D. P. Abhushan Limited — Q3 FY25 earnings call

Call held 11 Feb 2025

Management summary

D.P. Abhushan delivered a record-breaking Q3 FY25, with significant YoY growth in revenue and an exceptional 123% surge in profitability, fueled by robust festive and wedding season demand. The company's focus on higher-margin product segments like wedding and diamond jewellery significantly improved margins. Management unveiled an aggressive expansion strategy, aiming to double its store network in 2-3 years, which will be financed by a proposed ₹600 crore QIP, signaling strong confidence in future growth.

Highlights

  • Total revenue reached ₹1,085 crores, a 42% YoY increase from ₹766 crores in Q3 FY24.

  • EBITDA grew 92% YoY to ₹56 crores, with the EBITDA margin expanding by 135 basis points to 5.14%.

  • Profit After Tax (PAT) saw a remarkable 123% YoY increase to ₹37 crores, marking the company's highest-ever profitability.

  • Gross profit increased by 72% YoY, outpacing revenue growth, driven by a strategic focus on higher-margin wedding and diamond jewellery.

  • The company plans to raise up to ₹600 crores via a Qualified Institutional Placement (QIP) to fund a major expansion.

  • Expansion plans include doubling the store count by adding 10 new company-owned stores and 2-3 franchise stores over the next 2-3 years.

  • A new showroom was launched in Neemuch, MP, and a second large-format showroom in Ratlam is expected to open by the end of FY25.

  • Revenue mix for the quarter was 93% from Gold, 5% from Diamonds, 2% from Silver, and 0.3% from others.

Key financials

  1. Total Revenue ₹1,085 Cr +41.6%YoY
  2. EBITDA ₹56 Cr +93.1%YoY
  3. EBITDA Margin 5.1%
  4. PAT ₹37 Cr +123.5%YoY
  5. PAT Margin 3.4%

What they filed

Q4 FY26: revenue up 86.2%, net profit up 104.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26
Revenue505 1,005 1,084 717 540 +7%968 −4%1,222 +13%1,335 +86%
EBITDA38 38 55 42 54 +42%76 +100%106 +93%69 +64%
Net profit25 25 37 25 36 +44%51 +104%73 +97%51 +104%
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

  • Gold
    93% Revenue Contribution
  • Diamonds
    5% Revenue Contribution
  • Silver
    2% Revenue Contribution
  • Others (incl. Platinum)
    30% Revenue Contribution

Guidance & targets

Capex

  • Fund Raising via QIP Capex · Near term · High confidence up to ₹600 crores
    To support our strategic expansion plans, we are planning to raise up to ₹600 crores through the QIP route.

    — Santosh Kataria

Capacity

  • New Company-Owned Stores Capacity · next 2-3 years · High confidence 10 more stores
    So, we are trying to double the number of the store. We will open 10 more stores almost.

    — Vikas Kataria

  • New Franchise Stores Capacity · next 2 years · Medium confidence 2-3
    We plan to open 2-3 franchises within the next 2 years, with further expansion to follow.

    — Vikas Kataria

  • Launch of second Ratlam showroom Capacity · by the end of FY25 · High confidence Launch
    We expect to launch this showroom by the end of FY25.

    — Santosh Kataria

Revenue

  • Annual Growth Revenue · next year (FY26) · Medium confidence 20%-25%

    Previously 15%-20% → 20%-25%

    Yes, we are definitely aiming to achieve the same growth. However, being conservative, we are targeting at least 20%-25% growth.

    — Vikas Kataria

Margin

  • Margin Improvement Margin · 2-3 years · Medium confidence increase of 20%-25%
    We are definitely aiming to improve our current margins, targeting an increase of 20%-25% with continued focus on wedding jewelry, collection jewelry, diamond jewelry, studded jewelry, and Polki jewelry.

    — Vikas Kataria

Risks & concerns

  • Inventory Hedging Policy

    medium

    The company relies on a 'natural hedge' from its low-cost inventory (8-10% below market) and lacks a formal, active hedging program, posing a risk in case of a sharp, rapid fall in gold prices.

    Analyst acknowledged

  • Inventory Valuation Impact on Margins

    medium

    Use of weighted average cost accounting inflates reported gross margins versus peers. This benefit could diminish if gold prices fall or stabilize, impacting perceived profitability.

