Sky Gold and Diamonds Limited (541967) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Sky Gold Limited Q3 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Parth Patel from Orient Capital. Thank you, and over to you, sir.

Thank you, Sagar. On behalf of Orient Capital, I welcome you all to Sky Gold Limited's Q3 FY '25 and 9-month FY '25 Earnings Conference Call. On the management side, we have Mr. Mangesh Chauhan, Managing Director and Chief Financial Officer; Mr. Jayesh Sanghavi from the Finance team; and Ms. Nikita Jain, Company Secretary. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded on exchanges and the company's website. I would like to mention a short disclaimer before we begin the call. This call may contain some of the forward-looking statements, which are completely based upon our belief, opinion, and expectations as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With this, now I hand over the call to Mr. Mangesh Chauhan. Over to you, sir.

Thank you, Parth. Good morning, everyone. Thank you for joining us today as we discuss our Q3 FY '25 quarterly performance. In Q3, the company maintained its strong growth momentum, achieving its highest-ever quarterly revenues and operating profits with year-on-year growth of 116.7% and 217-point-odd percent, respectively. We continued to onboard new clients and expand our customer base as part of our vision to become one of the largest B2B gold jewelry manufacturers in our segment. This quarter, we successfully onboarded Aditya Birla novel jewels' Indriya brand, marking a significant milestone that highlights our ability to cater large-scale premium projects. Additionally, we strengthened our presence among major jewelry retailers by partnering with CaratLane and P.N. Gadgil in the past quarter. The jewelry industry as a whole is witnessing aggressive expansion with leading brands rapidly increasing their retail footprint to capture a larger share of organized market. Our existing clients have also expressed plans for aggressive expansion, further enforcing growth opportunities. Demand for wedding jewelry remained strong despite fluctuation in gold prices with customers adopting to market changes. Sky Gold diversification into new jewelry segment has gained strong traction this quarter, further strengthening our market presence. The expansion includes 18-carat natural diamond jewelry and lab-grown diamond jewelry. Both exports and domestic market remained key focus areas, and we enforced our distribution network in Singapore to drive export revenue growth. Additionally, we have announced plans to rebrand Sky Gold Limited as Sky Gold and Diamonds Limited. This rebranding reflects a strategic shift, highlighting the company's broader focus beyond gold to include diamond -- lab-grown diamond and other precious stones, offering a more comprehensive view of our operations. We are pleased to announce an update on Sky Gold's credit rating from India Ratings, a subsidiary of Fitch globally, which has assigned a rating of A- stable rating to the company bank loans. The fund-based working capital limit and proposed fund-based working capital limit have been rated A- stable and A2+. India's Ratings has based its assessment of Sky Gold significant operational expansion driven by increased installed capacity, inorganic growth along with effective working capital management. Rating is expected to reduce the company's cost of fund collateral requirements while the impact may not be immediate. This structured improvement will strengthen the company's financial position, leading to better negotiation terms and lower borrowing cost in the long term and improving ROCE and ROE. This quarter, our monthly production volume averaged 447 kg, up significantly from 270 kg per month last year, marking a robust 66% growth year-on-year growth. Exports continued to make healthy contributions with sales reaching INR 71 crores, marking a 12% growth as compared to previous quarter. Now I will discuss our Q3 financial performance. The consolidated revenue for the quarter stood at INR 998 crores versus INR 460 crores in Q3 '24, thus registering a growth of 116% (sic) [ 116.7% ] on a year-on-year basis. The gross margin was 7.3% as compared to 5.3% on Q3 '24. EBITDA for the quarter was INR 57.3 crores compared to INR 18 crore, showing a growth of 217%. EBITDA margin for the quarter stood at 5.7% as compared to 3.9% in Q3 '24, improved by 182 bps on a year-on-year basis. PAT for the quarter stood at INR 36.5 crores as compared to INR 8.9 crores in Q3 '24. PAT margin for the quarter stood at 3.7% as compared to 1.9% in Q3 '24, hence improving 172 point basis on a year-on basis. Moving to 9 months FY '25 financial performance. The consolidated revenue for 9 months stood at INR 2,489.8 crores versus INR 1,232 crores in 9 months FY '25, thus registering a growth of 102% on year-on-year basis. The gross margin was 6.8% as compared to 5.6% on 9-month FY '24. EBITDA for 9 month FY '24 (sic) [ 9 month FY '25 ] was INR 133 crores compared to INR 51 crores, showing a growth of 156% (sic) [ 157% ]. EBITDA margins for 9 months stood at 5.4% as compared to 4.2% in FY '24, improving 115 basis on a year-on-year basis. PAT margins for 9-month FY '25 stood at INR 94 crores as compared to INR 26.9 crores in FY '24. PAT margins for 9 months FY '25 stood at 3.8% as compared to 2.2% in 9 month FY '24, hence, improving by 161 bps on a year-on-year basis. We have delivered a strong performance in the first 9 months for the financial year and remain on track to achieve our annual revenue target of INR 3,300 crores driven by new client acquisition, operation efficiencies and enhanced management capabilities. To support our growth, we have strengthened the leadership team by bringing in industry veterans across key roles, including plant heads, sales heads, designers to further propel the business forward. I now request the moderator to open the floor for questions.

