RBZ Jewellers Limited (RBZJEWEL.BO) Earnings Call Transcript & Summary

Okay. Let's begin. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal, CEO of Valorem Advisors. We represent the Investor Relations of RBZ Jewellers Limited. Firstly, on behalf of the company, I would like to thank you all for participating in today's event. And I'd also like to take this opportunity to thank the management Harit bhai to giving us this opportunity for hosting them to today's Valorem CXO Meet. The Valorem CXO Meet, as you know, is the first of its kind virtual analyst meet event series, and our intention with these virtual CXO meets is primarily to take advantage of technology platforms like this by reaching out to a wider audience and to create a better understanding and bringing awareness about our client, company's fundamental business, provide insights into their specific industry, financials and future growth strategies. The format of this analyst meet will be primarily a Q&A interview format where I will start off by asking the management some broad level questions and then move on to questions from the participants. [Operator Instructions] Now before we begin, let me mention a short cautionary statement. Some of the statements made in today's meeting may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. Now without any further delay, let me introduce you to the management participating with us. We have with us Mr. Harit Zaveri. He's the Joint Managing Director and also Chief Financial Officer. Mr. Harit has a diploma in Gemology and diamonds from the Gemological Institute of America. He has over 19 years of experience in the jewelry industry, and he has been a key growth driver since the company's inception. Without any further delay, let's begin with our Q&A.

So Harit bhai, my first question to you is a bit broad-based for some of the participants that are joining us for the first time and new to your company. Can you give a brief history and background of the company and also take us through your journey of the company so far?

The company was incepted in the year 2008 before that it was a proprietorship firm. I joined the company at the age of 17 in 2006, and we are a jewelry manufacturing company. Before it was more of a job work that we used to do from outside. It was a wholesale company, B2B company. And going forward, we grew in our niche of manufacturing, that is antique jewelry. In the domain of antique jewelry, we were the primary first ones to set up manufacturing unit in Gujarat and -- for, again, the antique jewelry. And because of our quality making and manufacturing standards, there are corporates whom we attract as a clients like Titan, Malabar, so on and so forth. We specialize in this domain, and we have got a capability of 200 artisans plus 285 in-house employees strength. I think this is a brief history about the company and the capabilities.

Thank you, Harit bhai. Moving on, so one of your business verticals is the B2B business, which is your traditional business. Can you explain to our audience today what specifically we do in the wholesale business versus -- and how is that different from the job book business? Also, while you explain this, can you also explain to us how the company manages the procurement of gold and the inventory management in both these businesses also?

So in the B2B model, we deal generally with corporates and corporates works on the gold metal loan business. So in order to understand our job work model, one needs to understand what is the corporate doing. So when the gold metal loan, you cannot trade that, you can just manufacture that. So they become the principal manufacturer and we become the actual manufacturer for that gold metal loan, which is provided in the job work segment. So it is basically the service charge that we take, and it is highly profitable. To give an example, let's say, if a corporate A gives us 1 kg of job work metal and we charge him INR 1 lakh for that, he can sell that goods and he can get INR 1 crore of revenue with that good because the raw material cost of gold is itself involved in it with our service charge also. So we generally charge for services. And in the wholesale model of the B2B segment, we make the products, we give that products -- we sell those products so the revenue is getting booked with the raw material. I mean it's a normal manufacturer sale and then there are letters and we get the money back after a month. So the period of -- cycle period is quite long. It is almost 3 to 4 months. But in the job work model, we get the good either when we finish the manufacturing days or just before that, and then we supply back to them. So job work model is service-oriented, extremely profitable in terms of the margins and wholesale model is a normal sale of goods model.

And how do you -- just to elaborate on this, how do you sell through these wholesale clients? Are they catalog or are they exhibitions? How do you usually go through that?

So the exhibitions, IIJS is particularly a platform. It's the second largest exhibition in the world jewelry industry. And we get most of our orders from those exhibitions. And seasonally, when there are new product developments, we showcase them to the corporate clients. They come when they have the requirement or the inventory gap is there. So it is exhibitions and also they are coming to our facility to see those products. Whenever there is a new product development, we invite those corporates to come to our premises and see.

Moving on to our B2C business, Harit bhai. We've seen a phenomenal growth and traction in our flagship store in Ahmedabad. Can you give us some explanation of how -- what has been your experience in this as well as what is the expansion plans in the retail segment?

Correct. So some of the gaps that we had understood in retail division is primarily on a demographic basis, the specialty of design that we hold. So because of our manufacturing capability and design capability, those corporates are purchasing with us in B2B. So in B2C, understanding the demographic, the design demand and all, we have created good specialized designs for our retail showroom, which has worked really well, due to which in the past 4 years, our growth rate in design -- because of our design, the growth rate in the retail was quite phenomenal. It was from INR 24 crores to INR 323 crores in the matter of 4 years. And we are seeing that once we have understood the demographics of Gujarat, it is mainly Patel and Jain community concentrated, we want to expand further into some of the prominent economies of Gujarat. So yes, retail seems -- it seems very promising when it comes to scalability and expansion. We pulled our niche and it is strong and we are able to give the competitive edge also because of the back end that we have. That is a supply chain. There's manufacturing that we have, we have a cost leadership in that. Because of that cost leadership, we are able to produce right kind of designs at lowest amount of cost, sell that to the retail customer directly, have the exclusivity of designs in place and also the brand is there in Instagram and social media. We are among the very good trending brands in the jewelry industry, if you see so.