    Analyst acknowledged

  • Demand Lumpiness from Gold Price Volatility

    low

    Management confirmed that gold price fluctuations can pull forward or delay customer purchases, leading to lumpy quarterly performance that may not reflect underlying trends.

    Management acknowledged

Q&A highlights

3 direct
Inventory Accounting Method and its Impact on Margins Direct
We are using the weighted average method for the inventory. So, if the market is like the Rs.88,000 but our inventory price is somewhere around like ₹73,000- ₹74,000 of our inventory prices.

Reveals a key accounting difference that inflates reported gross margins compared to peers, making direct comparisons misleading.

Asked by Pranav from Singular Capital

End Use of ₹600 crore QIP and Store Expansion Strategy Direct
The majority of the funds will be allocated to inventory, with a smaller portion used for CAPEX, including store development... We will open 10 more stores almost. ... Like 5 stores will be small and 5 will be big.

Provides clear details on capital allocation for the upcoming expansion, clarifying the fund split, store count, size mix, and geographical focus.

Asked by Kushal from Inved Research

QoQ Degrowth in Flagship Ratlam Store Direct
We saw extraordinary results in Q2 because many customers made their wedding purchases earlier, taking advantage of lower gold prices at that time. This led to higher sales in Q2 compared to Q3.

Explains a potentially concerning data point (flagship store degrowth) and highlights the impact of gold price volatility on consumer purchasing behavior.

Asked by Heet Parekh from Ashika Institutional Equities

2 min read 5 chapters

Detailed narrative

Record-Breaking Quarter Driven by Festive Demand

D.P. Abhushan reported its highest-ever profitability in Q3 FY25, driven by strong festive and wedding season demand. Total revenue surged by 42% YoY to ₹1,085 crores. This top-line growth translated into even stronger bottom-line performance, with EBITDA growing 92% YoY to ₹56 crores and PAT increasing by an exceptional 123% YoY to ₹37 crores. The EBITDA margin expanded significantly by 135 basis points to 5.14%, underscoring operational leverage and a favorable product mix.

Strategic Focus on High-Margin Jewellery Boosts Profitability

A key driver of the quarter's outstanding performance was a significant improvement in gross margins. Management highlighted that gross profit grew 72% YoY, far outpacing the 42% revenue growth. This was attributed to a strategic focus on higher-margin categories like wedding and diamond jewellery. The revenue mix comprised 93% from gold and 5% from diamonds. The company also noted a growing consumer trend towards 18-carat, rose gold, and white gold jewellery, which now contributes 10-15% to revenue.

₹600 Crore QIP to Fuel PAN-India Expansion

The company unveiled an aggressive expansion plan, intending to raise up to ₹600 crores through a Qualified Institutional Placement (QIP). These funds are earmarked to double the current store network over the next 2-3 years by adding 10 new company-owned stores. The expansion will target key regions beyond their strongholds of Madhya Pradesh and Rajasthan, including Gujarat, Chhattisgarh, and parts of Uttar Pradesh and Bihar. Additionally, the company plans to pilot a franchise model, aiming to open 2-3 franchise stores within the next two years.

New Store Development and Performance

During Q3, the company launched a new 7,700 sq. ft. showroom in Neemuch, Madhya Pradesh, which, along with the previously opened Ajmer store, is reportedly receiving a positive customer response. Construction is also well underway for a second, large-format showroom in Ratlam with a 12,000 sq. ft. carpet area, slated to open by the end of FY25. Existing stores also demonstrated strong performance, with 9M FY25 YoY growth figures of 76% for Bhopal, 54% for Banswara, and 51% for Ujjain.

Inventory Accounting and Hedging Strategy

In the Q&A session, management clarified its inventory accounting policy, which uses the weighted average cost method. This results in an inventory book value that is currently 8-10% lower than the market price of gold (e.g., book value of ₹73-74k vs. market price of ₹88k). While this practice boosts reported gross margins compared to peers, it also highlights a risk. Management stated they are 'naturally hedged' due to this price buffer and will only implement formal hedging (like Gold Metal Loans or futures) when their book value aligns more closely with the market price.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Consumer Durables earnings calls