[Operator Instructions] First question comes from the line of Palash Kawale from Nuvama Wealth.

Congratulations on a great set of results. Sir, my first question is on volumes. So what was the volume -- out of 447, what was the volume for the Sky Gold standalone entity?

Standalone for the 9 months, it was 997 kgs and 134 -- sorry, 975 kgs and 181 kgs for Sparkling Chains and 182 kgs for Starmangalsutra. Totally, we stood at 1,339 for the 9 months.

Okay, okay. And sir, out of this, have you started delivering to Aditya Birla as well in this quarter in Q3?

Yes. Already, we have started delivering. CaratLane we are delivering monthly 20 kgs and -- so Aditya Birla already got the order of last quarter only of 20 kgs and this quarter we will be -- already we have started delivering the products. So this quarter, the numbers will come how much we are delivering this quarter to Aditya Birla.

So sir, in upcoming years, like FY '26 or FY '27, how much do you expect to deliver to these 2 companies, which are CaratLane and Aditya Birla?

So now we are making monthly 450 kg per month with the subsidiaries. We are expecting 10% of revenue from -- more growth from CaratLane and Aditya Birla. So we are expecting monthly 50, 50 kg from both CaratLane and Aditya. This will add 100 kg extra production from our regular guidance. So I think CaratLane we are on track. Every month, we are getting orders. Aditya Birla, first order has already dispatched. So this quarter will be a trial basis and then we'll get a regular order. So we are expecting to add from April quarter 50, 50 kg from both the companies.

Okay. So just to be clear, you said that 10% from both the companies you can deliver by FY '26, '27?

Yes, yes, yes.

And sir, you don't have to take gold on your balance sheet, right? So it will be very capital-efficient business?

Yes. So we don't have to find the details also and inventory also because they provide us their bullion gold material to produce. We make them and we charge -- making charge. So making charge will add on to the gross margins and sales. So we just make a bill of making charges, which will add directly to our gross margin.

Okay. So it will be like adding to your cash flow as well, and yes, that's great to do.

And we don't have to fund inventory also, so that is a good sign if these large corporates are giving us more production.

And sir, any change in guidance after adding this customer for FY '26 or FY '27? Are you planning to -- like you have guided for INR 6,300 crores. Would you be changing that guidance?

Yes, already we were at INR 6,300 crores. Now we are guiding at INR 7,300 crores as we have already -- we are already reaching -- out of INR 3,300 crores, we have already done INR 2,500 crores. So we will be -- we have changed our guidance to INR 7,200 crores because these are clients we have not counted in our guidance of INR 6,300 crores. So these new 2 clients already we added, P.N. Gadgil also was not there. So we have revised our target to INR 7,200 crores by FY '27.

Okay. That's great to know. And sir, what would be your PAT margins on this INR 7,300 crores business?

So we are expecting from 3.5% to 4%. 3.5% to 4%, in between that.

Okay, okay. And sir, how is Q4 shaping up since 2 months are already done? If you could just give a directional guide -- update that would you be crossing this 447 kg mark? Would you be reaching 500 kg per month for Q4?

100% we are on track. We will not talk about the number of the ongoing quarters, but this quarter is much better than the December quarter.

The next question comes from the line of Chintan Sheth from Girik Capital.

I missed your number on the standalone volume for 3Q and subsidiary volume for the third quarter.

So by number, INR 730 crores we've done from Sky Gold and subsidiary INR 135 crores and INR 134 crores. Together, we have...

INR 998 crores. But no, I'm saying from 447 kg per month in third quarter, how much came from standalone and how much from the subsidiary?

Okay. Volume-wise, 447 kgs. I can send you -- you can send me the mail, I will send you the details, yes. Right now, I am not having the specific kgs in the note.

Sure. Okay. No worries. And second is on the gold loan GML side, where are we now? Last time we were at 20%, 25% of our loan converted to GML. Any progress and what should we expect by the year-end?