And what are the expansion plans for the B2C segment now?

So I think, again, Ahmedabad, we are a good player. We are expanding in Surat and Rajkot. And I think their 4 major economies are Ahmedabad, Surat, Rajkot and Baroda. So first phase will be to cover these 3 things, but Surat and Rajkot are coming in the quarter 4 and the quarter 1, respectively. So let us focus on those 2 cities right now.

Moving on -- so in terms of your financials, let's talk a bit on that. We've obviously seen a very healthy growth on both top line and bottom line. And obviously, a big driver of that was, as you rightly said, driven by your B2C business. Also, your margins are one of the highest in the industry from most peers. Can you explain, first of all, how -- what has made this possible? How is -- what has led to your top line growth as well as what is the long-term sustainability of your margin profile?

So -- see, if you understand the business model, again, I have to put it you an example. Let's say, for an example, if the largest of the corporate buys from us on a job work model. So when they buy from us from a job work model, we only charge for the services. So in gold industry, 90% of the component is of the gold and the 10% is of the making charge. Now when I book my revenue on the making charge only, my profit margins are definitely going to get increased because I'm -- let's say, for an example, a corporate A buys from me 100 kilos, okay? And I have to charge INR 1 lakh per kilo as my service charge. So I'm booking a revenue of INR 1 crore. With that INR 1 crore, I'm saving most of the money. because it's only services. Whereas that corporate, who have supplied 100 kilos, that is INR 100 crores, he might sell it at a more -- let's say, 15% margin or a 20% margin. So his margin still would be like, okay, INR 120 crores that sale of goods can happen versus the COG of INR 100 crores. So his margin can be 20%. Whereas my revenue booking is only very less. We do approximately 600 kilos plus of job work. So that defines into amount, let's say, INR 600 crores, INR 500 crores of job work that is not seen in books because, again, it's only service charge that is getting booked in the books. That is a result our bottom line is very strong. Second part, we are dealing directly with consumers. When the manufacturing company, we are supplying to, let's say, corporates, we have that bandwidth wherein we can earn from corporates. Now skipping that, we are directly supplying to the retailers. So if you understand the supply chain line of a jewelry industry, it's like karigars, contractors or lead contractors, manufacturers, wholesalers, distributors and retailers. So we are having in-house karigars and we are directly supplying to customers. So that whole pipeline is there with us, which gives us a clear competitive edge in the industry. Tomorrow, there's going to be a price war in the industry, we can still sell at the cost we sold to one of the -- any of the retailer and still attain that margins. So that is something that explains overall that the business model itself robust because of the back-end manufacturing being there. And the supply chain, we hold the value -- the supply chain thing is a nice proposition that we have. That is why we were able to -- we are confident in scaling up the retail formats also. So no matter what price wars or competition, we'll be able to cross it over the back-end manufacturing revenue.

That explains the margin profile. In terms of your visibility on your top line, are you -- with the new expansion of the new retail stores, are you confident that we'll see the same kind of traction that we have seen in Ahmedabad for these as well?

Yes, definitely. I mean all the cities that we are planning are quite homogeneous or similar to what Ahmedabad GDP is. And like Surat is 90% or 80% of Ahmedabad and it is in the top 10 cities of India, Ahmedabad being #7, Surat being #9. The demographics are also remained same. It is Patel dominated, be it Rajkot. Rajkot is also Patel dominated. It's Gujarati dominated. So we are not changing demographics over here. So we are expected to see -- in Ahmedabad also, it's not a legacy business. We entered into retail market in an actual way in 2019. So 2020, COVID hit. So you can actually say that it's been 4, 5 years for us to have a retail. And the success that we got from a INR 24 crores to INR 323 crores has itself given us quite an amount of confidence that in other cities without having this legacy brand, we can still get in and because of our cost advantage, the manufacturing grip that we have, the brand that we have built on social media, the exhibitions that we have done in Rajkot and Surat are giving us a promising response in terms of consumers. So there are a lot of data and logics behind it. It's not that, okay, tomorrow, I want to open and I have -- nothing like that. It's a very planned -- well-planned and well-thought thing with data that, okay, the demographics, the market study in terms of exhibitions done there, the feedbacks that we have got from consumers, the footfalls that we get. Being in an Ahmedabad store, we get from Surat and Rajkot are very promising us to put up a store -- additional store there.

Harit bhai, thank you so much for these responses. Now let me start taking questions from the participants. I've already taken up a bit of time. [Operator Instructions] I see a few people have raised their hands. So first question is from Yash. He wants to understand how important manufacturing becomes for the clients and how to retain or gain any new client. He has a few follow-up questions, but I will start one by one.

