Senco Gold — Q3 FY25 earnings call

Call held 14 Feb 2025

Management summary

Senco Gold delivered strong top-line growth in Q3 and 9M FY25, driven by robust gold jewellery demand and a recent surge in diamond sales. While margins were impacted by a lower stud ratio, customs duty, and hedging costs, management expressed confidence in normalization by Q4 FY25 and maintaining an 18-20% revenue growth trajectory for FY25 and FY26, supported by strategic store expansion and a recovering diamond segment.

Highlights

  • Consolidated revenue grew 27% YoY in Q3 FY25 and 22% YoY for 9M FY25.

  • The company achieved its best-ever quarterly performance, crossing ₹2,100 crores in revenue for Q3.

  • Adjusted EBITDA for 9M FY25 stood at 6.2%, down from 7.1% in FY24 and 7.7% in FY23, impacted by stud ratio and customs duty.

  • Diamond jewellery sales showed a significant 59% growth year-on-year in the last three months (Dec-Feb), recovering from earlier degrowth.

  • The stud ratio for 9M FY25 was 10.5%, with Q3 at 11.0%, indicating a slight pickup.

  • Senco Gold aims to open 18-20 new stores in FY25 and another 20 in FY26, maintaining an 18-20% revenue growth target.

  • The company expects to achieve an EBITDA margin of 7-7.5% by the end of FY25.

  • Total revenue for FY25 is projected to be in the range of ₹6,300-₹6,400 crores.

Concerns

  • Rising interest rates on metal gold loans

  • Customs duty impact

Key financials

3 periods

Headline

  • Consolidated Revenue Growth
    27%
  • Diamond Jewellery Growth (last 3 months)
    59%

9M

  • Consolidated Revenue Growth
    22%

9M FY25

  • Adjusted EBITDA Margin
    6.2%
  • PAT Margin
    2.1%
  • Stud Ratio
    10.5%

What they filed

Q1 FY27: revenue up 64.8%, net profit up 9.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,459 2,023 1,362 1,825 1,554 +7%3,032 +50%1,963 +44%3,007 +65%
EBITDA56 79 126 182 108 +93%404 +411%271 +115%223 +23%
Net profit17 33 62 104 53 +212%267 +709%158 +155%114 +10%
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.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · FY25 end · High confidence 7% to 7.5%
    what we are expecting is that in terms of EBITDA, as we end the year, we will be about 7% to 7.5%.

    — Suvankar Sen

  • EBITDA Margin Profitability · Over 3-4 quarters / Future · Medium confidence 7% to 8%
    Over 3 to 4 quarters, you will always find 14% to 15% gross margin and 7% to 8% EBITDA margin.

    — Sanjay Banka

  • Gross Margin Profitability · Over 3-4 quarters / Future · Medium confidence 14% to 15%

    — Sanjay Banka

Revenue

  • Top-line Revenue · FY25 end · High confidence ₹6,200 crores
    In terms of top-line numbers, we have already crossed Rs.5,000 crore in the 9 months. So, we should be crossing Rs.6,200 crore as we end the year.

    — Suvankar Sen

  • Full Year Turnover Revenue · FY25 · High confidence ₹6,300 crore to ₹6,400 crore
    our expected revenue numbers for the whole of the year should be anywhere between Rs.6,300 crore to Rs.6,400 crore.

    — Suvankar Sen

Revenue Growth

  • Year-on-year growth Revenue Growth · FY25 · High confidence 18% to 20%
    much like the 18% to 20% growth year-on-year that we continue to project and continue to work towards and we will be doing it in this financial year

    — Suvankar Sen

  • Year-on-year growth Revenue Growth · FY26 · High confidence 18% to 20%
    and we will continue to grow at 18% to 20% in the next financial year as well.

    — Suvankar Sen

  • Q4 FY25 Growth (YoY) Revenue Growth · Q4 FY25 · Medium confidence 6% to 7%
    We are looking at a 6% to 7% growth.

    — Suvankar Sen

Store Expansion

  • Total new stores Store Expansion · FY25 · High confidence 18 to 20 stores (8-10 own, 8-10 franchisees)
    Our endeavour has been to open about 18 to 20 stores for the financial year, where we were of the expectation that there will be 8 to 10 own stores and 8 to 10 franchisees.

    — Suvankar Sen

  • Total new stores Store Expansion · FY26 · High confidence 20 odd stores (8-10 own, 8-10 franchisees)
    And then going forward for the new financial year, we will continue to endeavour to open about 20 odd stores, 8 to 10 company-owned-company-operated stores and 8 to 10 franchisees.