So yes, we are expecting by March end 60%, 70%. We were expecting by December. We are a little bit slower by 1 quarter because of Karur Vysya Bank has closed their model, so we have to shift to ICICI Bank. SBI is also on the process. So we are like at 20%, 25% right now also. But we are -- I think we are sure that we'll move by March quarter to at least 55%, 60%. So we are on track. Bankers have the system to change this or they have to go to committees and change, but a little bit we are slow on this. We were expecting by December quarter, but let's see, we will be at 55%, 60% by March quarter.

Yes. And if you can provide a split in terms of volumes and if you can provide -- or revenue, whichever is available, the split between 2 carat, 18-carat and studded ones, if you can provide?

Yes. So 18-carat, we were at 3% last quarter and now we have done 5% of this revenue in 18-carat. So last quarter, we sold diamond of around 400 carat and this quarter we have done 800 carat. Sorry, I will do it like this again. So last quarter, we approximately sold 400 carats. This quarter, we sold 883 carats of diamonds. Last quarter, we were at 37 kgs of 18-carat; this quarter, we are at 49 kgs of 18-carats, which is we were at 3% of the production. Now we are at 4%, 5% of the production. So 18-carat, as we told earlier, we are concentrating on 18-carat rose gold and white gold jewelry, which is bringing us again margin to us. So we are more concentrating on 18-carat also. And natural diamond also, we doubled the carats in this quarter. So this both segment we are concentrating. And one good news is that we already started lab-grown diamond and our first build also shipped to Limelight jewelry, which has 25 stores. So lab-grown diamond also we shipped the first of our production.

Okay, okay. Got it. And lastly, on the guidance, you mentioned INR 7,200 crores by FY '27. That implies that you will be almost utilizing or existing -- your existing capacities, right? Any broad plans for further expansion in capacity and how you will be funding it? Because so far right now, given that our working capital, our operating cash generation is still negative and we were targeting somewhere turning positive in the upcoming year. If you can highlight how are you going to expand your capacities for future growth beyond FY '27 and how you will be funding them?

So we have in mind that after FY '27 March, we'll build a new facility as new clients are onboarded, big clients are onboarded. But as and when, we will plan and we'll inform the exchange. So right now, we are in the [indiscernible] as and when required so we will be cash flow positive in '27. As you can see, the client onboarded are giving us the raw material by their own. So we do not have to fund that inventory. So we are adding those clients only. We are targeting Reliance also for that and already Tanishq is in pipeline. So we are targeting them also. So we are concentrating those clients who are providing us raw material. So immediately we will be not requiring much capital to fund them, and we'll be cash flow positive by 2027. For FY '27 March, we'll need a new facility we have in mind. So we are referring for that, but as and when Board approves, we will inform the exchange.

The next question comes from the line of [ Srinath Krishnan ], an individual investor.

The first question is on capacity expansion. This is a very large expansion that you're undertaking. What gives you the confidence that we would be able to utilize this capacity maybe even in 4, 5 years, which is like a 4 to 5x increase in capacity, right?

Sure. So you can see that this CaratLane now is planning for, I think, 300 more stores as he has moved his subsidiary from Tanishq to Tata. So earlier, they were Tanishq subsidiary, we were not able to keep all the inventory because Tanishq was keeping. So CaratLane now itself -- the CEO from Tanishq has came to CaratLane and they are planning to open 300 stores -- more stores in 2 years. So like that, Kalyan, Senco, Malabar Gold, Khazana, Gadgil, all are planning aggressively in 2 years, 24 months, they are aggressively opening 100 stores, sometimes 150 stores, which they have opened. They had taken 7 to 8 years to open 50 stores. Now they are opening in 1 year. So they are into an aggressive plan, and we are in the mindset that after 2 years, we'll need a huge facility when we will have Tanishq also and I think major clients are onboarded. We are in talks with Reliance also. So the growth will come from the organized market, which is unorganized market is shifting to organized very much drastically. Earlier, they were expecting to shift it by 2035. Now they are expecting that in 6 years only, much of the -- higher percentage of the unorganized market will shift to organized and it will come to 78%, which we are -- they are expecting in 10 years, it will happen in 5 years only because of the stable development and BJP government and also policies they are taking. So we are expecting a huge growth in the stores opening. We have onboarded all the corporates right now in Dubai. Singapore also, we have a distributor -- we have appointed a distributor. So export is also growing very much. We are expecting lab-grown diamond to grow very much in these 2 years. So we need a good space. Now we are producing in a small space in Sky Gold only for lab-grown, but we need a huge space for lab-grown also. And 18-carat is accepted very much for rose gold, white gold and yellow gold really. As the gold rates are going up, 18-carat market share will also grow. Keep in mind that we are into all the segments. We have to plan a huge facility where this client will be growing very aggressively, and we have to cope up with them. So we have in mind, let's see, as and when the plan is on board, we will inform the exchange.