So when it comes to manufacturing, see -- if you are in the -- if you are doing manufacturing, means you are hardcore producing the products. So for having that manufacturing expertise, that whole ecosystem of design, the infrastructure of karigars, quality checks and et cetera, are needed. So when this kind of an ecosystem is built, we are leveraging those ecosystem by supplying to niche corporates who are having chains of stores and also the B2C model that which we are going. Because of this manufacturing, we are able to have the cost leadership in place because -- you get it, right? You -- see, when we are supplying to corporates, you're also earning profits. So -- and we supply -- those corporates are supplying to consumers and earning those margins. So in the price war, we can actually not have any issues -- much issues with that. And manufacturing at a lower cost reduces the risk of melting. So even if the goods doesn't work and we melt it, still the amount of risk is very less. So if you calculate those stuff -- let's say, if I manufacture it, let's say, whatever X person and sell it to Y person to the direct consumer, the X is quite lower than the X that the competitor has. So the risk of carrying -- yes.

So his follow-up question is also, is my understanding correct that, it is -- the retailers themselves also can do in-house manufacturing. So profitability will always be limited. And if no, how can we add value to increase the ROIC and how to protect the ROIC from competitors. So his question is primarily that do retailers also have in-house manufacturing? And if so, then are we competing against that? And if not, then how are we -- what are we doing to increase ROIC?

Correct. It's a good question. In fact, I would admit that retailers are having their in-house manufacturing capabilities up to a certain extent. See, the domain of retail is to look at consumers and et cetera, whereas manufacturing is more of a hardcore thing in which you deal with machineries and X and Y axis and whatever, how mechanics are made and a lot of handwork is also there. So we are in a niche of antique category. So understanding that -- we have done manufacturing since a long time and understanding its nitty-gritties, yes, the products like chains and machine products can be made by corporates, but corporates are not heavily involved in making everything in-house. So even they are outsourcing much of their things, coins can be made in-house, chains can be made in-house, but most of the things are not made in-house. So wherein as a hardcore manufacturer, we have the ability to make a lot of things in-house. We are specialized in antique and we are -- when we are expanding also, we see that, okay, antique jewelry domain, we can expand. We can make our own designs. We are already making for corporates. We can make other designs that we are exclusive to -- understanding the demographic are exclusive to Harit Zaveri. And that is why we are -- we want that, okay, even if the corporates are turning into manufacturing, we are also going in that same way into retail. So them coming into manufacturing will have actually a lesser margin than we coming into retail because retail actually has much more margins from start itself. So yes, this is a transition in the industry, which is going on.

Okay. Next question from Ayush Mittal is we have noticed significant volatility in turnover with sales peaking in December, then declining in March and further in the June quarter. Could you share your perspective on the seasonality of your business?

As a jewelry industry in the B2B and the B2C domains, so I would want to -- quarter 2 is most critical in terms of B2B business and quarter 3 is most critical in terms of B2C business. On the -- whenever you check RBZ, you must check -- you make sure that you check on Y-on-Y basis. And you keep 2 factors into play. One is, is Diwali early or Akshaya -- is Diwali late? And is Akshaya Tritiya early or Akshaya Tritiya late? So these 2 parameters has to be kept in mind for the whole industry. So if Akshaya Tritiya is early, our fourth quarter is going to be good. And if Akshaya Tritiya is late, our quarter 1 is going to be good. If Diwali, let's say, is late, okay, then you might not see that upswings in the second quarter, but the third quarter in retail is great. But in any of the case, quarter 2 -- on a very overall cycle, quarter 2 should be very strong in terms of B2B and quarter 3 in terms of B2C. And with respect to retail, quarter 3 and 4 are more stronger than quarter 1 and 2. And in terms of B2B, quarter 2 and 3 are more stronger when it compared to quarter 1 and quarter 4.

His follow-up question is that our operating margins appear unsustainably high, especially since very few players in the industry are able to achieve such levels. What factors enable us to sustain these margins? You've already explained in your opening statement, but if you want to just reiterate that, maybe one more time.

So -- okay. So let us say -- the person's name is Ayush, right, if I'm correct?

Yes, Ayush.

So Ayush, let us say that a corporate A has a margin of 20%, which is wonderful in the jewelry industry, right? And he gives me 1 kg gold bar, okay, for manufacturing. Now from that 1 kg gold bar, okay, I am doing his job work, and I'm giving a bill of INR 1 lakh, okay? So from that INR 1 lakh, only the making charge amount, I am saving, let's say, 90%. Let's say, I'm saving INR 90,000, okay? And that person when he sells the goods, he sells with the raw material value included. So when you sell it to the customer, even though you have a 20% markup, that raw material value of INR 1 crore a gold bar kg is already there. So because of that, even though on the making charge part, they have more margin than us. So their revenue top line will become INR 1.20 crores. My top line will become only INR 1 lakh. From that INR 1 lakh, I am saving INR 90,000. From that INR 1.20 crores, they are able to save, let's say, INR 20 lakhs, okay? So they are earning more than me, but because I'm doing only service business, my margins are higher. If -- let's say, if I'm not -- if we should not look at job work business, now my margin will be comparatively a little less. Again, we are into manufacturing business. So from -- again, I've explained to the supply chain, Ayush. It is from karigars, to contractors, manufacturers, wholesalers, distributors and retailers, okay? So my retail business does not have the supply chain. I have a manufacturer in which karigars are in-house, be it handover and I'm directly supplying to the retailers. So in both the cases, my margins are 100% going to be better. Now, again, you don't look at this company as a INR 530 crores company, Ayush. You should look at the company as it produces or it sells 1,317 kilos. So if you calculate by INR 75,000 rate, the amount of goods that we have delivered so far is approximately INR 1,000 crores. If you calculate the INR 75,000 rate as an average rate, it is INR 1,000 crores of goods which we have delivered, but 600 kg is job work. So my -- 45% to 50% of my total company's business is job work business. And that is a result, again, that my margins could fluctuate on quarter-on-quarter basis on my job work ratio being higher or my sales ratio in retail being higher. So we are blessed to have this kind of model. But you again look at it, it's not a INR 530 crores company in terms of volume, it's a INR 1,000 crore company. And then when you extract the margins from it, you will find the margins to be quite neutral or good in place. But yes, INR 530 crores comparison, it's a great.

