Khazanchi Jewell — Q3 FY25 earnings call

Call held 19 Feb 2025

Management summary

Khazanchi Jewellers reported strong Q3 FY25 financial results with total income growing 89.65% YoY to INR 393.89 crores and PAT increasing 113.37% YoY to INR 12.38 crores. The company is strategically expanding its retail footprint with a new 10,000 sq ft flagship showroom opening in April 2025, projected to boost B2C sales by INR 150 crores. While short-term demand might be affected by rising gold prices, the company remains confident in its growth trajectory, though a discrepancy in reported EBITDA/PAT percentages for the quarter required further clarification from management.

Highlights

  • Total income for Q3 FY25 grew by 89.65% YoY to INR 393.89 crores.

  • EBITDA for Q3 FY25 increased by 56.73% YoY to INR 16.48 crores.

  • Profit After Tax (PAT) for Q3 FY25 rose by 113.37% YoY to INR 12.38 crores.

  • Earnings Per Share (EPS) for Q3 FY25 surged by 113.68% to INR 5.

  • The company is set to open a flagship 10,000 sq ft showroom in Sowcarpet, Chennai by April 2025, projected to boost B2C sales by INR 150 crores.

Concerns

  • Management could not immediately clarify a discrepancy in reported EBITDA/PAT percentages for Q3 FY25 vs Q3 FY24, stating they needed to check figures.

  • A short-term slowdown in demand for gold ornaments is expected due to steep gold price increases.

Key financials

2 periods

Q3 FY25

  • Total Income
    ₹393.89 Cr
    YoY +89.6%
  • EBITDA
    ₹16.48 Cr
    YoY +56.7%
  • PAT
    ₹12.38 Cr
    YoY +113.4%
  • EPS
    ₹5
    YoY +113.7%

9M FY25

  • Total Income
    ₹1,150.42 Cr
    YoY +87.4%
  • EBITDA
    ₹45.28 Cr
    YoY +44.8%
  • PAT
    ₹32.43 Cr
    YoY +50.7%
  • EPS
    ₹13.1
    YoY +50.6%

What they filed

Q1 FY27: revenue up 45.0%, net profit up 86.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue375 394 622 404 549 +46%589 +49%508 −18%586 +45%
EBITDA15 16 19 21 32 +113%35 +119%37 +95%39 +86%
Net profit11 12 13 15 24 +118%25 +108%26 +100%28 +87%
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.

Capital allocation

high confidence
  • Capex Capex disclosed entirely through internal sources
    • New flagship showroom (10,000 sq ft, extendable to 6,000 sq ft)
    See, the debt what our company is holding in a very lesser pace only, but we will finance the opening of new showroom internally only. We are not outsourcing any funds outside.
  • Debt Gross ₹40 Cr
    We have currently long-term borrowings of around INR40 crores.

Guidance & targets

B2C Sales

  • Additional B2C sales from flagship showroom B2C Sales · After opening of flagship showroom (April 2025) · High confidence INR 150 crores
    The management is expecting to increase somewhere around the top line of B2C segment after opening up the flagship somewhere, it would be an additional sale of INR150 crores expected.

    — Rajesh Mehta

B2C Margin

  • B2C segment margin B2C Margin · After opening of flagship showroom · High confidence 9% to 11%
    So, in that case, the B2C margin, what we are expecting is somewhere around 9% to 11% in between would be the margin.

    — Rajesh Mehta

Overall Top Line Growth

  • Annual top line growth Overall Top Line Growth · For the year (FY25) · Medium confidence 25%
    We are expecting that, but overall top line -- from the current year's top line, you can say that it would be for the year somewhere 25% would be the growth.

    — Rajesh Mehta

B2C Proportion

  • B2C segment's share of overall business B2C Proportion · After opening of flagship showroom · High confidence 15% to 18%
    But after the opening of the flagship showroom, our overall proportion to B2C segment to improve to somewhere around 15% to 18%.

    — Rajesh Mehta

What to watch in Q4 FY25

Flagship Showroom Opening & B2C Sales Contribution

Next quarter (Q1 FY26)
Current Under construction, expected April 2025
Target Operational, contributing to B2C sales

Why it matters

This is a major strategic expansion expected to significantly boost B2C revenue and overall growth.

In line with our expansion strategy, we are excited about the launch of our flagship 10,000 square feet showroom in Sowcarpet, Chennai in April 2025. This milestone will significantly enhance our retail presence and elevate the customer experience.

Risks & concerns

  • Short-term demand slowdown due to steep gold price increases

    medium

    Management expects a temporary slowdown in demand for gold ornaments due to recent steep price increases, but anticipates recovery as the market adjusts.

    Management acknowledged

  • Increased competition impacting margins in lab-grown diamonds

    low

    While lab-grown diamonds currently offer good margins, management expects increased competition to stimulate margins later, though they believe margins will remain comparatively good.

    Management acknowledged

Q&A highlights

6 direct, 2 evasive
Dividend Payouts for Shareholders Evasive
Yes, obviously. Currently, the management has not decided on making any growth, maybe in the ending of this financial year, there are possibilities.

Analysts are looking for shareholder returns, and management's response indicates no immediate decision but leaves room for a year-end possibility, suggesting a wait-and-see approach.

Asked by Aditi Roy

Discrepancy in Q3 FY25 vs Q3 FY24 EBITDA/PAT Percentages Evasive
I have to check with the figures. I will note down your doubt. I will check out with the figures and then clarify you...