Sure. So the next one is on the capital employed in the business. If you look at it, you -- one effort you're taking is gold metal loan. But the -- and also importantly, the customers are going to be [indiscernible] reduce the capital employed [indiscernible] that is also a very large pool. 50% of your capital employed.

Can you please...

Yes. Can you hear me now? Can you hear me now?

Can you repeat the question?

Yes. So 50% of your -- you're taking care of your gold bullion, right, because the customers are going to give it to you, a large portion of your capital employed. And the rest is receivable. So what is -- because reduction there will also significantly reduce the capital employed and improve the ROCE and cash flows. So what is the effort that you're taking there? Directionally, where can we move towards in terms of receivable cycle from the 25 days we are at?

So 100% inventory days are -- we are at 25 days. Debtor days, we are at 25 days, that will come down blendedly because nowadays whichever we are exhibiting, we are nearly 4 times and we are totally doing cash and carry business with them. So we are now targeting -- now our Vice President, Akash Talesara joined SGL totally targeting the customers who are giving the bullion in advance or we are doing the cash and carry business. So in 2 years span of time, we are expecting that this CaratLane, Aditya Birla, Reliance and if we are successful in onboarding Tanishq also, so they will give only 60% of production of their bullion and 60% out of 1,000 kg we have a capacity. 500 kg will be from their raw material and 500 kg only we have to fund and -- fund the debtors. So blendedly -- automatically, it will come down to 15 days or something. So already you can see we are concentrating on debtor days, and we are expecting it to come to 15 to 10 days because 50% business from right now is from here to FY '27 March we are targeting 30% business should come from their raw material. We don't have to fund that raw material debtors also. So blendedly, it will come down.

So one, 30% of your business will come from people who are keeping bullion, right?

Yes.

And also exports will also be another 20%, 30% where -- what is the receivable cycle there?

Exports is, again, 10 to 15 days, 7 days, 10 days. So it's much better than India. So their receivables is very fast from India. So blendedly, exports also we are concentrating -- we were at 1% or 2%, we are now 8%, 9% and we are targeting to take it to 15%.

Okay. Both these put together will be nearly something, 30%, 40% of your revenue, which will have very low receivable cycle?

Yes, yes, yes. We are on track for that.

The next question comes from the line of Jehan Bhadha from Nirmal Bang.

Sir, my question is on the borrowings front. So what are the current borrowings as on December?

So it's approximately INR 380 crores to INR 400 crores approximately.

Okay, okay. And any of the funds that we raised recently of INR 270 crores that are going to be used for working capital?

Yes. So already we used INR 70 crores in subsidiaries and INR 140 crores with the subsidiaries. And out of the INR 130 crores, INR 100 crores was used in Sky Gold and INR 30 crores for the general corporate expenses. So we have already infused here 18-carat natural diamond and lab-grown diamond, we have infused a new capital we increased. And there we infused in the Starmangalsutra and Sparkling Chains. So all the divisions we have spreaded and invested. So we have seen the growth in 18-carat also, we have grown from 3% to 5%, then we have grown natural diamonds also by 50% quarter-on-quarter.

Okay. And so sir, how should we look at debt for -- by the end of this year and by end of next year, where should the debt figure be?

So I think by the end of this year, we are at INR 380, INR 400 crores only. We are in a comfortable situation. And next year, we can increase some INR 50 crores, INR 100 crores debt, not much than that because we are getting GML right now. So it will be not -- and our interest cost will be lower because of GML. So already ICICI Bank has granted us INR 100 crores of GML. So we'll be much of taking GML only, which will not impact our PAT margins.

Yes, that I understood, sir. Yes, but the gross debt will be how much?

So gross debt will be approximately -- next year, we are planning -- this year it is INR 400 crores, so INR 550 crores to INR 600 crores.

Next question comes from [ Raj Saraf from Finvestors ].

Congratulation on great set of numbers. Sir, how would be the margin outlook, sir, on EBITDA and gross margin? Will it sustain this level? Or what could be the outlook, sir, going forward, FY '26 and FY '27?

We have worked very hard for the fancy jewelry and we have improved our gross margin also and EBITDA also increased. So we'll maintain this EBITDA, 5.5% approximately, and PAT margins were 3.5%. So we have improved and we maintained this in this 2 quarters also. So we are largely concentrating on the margin-based products, which are like 18-carat natural diamond. Lab-grown also adding -- first shipment only gone from a small amount of INR 15 lakhs to INR 20 lakhs, but it's going to grow by, I think out of our revenue, lab-grown will have a place of 5% in next 3, 4 quarters or 6 quarters. So I think blended margins will be at 7% and EBITDA at 5.5% and PAT at 3.5%.

