are defining and we have a full confidence of achieving it better.

Okay. Got it. And can you also provide some insight into business trends during April and May of FY '27, particularly in terms of demand so for retail sales and overall momentum compared to previous year?

Sir, we are very positive about the whole segment. As you know, we have been growing at a pace of better case than what we have defined. Same way once again for the year FY '27, we are very confident of achieving at least the growth of 25% to 30%. As we have expanded our retail participation, we have seen or we are having very repeated the footfalls of customers in the retail segment and we are going to go through our margins. So in that way, for the top line and for the bottom line, we are going to have a reset of FY '27, we believe.

Okay. Okay. And I also had one question, so are you witnessing any slowdown in customer purchase is due to elevated coal prices or demand -- like demand has arrived...

So that was what is a very wide interest in the gold jewelry this is not new for the industry. The prices have been appreciating now and then every time. And each time, yes, for a shorter period of time, there is an impact when the prices goes up or any policy change happens. But that is diluted into the market and diluted in the minds of the consumer in a very short period of time. Maybe say 1 or 2 ports or we were in one month. Then once again, it's normal. So we do not see any, what they say, reduction in demand are fake.

Okay. And like how much of FY '27 revenue growth was driven by higher gold prices versus actual volume growth? And what are your business margins?

It seems we have been focusing on what they say -- higher-margin segment, you have already seen that even would you say our bottom line has improved in multiples. So in that case, if there is one reduction in the, what you say, volume, the top line, we are focusing on in higher-margin segments also, and we are stepping up on expansion plans so that we will be achieving everything as per the defined statement.

The next question comes from the line of Sakshi Shinde, HR Consultancy Limited.

I have a few questions regarding expansion. Do you have any plans to open it if the large format rooms over the next few years? If yes, what would be the targeted geographies and investment now?

Yes, we do have -- since we have started up with our flagship showroom in the upcoming years, we do have plans of expanding into a retail store, not of the same size of what we have done. We are also at a smaller size. And since we have a strong presence, our presence in South India in Tamil Nadu, so initially, we are going to expand in surrounding Tamil Nadu, later on, we have been planning to expand pan-India.

Also beyond Chennai and Teamilado, what is our own paper expanding? Are you looking for any new reason specifically in South?

Yes, we are teams on working to have, what we say, searching of locations where we could start up. Yes, it is a very near future. We are driving health plans of opening up stores.

You know that South is actually very competitive and it come, but any go-to-market strategy for it?

So even if there is -- yes, there is a competition for everywhere where there's a basic production product, there is a composition. But since we have our own designing our own concept of working and what they say our own creation, they are unique products we designed and for that, we have a separate market. In that case, surely, we'll be having a better business and even then if it is competitive, most of the sales, nearly 40% of gold is sold in Tamil Nadu. So in that case, volume-wise, it would be there. And if you then have a higher margin item, volume is less also, we make in strong.

And how has new [indiscernible] going after this, what makes for the expansion in Tamil Nadu and nearby states?

Could you repeat the question please?

Yes. I'm just asking an update on the new store room, how it's doing?

Yes. Yes. New showroom is going very good. As you know, that we have come up with a new store that only 2 months have gone, and it have given as expected results, what we are going to and we are very sure, confident of achieving what we have defined in the very near future.

What -- and sir, what inventory turn on months management target over the medium term?

That's what, our inventory turnover ratio for the current year is -- last financial year was around 70-plus days. And since we have made an additional stock of inventory for the new store recently only, so that no -- base has shown higher -- and basically, for the B2B segment, the turnover days are very high. What they say turnover cycle is very fast. And for the retail segment, it would be at least whatever stock we are holding. We are expecting to have 3 to 4.

Also, are you looking for any funding or fuel or decided to fund internally for the next expansion?

Yes, initially, the management has not planned for any fundraising or anything of that sort. It will be done on any expansion plan currently, it is planned on internal funding only. In the future if something is required, it would be surely update.

Sir, what is the guidance you want to quote for FY '27?

That's what, so as the year goes every year, that would be surely we would be at the level, we are defining that we are going to grow at the pace of 25% to 30%. And as we have been promising at this level growth and we have been giving better results always. So in that case, we are very confident that we will be growing at that pace. And since we have come up with our new retail stores, wherever -- which is going to add an additional boost to our bottom line. So our margins are going to be higher. So our PAT would be improved. So in that case, we are confident of achieving [indiscernible].

And coming to your con call, since I was there also in the last con call, just out of curiosity, where I can see you in the next 5 years?

Next 5 years we are planning to expand in all the next as B2B, B2C. So yes, we are -- and constrained level, we are always refining 25% to 30% growth. So 30% with the CAGR growth, if you add up and the bottom line is going to improve as we are going to expand into the retail segment also. In that case, it would be a very good next 5 years.

Sir, any -- are you aiming for any specific market cap?

Market cap, that market has to decide, market has to decide on the top line and business purpose management would be always there.

[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to Mr. Harshil for closing comments.

Yes. Thank you, everyone, for joining the conference call on Khazanchi Jewellers Limied. If you have any queries, you can write us at [indiscernible]. Once again, thank you, everyone, for joining the conference call.

Yes. Thank you so much. On behalf of Khazanchi Jewellers, I thank all the participants. Thank you so much.

Thank you. On behalf of Kirin Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.