A direct question about reported financial metrics (EBITDA/PAT percentages) that management could not immediately clarify, indicating a potential lack of preparedness or an oversight in the reported figures.

Asked by Ankita Rathi

Impact of Rising Gold Prices on Demand Direct
Yes, since the prices have steeply increased, there is a possibility that for a shorter period of time, the demand for gold ornaments would be little less. But later on when the prices get digested in the market, always that happens.

Addresses a key industry concern regarding gold price volatility and its short-term impact on consumer demand, with management expressing confidence in long-term digestion.

Asked by Abhishek Sharma

B2C Segment Margin Trajectory Direct
So, in that case, the B2C margin, what we are expecting is somewhere around 9% to 11% in between would be the margin. So, it would add up to the bottom line that way.

Provides specific margin guidance for the expanding B2C segment, which is crucial for understanding the profitability impact of the new flagship store.

Asked by Disha Cholia

Expected Benefits of Upcoming Flagship Showroom Direct
Guess what, we are expecting the flagship showroom to be opened by next financial year, April 2025. And additionally, as the management on the constraint basis is expecting a growth of somewhere around B2C business of somewhere addition of INR150 crores.

Clarifies the timeline and quantifiable revenue impact of a major strategic expansion, highlighting its importance for future growth.

Asked by Mohit Kumar

Funding Strategy for New Showroom Direct
See, the debt what our company is holding in a very lesser pace only, but we will finance the opening of new showroom internally only. We are not outsourcing any funds outside.

Addresses concerns about capital allocation and debt, confirming that the significant expansion will be funded through internal accruals without increasing current debt levels.

Asked by Tara Kaur

Quarterly Business Volume (Order Book) Direct
Sir, quarterly at an average, for every quarter, we do a business of somewhere around 450 kg to 550 kg.

Provides insight into the company's operational scale and consistent sales volume in terms of gold weight, which is a key metric for a jeweler.

Asked by Nish Parikh

Strategies to Attract Direct Consumers to New Showroom Direct
Initially, we have launched an app so that it is what they say, jewellery purchase plan, we can say it's like a gold saving scheme since the prices are increasing day-on-day basis. Now initially, we have launched the app so that the customer at any point of time can buy gold. So, they do not wait till the opening of the new stores. They can start saving from today itself.

Details the company's digital strategy (Gold Savings App) and marketing efforts to build customer engagement and drive traffic to the new showroom even before its physical opening.

Asked by Shweta BK

3 min read 6 chapters

Detailed narrative

Strong Q3 FY25 Financial Performance

Khazanchi Jewellers delivered exceptional financial results in Q3 FY25, with total income surging by 89.65% year-on-year to INR 393.89 crores. This robust growth translated into a 56.73% increase in EBITDA, reaching INR 16.48 crores, and a significant 113.37% rise in Profit After Tax (PAT) to INR 12.38 crores. The company's Earnings Per Share (EPS) also saw a substantial jump of 113.68% to INR 5, underscoring its solid financial position and growth momentum. For the nine months of FY25, total income grew 87.41% to INR 1,150.42 crores, with PAT increasing 50.69% to INR 32.43 crores.

Strategic Expansion and Digital Transformation

The company is poised for a significant retail expansion with the launch of its flagship 10,000 square feet showroom in Sowcarpet, Chennai, by April 2025. This new showroom is expected to contribute an additional INR 150 crores to B2C sales and elevate the B2C segment's share from 10% to 15-18%. Complementing this, Khazanchi Jewellers has launched a Gold Savings Scheme App, a key step in its digital transformation, designed to enhance customer convenience and engagement by allowing customers to buy gold daily based on prices, mitigating the impact of price fluctuations.

Industry Outlook and Gold Price Dynamics

The Indian jewellery sector is projected for robust growth, supported by a favorable macroeconomic environment and key measures in the Union Budget FY25, including a reduction in gold import duty. While steep increases in gold prices, such as the 10-11% rise in January, may lead to a short-term slowdown in demand, management anticipates a recovery as the market digests the new price levels. Historically, gold prices have compounded at 13-15% per annum, and the company expects this trend to continue, further reinforcing its long-term growth outlook.

Product Portfolio and Design Innovation

Khazanchi Jewellers boasts a diverse product portfolio with over 25 categories and an extensive library of more than 5 lakh designs. The company continuously enhances its offerings by adding new artisans and adopting the latest designing techniques to improve its design library. There is a strategic focus on lightweight jewellery to meet customer preferences for affordability, and also an expansion into premium segments like diamond, Kundan, and Jadau jewellery, which offer higher margins and cater to evolving consumer trends.

Capital Allocation and Funding Strategy

The company currently holds long-term borrowings of approximately INR 40 crores. For its upcoming flagship showroom and future expansions, management has confirmed that funding will be entirely through internal accruals, with no plans to increase existing debt. This approach aims to maintain a healthy balance sheet while supporting strategic growth initiatives. The new flagship showroom is a 10,000 square feet facility, with an extendable area of around 6,000 square feet, indicating significant internal investment.

B2B and B2C Business Mix and Margins

Currently, Khazanchi Jewellers operates with a 90% B2B and 10% retail (B2C) business mix. Following the opening of the flagship showroom, the company anticipates the B2C segment's contribution to increase to somewhere around 15% to 18% of total business. The B2C segment is expected to yield higher margins, projected between 9% and 11%, which will positively impact the company's overall profitability and bottom line. The company is also introducing various higher-end products in the B2C segment to further enhance margins.

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