And sir, you have given guidance for this year, INR 3,300 crores. So if we maintain the same run rate for next quarter, we'll be already crossing this number. So what could be the guidance for this year and FY '26, though you have already given the guidance for FY '27, that is INR 7,200 crores, sir?

Yes. So already we have given the guidance of INR 5,700 -- we have revised the guidance to INR 5,700 crores for the FY '26 and INR 7,200 crores for '27.

So FY '26, sir, can you repeat again?

INR 5,700 crores for FY '26 and INR 7,200 crores for FY '27.

Okay, sir. And this year, we will maintain the guidance of INR 3,300 crore?

Yes, 100%. So I think it will be better than that, but we'll not talk on the numbers, but this quarter is much better than that. Yes.

Next question comes from the line of Manan Vandur from Wallfort PMS.

Sir, I had a few questions. First one would be that for the past few quarters, you are saying that...

Your voice is not coming through properly. Can you...

Manan, may we request you to use handset, please?

Hello? Is it proper?

Yes, now it's clear, I think.

Okay. Sir, for the past few quarters, we are saying that we will onboard Tanishq. So where are we on that front?

So I think we are right now in a good position because we have supplied 2, 3 times to the CaratLane. And CaratLane -- we have become a regular vendor to the CaratLane. It's not the first time we supplied. Two, 3 times more we supplied so we are -- and orders are coming back-to-back. So it will get very good impact in the Tanishq also because Board members meet every time and they discuss about the vendors and there's a very good review about our company's product and selling time of our products. So it will help us to onboard Tanishq also. We are regularly meeting them. Already our Vice President, Akash Talesara, is targeting them. Already we meet twice in last week also, but we are expecting, let's see, in a quarter, we will -- but we are able to achieve novel jewels Aditya Birla onboard then CaratLane. Now Tanishq is the only remaining part, so we are very nearby.

Great. Understood. Sir, second will be when did you say that we will be cash flow positive?

By FY '27, we'll be cash flow positive.

Okay, okay. Understood, by FY '27. Okay. And sir, the next question was that when you spoke about the CapEx, I couldn't get it. So how much kgs per month are we planning, the next CapEx? And what will be the total capacity after that?

So we are not -- anything on the plan, we just have in the mind, but we are planning for this. So we will go up to 4 tonne capacity. Now we are at 1 tonne capacity. We will go up to 4 tonne capacity because by FY '27 March after that, we'll raise the facility and we will make -- now our competitor enlarges the capacity. He's making 2 tonne and he has a capacity of 2.5 to 3 tonnes. We want to make a 4 tonne capacity facility, including all lab-grown, natural, 18-carat and all. So let's see, we are planning for that arrangement and we'll look at the Board and we'll inform you. But we have a mind that we should have a capacity of 4 tonne per month.

4 tonne per month, okay. Understood. And sir, the last question would be that last quarter, you said that we might have other income in Q3 of about INR 15 crores-odd, but we had around something INR 7 crores. So will the balance INR 8 crores come in Q4? How can we look at that?

Can you repeat?

Sir, last quarter con call, we asked so you said that for the quarter 3, we might get other income from sale of shares or something about INR 15 crores. But this quarter, we had around INR 7 crores. So will the balance INR 8 crores come in quarter 4?

So you can see we have FDs against the bank limits collateral. So we are getting every quarter the interest income also. This year from sale of investment, we got INR 3.4 crores. Some of our investments are with single bank or SBI, they're in the process. So I think if they get released in this quarter, we'll get the income of -- other income also in this quarter. So INR 35 crores of shares are lying with SBI. They are in the release process. If they get released, we will get also -- but we already got in this quarter also INR 3.3 crores from the sales of investments and INR 2.4 crores from the interest income.

Okay, understood. And sir, last question will be, sir, I couldn't understand the debt part of it. You said that next year our debt will be around INR 550 crores to INR 600 crores. So could you please explain a little that why will our debt increase? I couldn't get it.

So we are expanding in many segments like 18-carat also lab-grown also, natural diamond also 18-carat. So to fund the growth, we have to take the debt. And we are now getting GML and so interest part will be only 3%, 4% yearly other than 9% from the CC limits. So we are getting good orders from all the segments. I think lab-grown, we have started with Limelight jewelry which has 25 stores now Wondr Diamond we are approaching who has 20 stores. So lab-grown has a huge potential in the next 2, 3, 4 quarters. So we'll fund that also. We'll fund 18-carat also. As and when required, we'll take the debt, but we are projecting INR 550 crores to INR 600 crores. And we have revised the number also of the growth. To fund the growth, we'll take the debt, yes.

