Khazanchi Jewellers Limited (KHAZANCHI.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Khazanchi Jewellers Limited Q1 FY '26 Earnings Conference Call hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshil Ghanshyani from Kirin Advisors. Thank you, and over to you, sir.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Khazanchi Jewellers Limited. From the management team, we have Mr. Rajesh Mehta, Chairman and Joint Managing Director, we have Mr. Vikas Mehta, Chief Financial Officer. Now I hand over the call to Mr. Rajesh Mehta.

Hello, everyone, warm good afternoon, and thank you for joining us today. It's my pleasure to share an update on our performance, strategic initiatives and the industry outlook. Our company, Khazanchi Jewellers Limited founded in 1971 and headquarters in Chennai, is a trusted name in gold, diamond and precious stones jewelery. With the legacy spanning over 50 years with, BIS Hallmark Certification and recognition as an authorized dealer of India International Bullion Exchange, the company serves both B2B and B2C market. In Q1 FY '26, we sustained healthy growth momentum with a significant momentum in our revenue mix compared to Q1 FY '25, with gold prices raising, we strategically focused on lightweight jewelry, forming jewelry, lightweight diamond jewelry and traditional close setting jewelry. These initiatives contributed to an improve in EBITDA margin from 3.53% in Q1 FY '25 to 5.24% in Q1 FY '26. While PAT margins rose from 2.41% to 3.75% during the same period. This reflects our continued focus on higher-margin business, driving both revenue quality and overall profitability. As you all know, the first season, Akshaya Tritiya, the sale was very good and due to which there was a raise in our margin. Over the last 2 years, we have delivered exceptional results with revenue ranging from INR 481.82 crores in FY '23 to INR 1,772.53 crores in FY '25, reflecting a CAGR of 92%. EBITDA increased from INR 16.78 crores to INR 64.92 crores, delivered a CAGR of 97%, while PAT grew from INR 0.56 crores to INR 44 crores and CAGR of 44%. These achievements demonstrate our ability to scale volume efficiency. We remain confident of sustaining this trajectory as we strengthen our market position, extract our retail presence and deepen customer relationships. Our flagship showroom in Sowcarpet Chennai continues to be the key pillar of our B2B business, offering a curative selection and addition of new product categories and adding 100-plus new designs in our design library. At the same time, our company caters to bulk buyers and institutional clients national-wide ensuring both scale and liquidity. Looking ahead, our flagship showroom 10,000 square feet showroom in Sowcarpet Chennai slated to open soon, will mark a major step forward in strengthening our B2C presence. We see this as a catalyst for margin improvement. Now I come to the financial highlights of this quarter. In Q1 FY '26, we reported total income of INR 403.8 crores, up 5.94% year-on-year. EBITDA grew by 57.07% to INR 21.15 crores with EBITDA margins of 5.24%, profit after tax stood at INR 15.15 crores up 64.73% year-on-year with EPS raising 64.52% to INR 6.12. These results clearly demonstrate our ability to deliver growth with improved margins even as several industry players face margin contraction. I would like to conclude our strong Q1 FY '26 performance combined with our dual B2B, B2C strategy, upcoming retail expansion, digital innovation and favorable industry reforms position us for sustainable growth and improved profitability. We are confident that the pace of the growth achieved over the past 2 years will continue and we aim to build on this momentum in the quarters ahead. I would like to thank our shareholders, customers and employees for the their continued [ support ]. Thank you so much once again.

[Operator Instructions] The first question comes from Mahesh, an individual investor.

So a couple of questions. So as the company grows rapidly, so what steps are being taken to strengthen the risk management in terms of like gold price volatility, inventory control and credit risk in B2B clients?

That's what. As the company is growing and since the management has a wide experience with regards to it and the fluctuation of prices have been happening in gold from a very longer period. And the management has a very systematic plan for taking care of that. And regarding inventory part, we have always taken a special care to check what is required in the market. And we manufacture things accordingly, which are fast moving and which are high in demand.

And something regarding the credit risk from B2B clients?

That's what, the average credit period for B2B client average, the stock inventory cycle, what we keep them and the manufacturing period, all work out to maximum of somewhere around 55 to 60 days. So the credit period, what we provide to our B2B client is 2 weeks to the max, average.

And my next question will be like with rising urbanization and like disposable income for the people. So are you considering expanding your product categories like such as like lightweight daily wear jewelry or new age design to targeting like younger demographics?

Yes, yes. We are working on it. And we have already started production of lightweight jewelry, and it has been on high demand among our clients, and we have already started that. And we are catering all categories of clients. We have product range for all range of people, all clients for working women, for marriages and for all type of festivals.

Okay. So like we are already starting entering into that segment. Got it.

Yes, yes. That's what, don't -- we are analyzing the market as and when the things are changing or requirement of the clients are updated. We bring up the product so that we can improve our sales.

Next one will be like how is our company is leveraging its position as an authorized dealer on India International Bullion Exchange, like to enhance sourcing efficiency or managed costs?

That's what, being a member of India International Bullion Exchange, we are getting the bullion as and we have been selected as a qualified jewelers. So there is an allotment of gold, which is quite a little cheaper compared to the market.

So that helps us for cost management and everything, okay.

Yes, obviously. Correct.

The next question comes from [ Palush Kumar ], an individual Investor.

Sir, your company has demonstrated from B2B traction with a 29% year-on-year growth, how do you -- how are you looking to balance your B2B scalability with higher margin opportunities in B2C without straining resources?