Thank you, Harit bhai. Moving on to his follow-up question. Given the current environment of elevated gold prices, we are seeing pressure on sales and footfall at retail counters. How is -- how are you seeing the impact on your company? Does it impact our new store expansion? Will it take a longer time to break even on new stores? And will we incur any loss for any of them?

So gold prices have always been moving up. It is nothing new that we are seeing. And there is a sharp increase in prices, but we are mainly into occasion wear business, which is an event-linked business. Weddings are -- it's not that because of rise in gold prices, weddings are not going to happen. So we are not predominantly into daily wear segments. Daily wear, you can avoid. Let's say, [Foreign Language] so we are into an event-linked business or when we are seeing this kind of expansion, we are again predominantly as a retailer also 65% into occasion wear business. We are quite sure that even in this year, we are subject -- we are 100% growing in terms of -- the retail business is going, if it is -- last year, it was INR 323 crores. We are expecting some percentage up this year. I think by quarter 3, we should be actually understanding how much percentage, but it's surely -- we are positive on the side. The walk-ins are not a problem when it comes to weddings. We are getting good amount of walk-ins, and we are getting good amount of queries. Wedding industry is booming and so the result is our industry booming and jewelry is getting that effect.

Sure. Moving on. The next question is, can we break up our operating margins in each segment, retail, job work, wholesale? Job work is, as you mentioned, very high margin. But if we remove job work business, still we have 11% operating margins, which I don't think is correct. What are the margins in retail and wholesale? This is not something we have disclosed, but I don't know if you want to give some direction out to you, Harit bhai, to them?

So -- see, as for competitive reasons, we cannot actually disclose all of our margins. But I can say that you have understood the model in a right way that job work is the highest margin and wholesale is slightly lower and retail is better than wholesale model in terms of margins and in terms of rest of the perspective.

Sure. Next question is who are the similar players doing job work and making such high margins? I don't know if we have any listed players, I don't think so.

No, I don't think so.

Of course, there will be a lot of unlisted players, but it doesn't make sense to even disclose that.

Correct. Correct.

Next question from Deepesh Sancheti is, how does gold price hike in the quarter affect our business? This is a repetition, but is job book and corporate sales same as last quarter? I don't think we want to discuss anything about Q2. So please avoid that and please avoid asking us these questions. But yes, any impact of gold price increasing? Will this have an impact on inventory, et cetera?

See, consumer confidence on gold has increased. On the underlying level, the amount of purchase that they are wanting to do and the amount of gold that they have in-house is quite in proportionate. If they're going to buy a 10-gram gold, they already have 100-gram gold in their house in forms of ornaments [Foreign Language]. So they are happy with gold. As an industry also, it is booming in terms of -- when the margins are doing, people [Foreign Language] people are more positive in the sentiment. They're expecting the prices, okay [Foreign Language] whatever, the consumer psychology will work. But what we have noticed that sharp increase in prices at times in the daily wear segment holds them [Foreign Language] because it's again an event-linked thing. So yes, there is a little bit of here and there. But again, it's a part and parcel of the industry [Foreign Language] when I came, gold prices were X, now it is at a different stage. So people are well versed. It is always increasing. That is what they're thinking.

Next question from Karun Kumar is, what is your next 5-year vision of the company in terms of growth rate and margins?

I think we have a showroom in Ahmedabad. We are going to have a showroom in Rajkot and Surat. I think those 2 -- adding those 2 stores, I think we should grow at a decent pace. I think you can -- I think we should -- like on a percentage basis, I have defined in my earnings call also. But let us assume that maturity of the -- I think the business should grow about maybe 2x or so in the coming 3 years or whatever. I think the bottom line should remain -- the percentage of profit margin should remain more or less same. And we are -- in terms of volume capacity, we have enough capacity, enough manufacturing capacity in place. So I think we are in a good place as far as the scale of retail is concerned and as far as the manufacturing is there. So we will be sustainably growing over the period of 5 years in a decent margins and decent volumes.

Next question is from Nisharg. Can you give us an idea about your hedging practices for the B2C gold business? What percentage of the retail inventory is price hedged? And if so, how?

So we follow practice [Foreign Language] so that is something that we are generally -- we book our inventory on this basis. And right now, we do not have anything in which we hedge a rupee. So our book value in terms of inventory is quite low to the -- subject to the market value. Let's say, if the market value of gold is INR 1 lakh, my book value will be lesser than INR 1 lakh. So right now, with this amount, we don't require any kind of -- we are comfortable to have our gold to gold hedge rather than the gold to rupee hedge as of now. And...