Okay, understood. And sir, very last question would be, sir, you said that FY '27 we will be cash flow positive. So in terms of -- if I take cash flow by EBITDA, so what would be the conversion? Like more than 50% or how would it be? For example -- it's just an example, EBITDA is, for example, INR 500 crores. So will our cash flow be more than INR 250 crores or something like that?

Yes, yes, yes.

So it will be more than 50%, you are saying, our cash flow?

100%. 100%.

Next question comes from the line of Bharat Gianani from Moneycontrol Pro.

Congratulations for great set of numbers. So sir, my first question is that on the natural diamond side and also on the -- especially on the lab-grown diamond side, we have seen the price of the lab-grown diamond correct very significantly in the last 2 years or so. And the prices are now stable, but then again, as the technology evolves, there is a risk that we may see a further price correction. So as a lab-grown diamond manufacturer that you have started this segment, I know it is a very small portion right now, but then what is your risk in terms of if the price of the lab-grown diamond continues to correct? So what risk do you have as a manufacturer of that? So if you can throw some light on that.

Sure, sure. Thank you, Bharat ji. So I will throw a light on that because lab-grown is a devaluating asset every time -- every quarter rates are falling. Earlier, it was falling drastically. Now it's falling in a limited. But as a manufacturer, all the industry works on that model. We also procure that only out of the lab growing companies that quantity only, which we get the fixed order of that. So we will keep in the stock of this inventory. As we got an order of 500 carat, we ordered to the growing company. We do not grow inside because there's a big setup and now we are very small in that. So as and when required, we grow inside also in 2027. But we take the inventory as which order is fixed. So retailers are also working on the same model. If they are keeping inventory of 300 carat, as they sold 50 carat in 1 week, they order 50 carat -- they sold 50 carat. So whole industry is working on that model because all of them know that the rates are falling and will fall much ahead also. So all industry is working on the same model. Whichever order is there, we order the inventory and we dispatch. Once other orders come, then we order. So in the same process, we do for the natural diamond also because natural diamonds also and the small diamond rates fall 10%, 15%, but solitaire we don't keep solitaire jewelry, but -- this also falls by 20%, 25%. But it's the same model that also in natural diamonds we procure the diamonds as per the orders of the companies. And when new rates come, we quote the new rates to the corporate and then they approve for the new rates. So every quarter or 6 months, we change the rate as and when the rates fall. So we also procure on the same rate. So that's why we keep a limited -- order for limited and we don't keep in the inventory also.

Okay, got it. So basically, as now that you're -- what you're trying to say is that as the business model that we have now for the gold, once you receive the order, you fix the price and then start manufacturing. So that model will apply to the lab-grown and natural diamond also?

Yes, yes. So as and when required and we are in a good position, we'll grow inside also because machineries are available to grow inside. So now quantity is very less, so we don't have to look at CapEx for the lab-grown diamond.

Okay. And sir, one more question from my side is -- I missed your point. So you said that new clients that you are onboarding are giving you the raw material, for example, CaratLane or Aditya Birla. So you gave some percentage, but I missed that number. So what percentage of the revenues that you have the clients give you the raw material and what that percentage will be going in next 2 or 3 years?

So in next 2 years, we are expecting 30% to 40% from this client. We will grow 1,000 kg, at least 300 to 350 kg we get from this advanced and 650 kg maybe from our inventory. Now we are getting per month 15 to 20 kg from CaratLane and Aditya Birla just started in this month only we get 5 to 10 kg per month. But coming 6 quarters, we are expecting -- after 6 quarters, we are expecting 30% to 35% business from this client. So out of 1,000 kg capacity, we are expecting 300 kg from this client and 650 kg from other.

Okay. So on an overall basis in the next 2 years, you're saying that about 30% to 40% of the raw material will be provided by the client?

Yes, yes. We are expecting that.

Next question comes from the line of Amit Agicha from HG Hawa.

Am I audible?

Yes.

Congratulations for excellent set of numbers. My question was connected to exports. Like how much of the total revenue is from exports? And what is the company's exports revenue target for FY '26 and '27? And how is the demand shaping up in Middle East, UAE, Singapore and Malaysia?

So already, we are at 8% this quarter, 8% -- sorry, 7% this quarter, INR 71 crores export we have done. And we were at 1%, 2% year before. And in 2 years, we are expecting it to take it to 13%, 14% or 15%. Majorly 85%, we will rely on India only because India has a huge potential. So UAE demand is stable and good. Singapore also, we have appointed a distributor. So we will be starting delivering this quarter. So UAE, Singapore and Malaysia, decent growth is there. But India is very strong growth we are seeing. India is growing so because unorganized market is shifting to organized. So we are relying 80% on India. And this 8% to 9%, we are taking -- we are expecting to go to 13%, 14% or 15% by FY '27.

