PNGS Gargi FJ — Q3 FY25 earnings call

Call held 5 Feb 2025

Management summary

PNGS Gargi FJ reported a strong Q3 FY25, achieving ₹23 crores PAT for the first nine months and fulfilling its ₹100 crore turnover commitment. The company is aggressively expanding its physical and online presence, with 80 locations currently and plans for 100 by FY26. New product launches like 'Utssav' are expected to drive future growth, while management maintains a cautious approach to capital deployment and acknowledges potential risks from import policies and competition.

Highlights

  • Profit after tax of ₹23 crores for the first nine months of FY25, demonstrating strong financial performance.

  • Successfully delivered on a prior commitment of ₹100 crores in turnover.

  • Expanded network to 80 locations, with 4 new locations expected to be operational by March 2025 and 100 locations targeted by end of FY26.

  • Online sales contribution significantly increased from 2% to 4.25%, with a target to reach 6-6.5% without cash burn.

  • Maintained robust implied margins: Gross Margin at 43%, EBITDA Margin at 30%, and PAT Margin at 25% for the last quarter.

Concerns

  • Potential impact on price and cost from future import policy changes or additional tariffs on imported items from China, Thailand, and Indonesia.

  • Acknowledged increasing competition in the fashion jewellery industry from players with 'deep pockets'.

  • Management is conservative about providing precise numerical growth forecasts for new stores, preferring to focus on long-term targets.

Key financials

4 periods

Headline

  • Online Sales Contribution
    4.3%

Q3 FY25

  • Gross Margin
    43%
  • EBITDA Margin
    30%
  • PAT Margin
    25%

9M FY25

  • Profit After Tax
    ₹23 Cr

Implied FY25

  • Turnover
    ₹100 Cr

What they filed

Q1 FY27: revenue up 10.7%, net profit down 4.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue23 36 23 27 46 +102%46 +27%30 +30%30 +11%
EBITDA7 12 5 6 13 +87%13 +15%7 +47%6 −6%
Net profit5 9 4 5 10 +102%11 +16%5 +25%5 −5%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Sales Mix (Last Quarter)
    4% Online Sales4% Shoppers Stop SIS12% Own Branded Store83% PNGS SIS (B2C)
  • Product Mix
    48% Silver Jewellery43% Studded (Diamond) Jewellery

Capital allocation

high confidence
  • Capex Capex disclosed
    • Expansion of owned stores, including diamond jewellery inventory ₹3 Cr
    • Back-end office expansion and increased inventory management for additional locations
    The owned stores I need to expand on my own fund if franchisee is not coming there for the brand store, then I need to invest almost Rs. 3 to 5 crores per store including the diamond jewellery inventory. Secondly, I need to invest more on the back-end inventory as number of stores will go on growing. And this money I will see that utilization will be completed in next 18 months' time and will start aiding for the business of the Company. But at the same time, I will not recklessly start investing money just because it is in my hand. (Page 11)
  • Debt Debt disclosed
    We have got ample resources lying in the bank. If you are looking to my other income, you can make it out. (Page 7)
  • Liquidity Liquidity disclosed Amount collected from preferential allotment was around Rs. 47 to 48 crore, mainly for expansion, inventory investment, and marketing purposes.
    And amount collected was around Rs. 47 to 48 crore and that amount was mainly for the expansion purpose, inventory investment purpose and marketing purpose. (Page 5)

Guidance & targets

Revenue

  • Top Line Revenue · FY28 · High confidence ₹200 crores or more
    by 2027 that is a FY28, not 2027FY it is FY28, we can see our top line reaching around Rs. 200 or (+200) crores if everything goes smoothly and if everything progress smoothly. (Page 5)

    — Amit Modak

Locations

  • PNGS Gargi EBOs added Locations · FY26 · High confidence 10 locations
    on our own at least another 10 locations will get added in FY26. (Page 4)

    — Amit Modak

  • PNGS Gargi EBOs completed Locations · March '25 · High confidence 4 locations
    current years 4 remaining locations I have already explained which are going to be completed by March '25. (Page 4)

    — Amit Modak

  • Total PNGS Gargi Locations Locations · end of FY26 · High confidence 100 locations
    we will complete at least 100 locations by end of FY26. (Page 5)

    — Amit Modak

  • Shopper Stop SIS locations added Locations · next financial year · Medium confidence 4 to 7 locations
    another 4 to 7 locations will get minimum added in next financial year. (Page 5)