So for lack of better words, it's a natural hedge. We are completely backing it with inventory, and there is no requirement for an hedge?

Correct. And the book value of gold is lesser than the market value.

Next question is from Harshita. You supply to leading national retailers such as Titan, Malabar, Senco in your wholesale segment. How do you ensure design exclusivity and avoid overlap between what is offered to B2B clients versus your own retail stores?

See, we do not want to give their designs in our retail outlets. I mean it doesn't make any kind of strategic sense. We have -- as a retail identity, we want to differentiate ourselves. In fact, we encourage practices wherein every corporate -- like the bigger question should be that if I'm supplying to Malabar and Tanishq, both are competitors to each other, how do I maintain design exclusivity for them rather than for my retail store, which are, let's say, 2 or 3 stores. So we have our things in place with respect to design exclusivity. Whatever we supply to X corporate, we don't supply to Y. And they also respect that thing. They also don't want their retail consumer impression to have that, okay, these people are having same kind of products. So from the starting, the infrastructure is made in such a way that design exclusivity for each corporate is different.

Next question is, does the corporate business have any bad debts? If so, have you had any bad debts for the last financial year?

We work -- when we say that we work in a job work model, we say that none of them industry works, and that means that corporate [Foreign Language] so even my 800, 900 kg that whatever I have sold in the B2B category, 600 kg is job work. So when people are ready to give me gold in a little advance, there is no question of me being greedy and selling to corporates which are -- or people which are having delayed payments or stuff, whatever. So generally, no bad debts.

Okay. Next question is from Yash. Could you let us know about your SAP ERP and other control processes to manage supply chain? Do we have any of that?

We are an SAP-enabled company since 2024. Our implementation has been done. And this has helped in maintaining the inventory accuracy and the cleanness of financial records and also it helps us in the whole efficiency when it comes to the supply chain part. So how many days of inventory is there in a particular location, in a particular process, so that mapping has been done. And with that, we are effectively able to maintain that what -- which areas, which operating indices are to be looked at. So I think with this kind of an ERP in place, what we are thinking is that with SAP and all in there, it can help us tomorrow in the scalability. The controls are developed beforehand, and it has not developed after the scale.

Okay. Next question is from Tanishq, again as a follow-up. Our inventory days are higher than competitors. How are we controlling it going further?

So Tanishq, this is a wonderful question. So to understand my inventory days, okay, divide my volume with my volume of inventory versus volume of goods delivered. So 1,317 kilos is what I have delivered. Even if you say my inventory is, let's say, X and divide it by, let's say, INR 75,000 as an average rate, let's say, INR 100 is my inventory, deduct 10%, it will be diamonds. So INR 90 is my gold inventory, divided by INR 75,000, you'll get the volumes -- assumption of volumes. You can then make -- you can then correct it. I am actually rotating my stock 3 to 4x. Now in this, my inventory days will look higher. It will look about 200 days. What is happening? [Foreign Language] Let's say, corporate X has given me 100 kg of order. So my manufacturing cycle is, let's say, 30 to 45 days. In 30 to 45 days, I have to manufacture them 1 week before they give me all the metal. Let's say, 100 kilo of metal, I have to ship them 100 kilos of gold. With this practice, my inventory -- their inventory holding days are lesser. But I'm -- if you actually see it makes a lot of business sense because I'm getting gold in advance. I don't need to ask for money after 30 days. [Foreign Language] So let's say, if I'm doing 100 kg of gold, I can book revenue as, let's say, INR 1 crore [Foreign Language] if you leave job work aside, my inventory holding days in retail is approximately 160 to 180 and wholesale, it is much lesser. But because of this job work coming in, my inventory days looks higher. What you can do is 1,370 kilos of delivered volume divided by the inventory in terms of kgs if you can [Foreign Language].

Or I think a better way, maybe if I can add, Harit ji, correct me if I'm wrong, if you're saying 6,600 out of 1,300 is job work, we take that out and then we actually do apple-to-apple of the wholesale and retail business and see the actual working capital of that, that will actually make more sense, which is then comparable to the rest of the industry.

Could be. Correct. Could be.

Moving on, Saurabh's question is do we have a B2B order book? Is there a current status? Is there an order book number that we have?

So B2B order book is generally -- right now, we are almost booked till October 1 week or so. And we have been -- generally, it is a 1-month order book or 45 days order book. The pipeline -- I said the manufacturing days are 45. So generally, there is a 30 to 45 days order book [Foreign Language]. And right now, it seems comfortable.

So it's basically a short-term seasonal order book more than a long-term order book? Okay.

Generally, retailers tend to give order depending on the manufacturing cycle that we have.

Correct. Next question from Ankit is, it's good that we have grown in our B2C side, but what is stopping us from growing in the B2B side? I understand that gold prices are increasing, so we are gaining some revenues, while utilizing less capacity, but some of the peers are growing at a higher rate in B2B, and we have a lower base. Why aren't we looking at adding more clients in B2B and having more penetration from existing clients?

