Detailed Narrative
Strong Q2 and H1 FY26 Performance Amidst Tariff Challenges
Goldiam International delivered robust financial results for Q2 and H1 FY26, with consolidated revenues increasing by 43% and 41% year-over-year, respectively. Despite the U.S. introducing hefty tariffs (from 16% to 56%) on Indian lab-grown diamond jewellery, the company's Q2 and H1 EBITDA grew by 37%, maintaining an H1 EBITDA margin of 21.6%. Consolidated PAT also saw significant growth, up 42% in Q2 and 47% in H1, demonstrating resilience and effective mitigation strategies.
B2B Segment: US Casting Model and Growth Drivers
The B2B segment, driven primarily by lab-grown diamond jewellery exports contributing 90% to sales in Q2 FY26, successfully navigated the U.S. tariff hike by implementing a U.S. origin casting model. This involved casting raw gold in the U.S. and then shipping to India for finishing, minimizing net tariff impact. Management expects the B2B segment to grow at a 'healthy double-digit clip' over the next 2-3 years CAGR, with EBITDA margins targeted in the 18-22% range, potentially seeing an upside from the new manufacturing model.
ORIGEM (B2C) Retail Expansion and Strategy
The India-focused B2C brand, ORIGEM, reported INR2.8 crores in revenue for Q2 FY26 from an average of 6 operational stores, following INR3.2 crores in Q1. Post a QIP of INR202 crores, ORIGEM plans aggressive expansion, aiming for 20-25 operational stores by March 31, 2026, and a 'doubling of stores' within the next six months. Each store costs INR3.5-4 crores to open, with INR2.5-3 crores linked to inventory, and is expected to achieve breakeven at INR20 lakhs monthly revenue, with a payback period of less than 3 years.
Lab-Grown Diamond Industry Dynamics and Pricing
Management expressed confidence in the robust global demand for lab-grown diamonds, noting that for smaller diamonds ($0.12 and below), prices have increased by 5-11% as demand has exceeded production. They believe price declines are 'totally now a matter of the past' and do not anticipate significant impact moving forward. Goldiam's vertical integration in ORIGEM, from growing/purchasing diamonds to in-house jewellery production, is highlighted as a key competitive advantage against new entrants.
Inventory Management and Margin Outlook
Inventory levels increased in Q2, partly due to building stock for the U.S. holiday season and the additional investment required for the U.S. casting model (approximately 30 days of gold). This is expected to normalize in Q3. Gross margins for Q2 FY26 were 36% (up from 34% YoY), while H1 FY26 gross margins were 34% (down from 39% YoY). Management anticipates gross margins to be 'pretty steady if not slightly hopefully growing' in the next couple of quarters, benefiting from the U.S. casting model allowing for slightly higher pricing.
Other Expenses and Customer Engagement
Other expenses in Q2 FY26 decreased to INR15 crores from INR18.5 crores in the prior year, primarily due to reduced marketing co-op expenses with U.S. retailers and lower certification costs. The company continues to focus on expanding its wallet share with existing corporate customers and adding new ones in other geographies, leveraging its design and execution strength. The B2B business sees 85% penetration in the bridal category, with an opportunity to grow in the fashion jewellery segment.