    — Amit Modak

  • P N Gadgil Sons Stores Locations · FY2030 · High confidence 45 stores
    By FY2030 we will have definitely at least 45 stores in the fold of P N Gadgil & Sons Limited. (Page 13)

    — Amit Modak

  • P N Gadgil Sons Stores added annually Locations · every year · Medium confidence 2 to 3 stores
    They are likely to add 2 to 3 store every year here in after. (Page 13)

    — Amit Modak

Company Growth Rate

  • Minimum Growth Rate Company Growth Rate · High confidence 30%
    I am confident that we will keep minimum to minimum 30% growth rate which is there in the market. (Page 15)

    — Amit Modak

Online Sales

  • Online Contribution Percentage Online Sales · Medium confidence 6% to 6.5%
    I am expecting in percentage wise it should reach to 6% to 6.5%. (Page 16)

    — Amit Modak

Inventory

  • Inventory Days Inventory · High confidence 180 to 200 days
    Inventory days I am expecting around 180 to 200. (Page 13)

    — Amit Modak

Sales

  • B2C Sales Sales · FY28 · High confidence ₹200 crores
    So, with the 200 crores B2C sales in FY28 and around maybe 50 crores of inventory with the FOCO. So probably we'll do around 250 crores kind of sales in FY28 on a total basis? (Page 20)

    — Amit Modak

What to watch in Q4 FY25

CEO/GM appointment

By May 2025
Current Two persons appointed for North India expansion and head office distribution; CEO/GM pending.
Target CEO or GM in place.

Why it matters

Completion of key leadership roles is crucial for strategic execution and expansion, providing stability and direction.

by May we will have CEO or GM in the place.

Risks & concerns

  • Impact of import policy changes and tariffs

    medium

    Potential impact on product pricing and cost if additional tariffs are levied on imported items from China, Thailand, and Indonesia.

    Management acknowledged

  • Increased competition from large players

    medium

    The fashion jewellery industry is becoming crowded with new entrants, including those with 'deep pockets'.

    Analyst acknowledged

  • Entry into lab-grown diamond segment

    low

    Management stated they will not enter the lab-grown diamond segment due to minimal price difference for smaller diamonds and similar setting costs compared to natural diamonds.

    Analyst downplayed

Q&A highlights

7 direct
Material cost as a percentage of sales and its drivers Direct
It is a product mix plus the size of operation because economies always work, higher the procurement, lowering of the cost, direct indirect cost and getting good deals in the market that may be the major reason and that is the main reason.

Clarifies the factors contributing to cost efficiency and potential for margin stability, indicating operational leverage.

Asked by Kiran Paranjpe

Increase in finance and depreciation costs Direct
It is a finance cost includes that credit card commission and during festival season there is a mini debit and credit cards are coming in and larger the sale, larger the card usages. Those costs are going up. Those costs are not going up because we are borrowing or anything. We have got ample resources lying in the bank. If you are looking to my other income, you can make it out. ... Depreciation because there are certain assets which we created our franchisee location. Plus, there is a back-end office expansion is there due to that diamond and increasing inventory management due to additional locations.

Explains that cost increases are due to higher sales volume and strategic expansion, not debt, addressing potential investor concerns about financial health.

Asked by Kiran Paranjpe

Progress on hiring CEO and COO Direct
We have already appointed two persons. One for exclusively looking to North India and expansion there... Plus, we have appointed one in charge manager at the head office who is looking and taking care of entire distribution and the retailers' channels and he is taking care. We have already appointed two people and by May we will have CEO or GM in the place.

Provides an update on strengthening the leadership team, which is critical for executing the company's ambitious expansion plans.

Asked by Kiran Paranjpe

Utilization of ₹47-48 crore funds from preferential allotment Partial
The owned stores I need to expand on my own fund if franchisee is not coming there for the brand store, then I need to invest almost Rs. 3 to 5 crores per store including the diamond jewellery inventory. Secondly, I need to invest more on the back-end inventory as number of stores will go on growing. And this money I will see that utilization will be completed in next 18 months' time and will start aiding for the business of the Company. But at the same time, I will not recklessly start investing money just because it is in my hand.

Details the strategic and measured deployment of recently raised capital for expansion and inventory, emphasizing a cautious approach to investment.