Okay. So in B2B, if you look at most of the corporates, in volumes, they are either growing by single digit, early single digits or by maybe some of them are having negative growth rate in terms of volumes. Why? It is because prices from INR 50,000 that is 3 years back have now -- now it is INR 1 lakh. So even if you calculate their, CAGR being 18%, 20% of sales, gold prices have increased more sharply. So we -- on the manufacturing level, we have tonnage capacity. So today, we have 2,000 tonnes -- 2,000 kg of capacity. So that translates that 3 years before, we had a potential of doing INR 1,000 crores as our revenue. Now we have -- in the same capacity, we have the capacity to do INR 2,000 crores because of INR 1 lakh with the gold rate going on in multiplied by 2,000 kgs. So we don't need right now to increase our capacity. We are great in terms of our relationship with many of the corporates. We are a preferred partner when it comes to antique jewelry. We are growing at a decent rate. Even last year, the companies are expecting the volumes to remain positive. If I say this year, we will remain volume positive, that clearly indicates that the prices of gold has sharply increased by 30%, 40%. So itself shows that company is growing and they're able to retain their volumes, grow with the volumes. And I think corporates are in line with us. If you see 2 years back, company's profit was INR 22 crores. Right now, last year, we have posted a profit of INR 39 crores. There is a question of growth. And peers, I don't want to comment.

Next question is from Lalit Budhwani. As the organized market segment is growing at a higher rate and do you guys as retailers will be able to gain -- so his question is, we are also competing in the retail segment, B2C segments, will we be able to gain adequate market share as of now a lot of people prefer buying from organized jewelry retailers like Malabar, Tanishq, et cetera. So the question is, will we be able to compete against these larger organized players?

So it's a nice question, but one has to get in a detail of certain questions. So the industry size is approximately $80 billion, $85 billion. It is -- I mean that I can narrate it as it is a INR 6 lakh-plus crore industry -- INR 6 crores, INR 6.5 lakh crore industry. Now if you see, none of them are touching even the double digit when it comes to market share. So market share of the largest player may be somewhere around 6% to 8%. So industry is highly unpenetrated and very much in the phase of transformation. The highest organized segment or the -- maybe the maturity of the organized segment in India is in region South. West, North and East are yet not that penetrated in terms of organized sector. There is a huge potential to grow, and we must tap that. Even we -- with this kind of an Ahmedabad store growing success, if we go across in retail, push a little, we should aspire to become one of the organized retail players in this segment and why not? There is an opportunity in hand.

Sure. Next question is, as we -- from Ayush again, as we have around 1,300 kilogram of utilization, we have to do -- will we have to do CapEx for our manufacturing in FY '27 to be ready for future? So do we have any CapEx plans for increasing manufacturing capacity?

If the volumes of corporates are growing in double digits, yes. Right now, I don't see that happening in the -- seeing the trend of past 5 years. We wish that it happens and we expand our manufacturing capabilities. But as of FY '27 -- till '27, I don't think so. From 1,317, we have quite a good room. Let us reach at 1,600 stage. At 1,600 stage, we will want to add a tonnage of capacity.

Okay. Next question is from Srinidhi. Where does RBZ procure gold from?

So -- see 50% of RBZ is job work. In job work, we get gold from corporate. So you are sorted with that 50% answer, okay? So remaining, let us say, the B2B and the B2C part, we purchase gold from local bullion dealers. We get gold from our customers also. That means [Foreign Language].

Next question from Deepesh is, aren't you competing with your own corporate customers by expanding retail stores? And how are they taking this move?

So I think these are pan-India players or global players. Now we're adding some stores in -- 2, 3 stores are -- I don't think so it is even seen that. They are more -- one -- see, I understand they are not competitors to pan-India retailers or global retailers. We are competing on a very local and regional basis. So they are -- perhaps the question should be that if I'm supplying to Malabar and Tanishq both, how are they allowing you to supply to each other? Because we are a wedding jewelry maker and occasion jewelry maker. The design specialization has to be there. So even with that perspective, we are supplying to, let's say, all the corporates in India -- most of the corporates in India. So I think they'll be looking at their competitors and looking at us. So far, we have a store in Ahmedabad, that is a success. We have not got any such signals. We don't see that as a challenge right now.

Okay. A lot of questions are similar. Ahmedabad store generates about INR 330 crores of revenue. Based on this benchmark, what should be the ideal size and scale for Rajkot and Surat stores? And what kind of revenue potential we can expect from them?

Similar kind of revenue potential you can expect from both the cities, Surat and Rajkot. Surat will be more closer to Ahmedabad and Rajkot will be 20% or 25% less than Ahmedabad and Surat. That is my sense because of seeing at the GDP data and everything and all the demographics and all the population study. I think both the stores are coming, and they will be one of the largest in their cities. And I think I have answered the question. I think most of the questions are answered.

Okay. Next question is current -- okay, so the question from Harshita is, current reported margins also reflect inventory gains due to rising gold prices. In a scenario of gold price stabilization, how should we think about your sustainable margin profile?