And last question was connected to the employee. Like what initiatives are being placed to retain skilled artisans and karigars in the competitive market?

Pardon?

What initiatives are in place to retain the skilled artisans and karigars in the competitive market like employees I'm talking about?

So we -- already we are giving many incentives on their design -- how design they have made and how it's working on the market. To design also, artisans we keep project type incentives to them, how much production they are taking. So we are giving each and every -- facilities also there. We have made gymnasium, saloon facility for them. So these are the basic facilities we are giving and incentives also we are giving to them.

So you're going to increase the hiring, sir, in the coming quarters?

So already, we were at 600 employees now. Together subsidiary, we are at 900, 950 employees.

Nine hundred and?

950 employees are there. Together with subsidiaries, we are at 950 employees. So we'll be hiring as and when -- every quarter, we are hiring a little bit at karigar level. Not much designer is needed because designer and merchandising team we have, we will increase by 10%. But at a worker level, the polish department, we have to increase every quarter. So for doubling the production, we will not need double employees, we'll need 1/3 employee lesser because technologies are coming. We have already increased U.S. electro polishing machine. Then 3D printers have came, which is reducing our manpower. So in few years, we are expecting that -- for doubling the production, we'll not need to double the employees. We have to just 1/5 of the employees we have to hire.

Next question comes from Nilesh Jain from Astute Investment Management.

Congratulations on great earnings. My first question was on the GML side. Like you mentioned by end of FY '25, you're planning to target to bring it to 50% to 55%. So when I talk about for FY '26, what percentage of overall debt you would like to convert to GML? And then how much of that savings would flow into your finance costs?

So we want to go up to 80% -- 75% to 80% and already it will help because we have already got a rating of A- from Fitch Rating. We were at BBB stable. Now we are at A-. So there is a good sign that we have got a good rating, which should help us to reduce our finance cost in CC limit also and GML also and reduce our collateral part also. So we are -- we want to go up to 70% to 80% GML, but by March, we are expecting 50% to 55%.

Okay, okay. So how much would that flow into as a finance cost? Right now, it's around between 1% to 1.3%.

Yes, it will help to improve by 0.5%. 0.5% will be improved. So 1.2%, 1.3% we are there. So it will come down to 0.7% or 0.65%.

Okay, okay. My second question was like you increased your guidance to INR 7,200 crores by FY '27. So does it include any new clients, which you plan to add? Or it does take into account only your existing clients and then your 2 accounts, which were added, which are CaratLane and Aditya Birla?

So we are -- we have increased the guidance on the base of the existing client only because their showroom are increasing drastically. They have accelerated showroom, Malabar Gold is opening 100 stores in the year. So we have given -- revised this guidance on the base of the existing customers only, whichever other companies or CaratLane they will give their own bullion. So in that, our revenue will not increase, our gross margin will increase because we are making charge bill only will be made. They will give their bullion and we'll make from them. So in that our gross margin will improve. And so we -- our revenue guidance will increase on the base of the existing client only Kalyan Jewellers, Senco Gold, Malabar Gold, Thangamayil and GRT jewelry, Khazana, these all are growing drastically in their showroom. That's why we have revised our revenue guidance.

Okay. Because I remember you mentioned that you were in a final agreement stages with Reliance. I mean -- so say, suppose you sign up by FY '26 Tanishq and Reliance, both of them. So that would eventually increase your guidance like on upside given right now you've not included them.

In that kg-wise percentage will increase, our kg-wise volume-wise guidance will increase 100% because they will give their own bullion. That will help us to improve much in our gross margins.

Okay. So that is right now not taken into consideration? Okay.

No, I'm not -- we are not taking consideration in the guidance. Right now also, we have not taken much consideration of the CaratLane, also Aditya Birla because they are in the initial stage. So after a few quarter, we'll see and change the guidance of that also.

Okay, okay. My last question is because right now with the new clients which you have added, you are trying to take the inventory directly from them. Are you in conversations with your existing clients to plan to change the model, which you have right now where you are taking inventory on your balance sheet, changing the model to taking inventory from them with your existing clients?

So we -- right now, we are not planning because every corporate has their own model because some corporates work on this model. Some corporate work on to fund inventory from ourselves also. So all -- they are large corporates, they have their own models. When we come to 30%, 40%, then we are in a position when we will talk to the existing corporate also to come to that model. But in the next 2 years, we'll first bring these clients on board and bring the volumes of 300, 400 kgs from their bullion. And then only we can negotiate with these clients also. But every corporate has their own models to work. And so they -- this Malabar Gold or Kalyan, they don't work on that model to give inventory to us and then they are in the mindset they don't want to fund the inventory for 25 days and they can open more stores and they will keep the inventory in their stores. So other mix of model -- mix of their models are there for the other corporates. But when we are at 30%, 40%, we are getting the bullion from these big corporates, then we can change our strategy, I think.

