RBZ Jewellers Limited (RBZJEWEL) Earnings Call Transcript & Summary

So Thomas, we follow a weighted average principle when it comes to inventory valuation or -- so as far as hedging is concerned, we generally try to hedge gold quantity with gold quantity rather than gold quantity with rupees. So in principle, let's say, in future, there are strong purchases of gold that has taken place. We have now gone out of our legacies. We will be soon going out of our legacy software, and we are adopting SAP as our software in which the final cost of -- when the gold is purchased, the purchase value of that particular will be mentioned with the batch ID and from the -- yes, there will be a batch valuation and till the raw material, it will be weighted average, but once the goods are finished, it will be according to the cost will be freezed for that particular portion of goods and the batch ID will be there. So I think in future, the procurement of gold will not affect totality in which the GP -- on the accounting front, the GP shows the negative fall. So yes, that is -- but the method will again remain the same. It is just that because of the software, we'll be able to trace down every batch of procurement that has been done, and we will be able to separate it from the previous batches that we have purchased. On the part of gold hedging, again, I'm repeating that it will be -- we hedge a unit of gold and not unit of gold with rupee. And if you were to do so, then we would have pay, let's say, if we had purchased, let's say my balance sheet right now has a gold of, let's say, 250 kg 300 kg. So if I hedge to hedge that thing, then I have to pay a margin money which would actually, if you just calculate 15,000 into 300 kg that will be INR 45 crores. So that would not that have eroded all the capital that I have been -- have already raised from the proceeds. So I think right now, we are in the step of evolution and according to the size and structure of the company, the method of unit-to-unit gold purchase is much better. I hope I'm clear with the answer.

May I know the one-off, if we remove the one-off effect of gold price fluctuation what is a normalized profit if you remove the one-off impact?

So the normalized profit would be around INR 23 crores, INR 24 crores in general because the sales has gone up. The unit quantity of gold sold has gone up. There was -- the only thing was that Akshaya Tritiya was late and 20 days deferred. So that's the reason the quarter could not show very, very strong numbers in terms of top line increase or quantity increase. Also the spike in gold prices that has resulted into a psychological back push gold purchases. But in general, still keeping all fundamentals in place, the patch should have been at least once a year more compared to last year. That would conclude the balance sheet around INR 23 crores to INR 24 crores if you remove the effect of COGS.

[Operator Instructions] The next question is from the line of Thomas from Suva Capital.

If you could talk about this year expansion plans in terms of production capacity?

So this year -- okay, so there is already -- we are trying to find a factory outskirts of the current manufacturing facility. And for that I think once the procurement of land and things are done, it will be more better in shape. But yes, the factory will be coming up, which will be at least having 5x of the capacity, which is currently installed. And in future, we are certainly forecasting the demand of that type. But let's say, the important factor would be again spotting of land and the whole operations going there. So currently, as of now, we do not require such an expansion of a factory because we have already a current capacity of 1,700 to 2,000 kgs of gold to be produced, and we are right now at 1,115 kgs. So let's say that by next year, yes, we should certainly switch and hop to the new premises or we should extend the manufacturing -- expand the manufacturing facility, so we can get a comfortable time to go forward for the upcoming -- we can go for the factory or expand the capacity to another location.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Harit Zaveri, Joint Managing Director of RBZ Jewellers, for closing comments.

Yes, thank you all for asking questions. And as the year has ended, I think we have completed with the quantity of around 1,115 kg. The expectation was around 1,200 or so. But due to the last quarter and the price rise, certainly it has pushed back. Nonetheless, in quarter 1 and quarter 2 of this year. We are expecting a strong deferred demand that was there will be recovered. And I think we remember quite well our commitments and we are strongly focused on the business operations and on the business to fulfill that. Thank you all.

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