See margins, when it comes to our business model, we are -- 50% business model is about job work. So if you -- straight away, I can say I'm not in the 50% of the business, I'm not earning anything from the increase in gold price. The second data is that the rest 50% of the business does make profit from the gold -- increase in gold price to the limited extent. We are -- every day we have to sell and every day we have to purchase. That does not mean that -- the way we look at it is 3% is what we get GML rate as a rate of interest and 9% is our CC rate. So 6% is the gap that is there. If the gold prices are earning more than 6% -- okay, we are making, let's say, 2% or 3% per annum in gold prices in terms of on a very aggregate level -- not on the net level, on a very aggregate level, that is it. But gold price is coming down, this model is still fundamentally strong. Supply chain is in our hand. There have been a complete decade wherein the prices of gold prices did not move higher or lower, but it is -- still we are -- as far as right now, we are placed well. If we see that the gold prices are not moving higher on XYZ, we will run to GML. You'll see the interest cost of 6%.

But it is also true that at the end of the day, when gold prices come down, then consumers also flock to buy the gold and then ultimately, again, it bounces back. So ultimately, top line growth comes and you benefit in the long run. So looking at it from a full year basis, the margin will still be stable.

Anuj bhai, wonderful. In fact, from this point, I note that custom duty of 9% -- drop in custom duty resulted in a better PAT just because of the rush in the demand coming in. So that was one scenario.

Next question is, what is the expected CapEx incurred for both the showrooms? Have you purchased the inventory with your INR 150 crores sanction limit for these showrooms?

So the inventory purchases will be done 1 or 1.5 months before, but there will be an inventory shift from, let's say, a B2B or the Ahmedabad store to the Surat store. There can be always an inventory shift that can happen. And I see that with our sanction limit of INR 150 crores, and I think we are yet to receive more sanctions. So you can see our credit rating for that. They have already sanctioned. The credit rating is sanctioned for INR 200 crores odd. But I think 1: 1 is the debt equity ratio that we want to maintain, and that gives us a leverage for raising at least a comfortable debt from here to at least 2x. So both showrooms will be operated from the internal accruals as well as the debt raise plan and inventory shift keeping in mind.

Sure. On that quote, I think there is a clarification required when is the planned launch for both Surat and Rajkot? You said Q4?

Q4 and Q1.

So Q4 will be Rajkot and Q1 will be Surat?

[Foreign Language] but Q4 and Q1.

So around those periods. What will be the total inventory -- you already talked about CapEx, but what will be the total inventory requirement for both the stores?

See, I think this, again, for competitive reasons, one should not give the number of inventory for each store and...

But we can assume it will be similar levels at current...

Yes. So you can assume that 90% like how Ahmedabad is running, Surat will run at 90% and Rajkot will run at 75% from the Ahmedabad level.

Next question is, Lalit is asking, do you guys use GML strategy? And if using what proportion at now and what are the future strategy regarding GML and how much will it increase your margins? Do you -- yes, so that's one question.

With GML right now -- so when there will be new source coming up, we are exploring the instrument of GML. Right now, we are not using a GML. We are in a natural hedge-to-hedge position with respect to gold. But in future, yes, when we use GML, we are sure that we are -- we will be saving some interest cost on that. At least a 6% interest cost can be saved. But let us look at it -- let us look at the instrument and our views upon that. Right now, if we are able to procure gold still and maintain the book value, which is lesser than the market value, we are still up for it. We don't know whether Trump government or what is going on, but surely, risk is mindfully watched. Every day, the moving working capital average of gold, we are noting it. We are comparing it to the market value. And the job work business does not have any effect for it because it is -- 100% gold is in advance, and we do not get any appreciation from the gold price rise. Let us look at the next last 50%. But yes, GML will be used in future. We are exploring this instrument.

Sure. Next question is, how are you seeing the overall demand panning out on ground? Like do you see the same traction from the customers like previous years? Or have they slowed down? And can we see an uptick later? Also, the FY '26 wedding season is 1 quarter early. And do you expect it to be robust or any change?

We are expecting the wedding season to be strong. We are seeing that the brand is strong. Anyone who uses Instagram actually type RBZ Jewellers, they can see the traction, continuity what we have. Today's consumer world is more about social media than about the traditional hoardings and XYZ. But if you see that, your brand is strong, brand is trending, consumers are good in the store. We are -- as a wedding jeweler, quarter 3 is going to be an important quarter for us. And what we are seeing in the month of September is some optimism that is coming in. So we are very hopeful for the season ahead. And I think the rising gold prices will have its effect in terms of volumes, but not in terms of value. Value will rise. We are going to do good in retail.

Next question is from Mythri and Tarun asking. How do you see your mix of business in coming years with retail and, say, B2B and B2C? Will this remain at around 50%? Will it grow? Will it change? How do you expect that to change?

In terms of volumes, it will be 50%. In terms of value, it can shift. So my job work business will -- we understand that the job work business is something that we also want to focus on, and it will remain good and stable. The volumes can grow in single-digit levels, but value can grow into -- approximately, it's a double digit because again, the gold prices will rise and XYZ. So -- but the overall revenue proposition will get changed. So again, when you ask such type of questions, at least for our company, volume data is mandatory to watch because it will not make sense if I tomorrow tell that, okay, my revenue percentage will be 75% in retail and 25% in wholesale because volume data [Foreign Language] so transition is happening, but volume over a period of time, 50% wholesale B2B [Foreign Language], 50% retail side.