Right, right. Just last question. Any inorganic acquisition or any companies, which you are looking to have in mind to acquire them just like you had acquired Starmangalsutra?

Nothing right now. But as and when required, as and when there will be any stronger, we will inform the exchange.

[Operator Instructions] Our next follow-up question comes from Palash Kawale from Nuvama Wealth.

Sir, what was the inventory and...

Palash, your line is unmuted. Please proceed with your question.

Yes, am I audible now?

Yes, Palash tell me.

Yes. So, sir, what was the inventory and debt position by the end of December?

End of this?

By the end of Q3?

Okay. So I think I will send you the numbers later.

The next question comes from the line of [ Shanmugan Selvanathan ], an individual investor.

Congratulations on your excellent set of numbers in Q3. Yes, I have just one question. Because of the rise in gold prices, currently, we are facing the gold is at an all-time high. Do you face any kind of impact in your demand from the current retail clients? Or how is the wedding season currently going on?

So wedding season is good. As a manufacturer, we are backed by order every month because there is every wedding season then Akshaya Tritiya comes in the April. For example, March orders will come for Akshaya Tritiya, now we are making for wedding season. At retail level, there is 10%, 15% of impact is there for a short term of 10 to 15 days. But I think nowadays, as and when gold rates from youngsters want to buy the gold as they presume that gold will go to INR 1 lakh or something, there is an assumption in the market. So at the manufacturer level, because we order back, so corporate has to give us orders. We have to prepare for other occasions going forward. But retail level, there is an impact of 10% to 12%, but I think it's short. As we talk to the corporate, they are telling the impact of 5 to 6 days or 7 days and back to normal in 7 days.

Okay. So do you feel any -- because of this, any impact in revenues in the current quarter or in Q1?

Nothing, because we are getting good orders of 18-carat also and because of the rate -- 18-carat are coming -- orders are coming much because 18-carat is a budgeted jewelry. And in that, the rate impact is lesser because it comes in budget. So some switch is there in 18-carat. 18-carat orders are coming much in this quarter also. So again, we have good orders lined up and we have backed up orders. So there's no impact on manufacturing level, but it's natural that when rate goes up, when 3, 4 days impact on the retail of 10% to 15%, and it goes back normal to -- relatively normal.

The next follow-up question comes from the line of Bharat Gianani from Moneycontrol Pro.

Yes, sir. I just wanted to check on the margin guidance for FY '27 at gross EBITDA and net profit level?

So gross margins, we are expecting to be at 7%, EBITDA at 5.5% and 3.5% PAT.

Sir, PAT, how much you say?

3.5%.

The next follow-up question comes from [ Raj Saraf from Finvestors ].

Sir, is there any difference in gross margin of export and domestic?

There is a difference of 0.5%, not much in UAE countries. It's similar to India, Singapore, Malaysia. So 0.5% is better there. But of course, Europe and U.S. is different gross margins are there, but we don't make products of U.S. and Europe. It's totally different products. So our products match to UAE country and Singapore, Malaysia. But the business is much of cash and carry and less debtor. So let's say advantage we can churn the inventory fast, but margins is a difference of 0.5%.

And sir, one request from my side, sir. Actually, the investor presentation, which has been posted of conclusion of Q3, we got now so many fresh updates on this conference call. So it will be helpful if you can please post a new investor presentation with so much updates, it will be helpful, sir. That's a request from my side.

Sure, sure. We will plan it out and update in 7 days.

Okay, sir. And one thing, sir, the volume guidance which you have given for FY '26, that was from 550 to 600 kg. So what could be the volume guidance for -- now the updated volume guidance for FY '26?

So we are expecting to 650 kg approximately, 650 to 700 kg. So as we told that we'll update new PPT guidance also in these 7 days and in our actions also. So I think we are expecting to 650 kg.

Okay. And for FY '27, it will be beyond 1,050 kg?

Yes.

Ladies and gentlemen, in the interest of time, this will be our last question. And I now hand the conference over to the management for closing comments.

Thank you, everyone, for joining us. I hope we have been able to answer all the queries. In case you have inquired any further details, you may please contact us or Orient Capital, our investment relationship partner. Thank you so much. Thank you for being a part of our Sky Gold journey. Thank you so much.

Thank you. On behalf of Orient Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines.