Detailed Narrative
Robust Q1 FY26 Performance Driven by Diamond Jewellery and Margin Management
Senco Gold reported an exceptionally strong Q1 FY26, with overall top line revenue growing by 30% year-on-year and PAT surging by 104% to cross INR100 crores. This performance was significantly bolstered by diamond jewellery sales, which saw a 36% increase in volume and 54% in value. The company's EBITDA margin expanded notably from 7.7% in Q1 FY25 to 10.1% in Q1 FY26, attributed to strategic making charge increases and better diamond realization.
Strategic Focus on Lightweight and Lower Caratage Jewellery
To counter rising gold prices and cater to a broader consumer base, Senco Gold is actively promoting lightweight and lower caratage (9-carat, 14-carat, 18-carat) jewellery, particularly in studded designs. The average ticket size for products below 7-8 grams is INR50,000-INR60,000, and 9-carat jewellery is priced around INR3,500-INR3,800 per gram, making it accessible for budgets below INR10,000-INR15,000. This strategy has helped maintain consumer demand despite a 30% year-on-year increase in gold prices.
Dynamic Hedging and Inventory Management
The company employs a dynamic hedging policy, maintaining a ratio of 55-60% in Q1 FY26, down from 75-80% in the previous financial year, to manage liquidity amidst gold price volatility. The total inventory as of June 30, 2025, stood at INR3,558 crores, up from INR3,299 crores in March 2025. Management noted that a lower hedging ratio contributed approximately 100-120 basis points to the Q1 gross margin, but emphasized that the board policy mandates a minimum 50% hedging.
Expansion Strategy with Focus on Franchisee Model
Senco Gold opened 10 new stores in Q1 FY26, including 5 franchisee stores, and aims to open 20 stores for the full financial year. The long-term strategy is to shift towards a higher proportion of franchisee-owned, franchisee-operated (FOFO) stores, targeting an ideal mix of 65-70% franchisee and 25-30% owned stores, up from the current 50-50 split. This approach is intended to support asset-light expansion and improve liquidity.
Strong Same-Store Sales Growth and Old Gold Exchange
The company achieved a blended same-store sales growth (SSSG) of 19% in Q1 FY26, with owned stores growing at 21% and franchisee stores at 16%. A significant driver of consumer engagement and sales has been the old gold exchange program, which now accounts for 40% of total transactions, a substantial increase from 25% two to three years ago. This indicates strong customer loyalty and a successful strategy to facilitate purchases.
Outlook and Guidance for FY26
Senco Gold maintains its full-year FY26 revenue growth guidance at 18-20% and a conservative EBITDA margin guidance of 7% (within a range of 6.8-7.2%). For Q2 FY26, the company anticipates growth in the range of 16-18%. Management expressed optimism for a strong Q3, driven by upcoming festive seasons like Durga Puja and Diwali, and expects wedding demand to pick up significantly in Q3 and Q4.