In your retail segment, Harshit was asking, do you primarily have antique jewelry or it's also other kinds of jewelry?

All kinds of jewelry, daily wear, antique, occasion wear, diamonds, polkies, everything.

Next question is, are we getting CEPA advantage in gold procurement? And how much was the allotment in FY '25?

The CEPA allotment, I did not understand that...

I also -- I have not understood...

I think they're asking about TRQ quota. And the TRQ quota, I think there is an allotment and we have got the sanction. We will be working on this thing, but that advantage is already there with the company.

Okay. Do we export any gold jewelry and with the Trump tariff, how will it look? We don't do any export...

We are not highly into exporting of gold jewelry. We do have a little bit of percentage share with gold at -- 2%, 3% of our revenue gold comes from exports in Dubai and in U.S. and et cetera. But majorly, we are focused on the domestic demand.

Yes. So talking about -- you mentioned about the volume and tracking the volume. Last 2 years, Shashwat is asking, majority of the growth has come primarily because of increase in prices of gold. So what is the guidance on? Or what kind of volume growth can be achieved in the next 2 to 3 years?

No, I differ from Shashwat. The majority of the growth that has come is because of the internal capabilities of the company in terms of design. So when the gold prices are up, the volumes generally try to slip. To make the volume increase or to even get it on the flat level, it requires your company capabilities. In this sensitive dynamic volatile environment, we have this infrastructure, which is there, which keeps us growing. Even by volume last year, we grew 18%. That speaks of the company's credentials. So even in retail, we have grown substantially in terms of volumes and revenue both. So it is not the gold prices only that is the driving factor. In fact, why the gold prices should be the driving factor. A little downside in gold prices can actually cater a lot of demand. Even in this volatile environment, we are growing. So...

Next question is Lalit is asking, do you just operate in antique jewelry segment like 22-carat gold? Or do you also serve other kind of customers and other products like diamond studded gold jewelry or daily wear jewelry whose demand is growing, as now a lot of individuals are preferring 14- and 18-carat gold jewelry due to lower cost as compared to '22 and '24?

So in retail, we do have all the cartage from 24-carat, 22-carat, 18-carat, 14-carat, daily wear, polkies, diamonds, et cetera, okay? So -- but in the wholesale domain or the manufacturing part, we have 22-carat antique jewelry. And for the corporate -- the demand of corporate is coming for 18-carat antique jewelry. We are making that also, but the quantum is quite less.

Okay. Next question is, okay, do you intend to expand beyond Gujarat? Or will we continue to target communities like Marwadies and Jains in Gujarat?

So we are just -- like we have plan of a couple of stores more. So if you understand Gujarat as a market, Ahmedabad -- there are 4 economies, Ahmedabad, Surat, Rajkot and Baroda. 50% of the economy of Gujarat comes from this 4 place. Rest 50% will come from the spokes like Himatnagar, Gandhinagar, et cetera. Those smaller cities. Now if you understand the market, there's enough capacity to grow, let us step on this capacity first because we have got the learnings. Now it's the time to have fruits for that learnings, expand in Gujarat, get things in order. Gujarat, I think, is a good couple of thousand crore market, at least for individual. I mean, the market is very big, but we can look forward for at least a nice decent scale up.

Sure. Next question, and I think we've reached the end of time, but we'll take one -- a few last. Would you -- how do you plan to improve your free cash flows over the next few years, as it is currently negative?

This is a nice question. So as a company, we are into a gold dominated company. It's a gold jewelry company. Now if you can understand, it's something which is an iron company or a software company or an et cetera, the free cash flow would matter, excluding all the CapEx and et cetera, things, and it is a great measurement to see. But when it comes to RBZ, we have gold in our hand. And one can actually park jeweleries, which are made at a very lower margin cost because we are a manufacturer to keep gold, which is already an appreciating asset, plus if you have more jewelry, you can get more customers, you can get more variety to see. So there is no issue when it comes to the part of cash flows. And we would want that the inventory base or the gold base to be always relatively high in the company as far as at least till the book value does not reach the market value, then we will have to hedge. But the free cash flow -- see, free cash flow is used for, let's say, giving dividends or making more expansion and et cetera. But also, in the industry, we can have this inventory shift from one showroom to the other showroom, let's say, if there's an excess inventory. So for us, particularly this kind of free cash flow thing does not make as much of relevance as compared to the other industry. But yes, we are looking for this thing that we have a nice healthy free cash flow and all. But right now, we are into an expansion plan in inventory plus plans and all, raising debts and et cetera so -- not right now -- as of now. You can expect that the company will -- at least for a decade or so, we are into an expansion soon.

Sure. Thank you so much, Harit bhai. I think we've run out of time, and I think most of the questions have been answered. To the participants, if there's any further questions, please reach out to us at Valorem Advisors. We'll be happy to answer anything that we have not been able to answer today. Also, Harit bhai, thank you so much for this opportunity. It was a pleasure to host you and getting to know so much about the company, and I'm sure the participants will agree. Thank you, everyone, and thank you, Harit bhai.

Thank you, Anuj bhai. Thank you, everyone, for asking questions. Thank you.