Kalyan Jewellers

Kalyan Jewellers reported a strong Q3 FY25 with consolidated revenue growing 40% YoY to ₹7,287 crores. Adjusted consolidated profit after tax (PAT) saw a 43% growth. The company achieved a robust Same-Store Sales Growth (SSSG) of 24% in Q3, following 12% in Q1 and 23% in Q2, primarily driven by strong festive and wedding demand. PBT margin expanded by approximately 40-42 basis points to 5.43% compared to 5.01% in the previous year, attributed to lower ad spend and employee expense leverage.

India operations were the primary growth driver, with revenue increasing by 42% to ₹6,393 crores and adjusted PAT growing by 54%. The Middle East business also contributed positively, reporting revenue of ₹840 crores, a 23% growth YoY. However, PAT growth in the Middle East was impacted by the introduction of corporate tax in the UAE, marking the first quarter under this new tax regime.

The company is on an aggressive expansion path, planning to launch 170 showrooms in FY26, comprising 90 Kalyan and 80 Candere formats. For the current quarter (Q4 FY25), 30 Kalyan and 15 Candere showrooms are slated for launch in India. All Letters of Intent (LOIs) for showrooms to be opened in the first half of FY26 have already been signed, indicating strong momentum in franchise expansion.

Management expects PBT margin growth to outpace revenue growth in FY26 and beyond, driven by continued leverage in employee expenses and ad spends, as well as interest savings from debt reduction. The company has reduced approximately ₹450 crores of debt over the past 18 months and plans a further reduction of ₹150 crores in the current quarter. Discussions are underway with banks for the release of collaterals, with clarity expected in 3-4 months.

Despite recent volatility and a 5-7% increase in gold prices, demand remains strong, particularly for wedding jewelry. Management noted that customers are adapting to price changes, often postponing non-wedding purchases for a short period. The impact of lab-grown diamonds on Kalyan's studded jewelry segment is minimal, as the company's focus is not on the solitaire category where LGDs are more prevalent, and most of its solitaire inventory is below 0.50 carat, where price corrections are not significant.

Candere, the company's online and smaller format brand, is targeted to become EBITDA positive in the next financial year. The long-term goal for Candere is to achieve ₹1,000 crores in revenue within the next 2-3 years. The expansion strategy for Candere includes adding 50 showrooms in Q4 FY25, with a focus on increasing footfalls and brand campaigns.

Kalyan Jewellers continues to leverage its franchisee model (FOCO), with no change in momentum. The company has signed LOIs for the first half of the next financial year. While the FOCO model currently contributes significantly, management indicated a potential shift towards more Company-Owned, Company-Operated (COCO) stores from FY27 onwards, once debt repayment is complete and excess cash becomes available. A 50-50 FOCO/COCO mix is projected to yield an EBITDA margin in the range of 6.5%.