Detailed Narrative
Q4 FY25 Performance Overview
RBZ Jewellers reported a strong Q4 FY25, with revenue growing by 59% year-on-year to ₹137 crores, up from ₹86 crores in Q4 FY24. The company's PAT also saw a significant increase to ₹8.5 crores in Q4 FY25, compared to a subdued ₹2.69 crores in the previous year's corresponding quarter. Management attributed the PAT jump to the accounting weighted average matter in the prior year, noting that current operating margins, EBITDA, and PAT levels are in line with expectations.
Demand Dynamics and Gold Price Volatility
Despite a 30% growth in sales on Akshay Tritiya, overall demand in April remained flat due to gold price escalation, which reached ₹1 lakh per 10 grams. Management noted that high volatility confuses consumers, leading to demand postponement rather than denial, especially for occasion wear which constitutes 70-80% of their jewelry sales. They remain positive on demand, expecting Q2 and Q3 to provide a clearer picture.
FY26 and FY27 Growth Outlook
The company provided optimistic guidance, targeting a top line of around ₹700 crores and PAT of ₹44-45 crores for FY26, representing approximately 30% revenue growth. For FY27, the long-term targets of ₹1,000 crores in top line and ₹55 crores in PAT remain unchanged. Management expressed confidence in achieving these targets, citing strong fundamentals and ongoing expansion plans.
Retail Expansion and Capacity
RBZ Jewellers plans significant retail expansion, with an existing store capacity of ₹500-600 crores. They anticipate adding an additional capacity of over ₹400 crores through new stores in the current financial year. New showrooms are planned for Surat (operational by Q3 FY26) and Rajkot (operational by Q1 FY27). The company aims for retail sales of ₹400 crores this year, growing to ₹600-700 crores next year.
Capital Allocation and Debt Strategy
The company does not foresee immediate CAPEX needs for its factory, as the effective capacity has doubled due to gold price appreciation (from ₹50,000 to ₹1 lakh per gram). They plan to raise debt to achieve a 1:1 debt-to-equity ratio in the coming year to fuel growth and improve ROE/ROCE. Following a recent rating upgrade, the cost of debt is expected to reduce to 9.5-9.75% from the current 9-10.25% range.
Inventory Management and Liquidity
Management addressed concerns about negative operating cash flow by emphasizing that inventory, primarily gold, is highly liquid and supports growth. They aim to improve inventory days to a 'right kind' of 180 days, down from the current 250-300 days. The company maintains good liquidity, with funds strategically deployed in inventory to support aggressive growth.