The main criteria for improving the sales in the B2B sector in the jewelry industry is the designing part and the consumer demand. As the prices are increasing, we have already been into the manufacturing of lightweight jewelry and latest minimal jewelry also. And we are already into the, what they say, bigger type of jewelry, which are made for marriages and all. So in that case, as the demand in the market for which product is improving, we are focusing on that production. And as we have a very vast experience, so all our designs are highly approved by most of the B2B jewelers.

And sir, with this increasing demand for lighter hallmark jewelry and transparent pricing. How do you plan on capturing the market share against larger organized players in the industry?

So there has been competition in the jewelry industry for always. But those who produce a better product, which are highly acceptable in the customer -- among the customers, then they are continuously growing. That's what I'm seeing.

And sir, with EBITDA margin improving to 5.24% in Q1 FY '26. What is your medium-term margin guidance and which factors will drive the further expansion?

That's what, we have been focusing on the production of lightweight jewelry. And even on the lower carat jewelry, as 18 carat jeweler, they have started coming up in the South India also, the demand is gradually increasing. The margins are quite high in that. And we have been focusing on the manufacturing of diamond jewelry also. So we are catering all type of customers from, what they say, daily use jewelry and on higher segment jewelry also. So the margins will gradually improve.

And sir, digital innovation was mentioned as a growth lever. So if you could provide more clarity on the digital initiatives being implemented and your expected impact on sales and customer engagement, it would be really helpful.

Yes, sir. Now the digital platform is gradually the demand for online customers is increasing. We have already been into customers' purchase the plan that they save in multiple rupees and then get the gold at end of the period. So that we are doing it. And on the opening of our flagship showroom, we are going to have an online presentation of all our goods, which are going to add up an additional sales only.

[Operator Instructions] The next question comes from Sanchita Sood with RoboCapital.

My question was that over the past 3 years, we've been growing at a CAGR of almost 90%. So going forward, can we expect the same growth rate for the next, say, 2, 3 years?

We have been growing at a faster pace, but conservatively, we define that we grew at a pace of 25% to 30%.

And sir, you mentioned that we'll be seeing margin improvement gradually. So would it be possible to quantify what kind of margin improvement we'll be seeing and by when?

As an opening of our flagship showroom. We are -- since we are going to have a better B2C sales. And that has a higher margin, say, non B2C sales when we are going for diamond jewelry, Jadau, Kundan Polki and all premium items, then the margins are around 13% to 14%. So in that case, and we have been focusing on various other lightweight jewelry are -- which are of high premium jewelry in our B2B segment also. So the margins are gradually going to improve.

The next question comes from [ Dhruv ] with Tiger Asset.

First of all, congratulations on your growth results. Sir, my question is as on the press release, I have seen that there is a strong presence in southern part of India, by both operations in wholesale and retail market. Sir, can you give me the split of the wholesale and retail markets like how do you -- like for the revenue side for the Q1?

Yes. On an average basis, we have 90% of our contribution from B2B segment and somewhere around 10% in the B2C segment.

The next question comes from Dinesh Saney with invest4Edu.

Congratulations for a good set of numbers in quarter 1. So my question was regarding your new upcoming showroom of 10,000 square feet in Chennai. So can we know that the operations will be commenced?

That's what, it will be shortly -- we will declare the date of opening very shortly.

So in last call, you mentioned about it will be in quarter 2 of FY '26. So can we expect in this month or maybe next month?

Yes, yes. We are working on it. There was some delays in approval. And since we are making it an exclusive showroom, so initially, it is taking time, but would be -- surely in the second quarter.

So overall revenue which you mentioned of INR 150 crores for this showroom, so is it -- can we expect that it will be the same revenue for FY '26?

Yes, already we have -- yes, we have defined at a very constrained level. We will surely be achieving better than that.

Sure. And one question is on the recent partnership. So you have partner with Malabar Gold & Diamonds. So can you specifically tell us what will be the impact on your B2B revenues?

No, no. The revenue part and all, we cannot declare it, but we have just added in as our client.

And one last question from my end. Can you tell us about your plans to invest your increased profitability to expand your retail footprint over the next year, maybe 2 to 3 years?

That's what, after opening of the -- out initial flagship showroom and working with it and getting good numbers of revenue from that showroom. We have an expansion plan, which we have already previously defined.

The next question comes from Palush Kumar, an individual Investor.

So sir, you have delivered a pretty good CAGR across revenue, EBITDA and PAT over the last 2 years. Now as you scale further, what structural growth levers will help sustained this trajectory and what do you see the inflection point for operating leverage kicking in?

That's what, we have given a very good performance in the past 2 years. But constantly, we always define that we grow in the pace of 25% to 30%.

Sir, this upcoming 10,000 square feet flagship showroom in Sowcarpet is expected to be a major growth catalyst. What is your broader road map for retail expansion? So like do you intend to replicate this flagship model in other Tier 1 and Tier 2 cities and...

Yes, we do have an expansion plan, but everything would be decided after the opening of the showroom and we get a good set of revenue numbers from this and later on.

And sir, what incremental revenue contribution do you project from this format?

That's what, constrainedly, we define that we will have an additional B2C sale of INR 150 crores.

Sir, with consumer preference shifting towards lightweight hallmark jewelry, how are you innovating in designs and product categories?

We have -- we already have a design team who have been working on it. And day-to-day we get lots of input from all the factories from which we are working. And we are getting a design update. And then we are already into the production of lightweight jewelry.

So I can see there is an increase in segment -- ornamental segment. So by 88% year-on-year in Q1 FY '26, what specific strategies or customer engagement initiatives are driving this growth? And how sustainable do you see this momentum in the coming quarters?