Asked by Bibhor Halan

New product line 'Utssav' and its market size Direct
Utssav which is a purely costume jewellery made out of copper and brass. And for that it's only right now available on the online. The top line contribution from that segment is not yet materialized in our top line. It will get mainly contributed in FY26. ... Utssav kind of jewellery, there is no organized market as on date, very few players are there... But as the rough estimations are there, this fashion jewellery market price is around Rs. 10,000 to 12,000 crores.

Introduces a new product category targeting a large unorganized market, indicating a new growth avenue for the company in FY26.

Asked by Nimish Kala, Sharad Anuragi

Company's share in the organized fashion jewellery market Direct
I am thinking that I might be somewhere 0.25% of the organized sector in the fashion jewellery. Because if you are taking CaratLane, taking Mia, taking Bluestone, all these people as a fashion jewellery people, then my share may be very low.

Provides a realistic assessment of the company's current market penetration, highlighting the significant growth potential within the organized sector.

Asked by Bibhor Halan

Expansion strategy for the next 3 years (owned vs. PNG SIS) Direct
Either I have to go through SIS or through my own brand store or the franchisee brand store. SIS yes, whatever P N Gadgil & Sons will expand I will have SIS at their every place and that will definitely contribute me good contribution in my top line. Regarding the standalone store or the brand store or the franchisee brand store, I will go selectively, I need to survey the location, I will see the market, I will see the potential and then I will decide where to set up these stores.

Outlines the dual-pronged expansion strategy, emphasizing a cautious, market-driven approach for owned/franchisee stores while leveraging the parent company's network for SIS.

Asked by Bibhor Halan

Trading availability of preferential shares after lock-in Direct
Yes. [The 7,29,000 shares would be available for trading on March 27th]

Clarifies the lock-in period for preferential shares, which is relevant for market liquidity and potential share supply.

Asked by Kiran Paranjpe

2 min read 6 chapters

Detailed narrative

Strong Financial Performance and Growth Outlook

PNGS Gargi FJ delivered a profit after tax of ₹23 crores for the first nine months of FY25, building on a previous commitment to achieve ₹100 crores in turnover. Management expressed satisfaction with the company's performance and expects to maintain a minimum 30% growth rate. The company's balance sheet stood at ₹30 crores in FY23, indicating significant growth since then.

Aggressive Expansion and Store Network Growth

The company is actively expanding its footprint, currently operating 80 locations, including 10 EBOs, 31 PNGS locations, and 38 Shopper Stop SIS points. Four new locations (Gurgaon, Indore, Aurangabad, and an expanded Lakshmi Road branch) are slated for completion by March 2025. The company aims to add at least 10 more EBOs in FY26, targeting a total of 100 locations by the end of FY26, leveraging both its own brand and the parent company's network.

New Product Launches and Market Diversification

PNGS Gargi FJ recently launched a new costume jewellery line called 'Utssav', made from copper and brass, initially available online. While its top-line contribution is not yet material, it is expected to contribute significantly in FY26. This new line targets the unorganized fashion jewellery market, estimated at ₹10,000-12,000 crores, and complements the existing product mix of 48% silver and 43% diamond-studded jewellery.

Strategic Capital Allocation and Fund Utilization

The company raised ₹47-48 crores through a preferential allotment in September 2024, with funds allocated for expansion, inventory investment, and marketing. Management plans to deploy these funds strategically over the next 18 months, estimating ₹3-5 crores investment per owned store for inventory and expansion. The approach emphasizes cautious and effective capital deployment to ensure good returns, rather than rapid, unmeasured spending.

Operational Efficiency and Margin Stability

For the last quarter, the company reported implied gross margins of 43%, EBITDA margins of 30%, and PAT margins of 25%, which management expects to maintain within a +/-1-2% range. Improved material costs are attributed to product mix, economies of scale, and better procurement. An increase in finance costs was due to higher credit card commissions during the festive season, reflecting increased sales volume rather than debt, as the company maintains ample liquidity.

Digital Channel Growth and Market Penetration Strategy

The online sales channel has shown robust growth, doubling its contribution from 2% to 4.25% in the last year, with a target to reach 6-6.5% without incurring cash burn. The company estimates its current market share in the organized fashion jewellery sector to be approximately 0.25%, indicating significant potential for future growth. Management anticipates that increasing disposable income and rising gold prices will further stimulate demand in the fashion jewellery market.

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