    — Suvankar Sen

Revenue Growth (Value)

  • Full Year Growth Revenue Growth (Value) · FY25 · High confidence 18% to 20%
    in terms of value, we will end the year with 18% to 20% and Q4 growth year-on-year also in terms of value will be 18% to 20% minimum.

    — Suvankar Sen

Revenue Growth (Volume)

  • Full Year Growth Revenue Growth (Volume) · FY25 · High confidence Low single digit
    In terms of volume, it is going to be low single digit.

    — Suvankar Sen

Risks & concerns

  • Rising interest rates on metal gold loans

    high

    Metal gold loan interest rates expected to rise from ~3% to 6-7% in Feb-March, increasing funding cost by ₹7-8 crores.

    Management acknowledged

  • Customs duty impact

    high

    A total impact of ₹57 crores in YTD FY25 due to customs duty, with ₹29 crores in Q2 and ₹27 crores in Q3, distorting margins.

    Management acknowledged

  • Falling diamond prices and impact on consumer sentiment

    medium

    Solitaire diamond prices fell 25-30%, impacting consumer faith in diamonds as a store of value, leading to a lower stud ratio.

    Management acknowledged

  • Gold price volatility leading to consumer wait-and-watch mode

    medium

    Sudden jumps in gold prices cause consumers to postpone personal purchases, though wedding demand remains strong.

    Management acknowledged

Areas of evasion (1)

  • The exact mechanics of hedging impact on a quarter-to-quarter basis, often attributing it to Ind AS accounting timing rather than a clear operational explanation of why it didn't 'protect' margins as expected by analysts.

Q&A highlights

2 direct
Discrepancy in Q3 growth numbers (22% vs 27%) and new subsidiaries Direct
To answer to the first part of the question, the 22% growth has been the retail sales growth that we have announced in the press release after the quarter ended. But the 27% growth that we are seeing is because it's consolidated. So, there is we have our multiple companies, the mother company, Sennes Fashion, the Dubai company, we have a subsidiary called Senco Artisan, which is running 2 factories. So, all put together, it is 27% growth.

Clarified the difference between retail and consolidated growth figures and confirmed the new subsidiary, Sennes Fashion, for lifestyle businesses.

Asked by Praveen Kumar

Impact of competition, discounts, and falling diamond prices on margins Direct
Buying natural diamonds as a store of value is mostly done for the purpose through solitaire, 1 carat and above. What we have seen in the last 1 year is that the prices of solitaires have come down to a large extent, falling almost 25% to 30%, if not more, that is what is impacting the consumer and their faith on diamond solitaire as a store of value has gone down for the short-term, while their faith on gold as a store of value and an asset has gone up to a certain extent.

Explained the consumer shift from diamonds to gold due to price volatility and its impact on the stud ratio and overall margins, while also outlining the strategy for lab-grown diamonds.

Asked by Moksh Ranka

Effectiveness of hedging strategy in protecting gross margins amidst gold price volatility Partial
So, I'm making it very clear on the earnings call, that this timing of the impact of the hedging when it flows, is not decided by the management or by the company. It is decided by the Ind AS and by the statutory auditor. So that is where it is. And due to this timing gap, which you said is that the gross margin is impacted optically, I will say.

Highlighted a key investor concern about margin volatility despite hedging, with management attributing it to accounting standards (Ind AS) and timing differences rather than a flaw in the hedging strategy itself.

Asked by Ali Asgar Shakir

3 min read 6 chapters

Detailed narrative

Q3 & 9M FY25 Performance Overview

Senco Gold reported robust consolidated revenue growth of 27% YoY for Q3 FY25 and 22% YoY for the nine months ended December 31, 2024. Q3 revenue crossed ₹2,100 crores, marking the company's best-ever quarterly performance. Retail revenue also grew by 22% in Q3 and 19% YTD December. The company has already crossed ₹5,000 crores in revenue for the 9-month period and projects to reach ₹6,300-₹6,400 crores for the full FY25, representing an 18-20% value growth.

Margin Dynamics and Hedging Strategy

Adjusted EBITDA for 9M FY25 was 6.2%, a decline from 7.1% in FY24 and 7.7% in FY23. This was primarily attributed to a lower stud ratio, a ₹57 crore customs duty impact YTD, and a net hedging loss of ₹89 crores for 9M FY25. Management clarified that gross margins are generally stable (14-15%) over 3-4 quarters, and the quarterly fluctuations are due to Ind AS accounting and timing differences in hedging impacts, not a flaw in their 80%+ hedging strategy. They expect EBITDA margins to normalize to 7-7.5% by FY25 end.

Diamond Jewellery Performance and Outlook

Diamond jewellery sales grew 9% for 9M FY25, but the stud ratio (diamond sales as a percentage of total sales) declined to 10.5% for 9M FY25 (11% in Q3 FY25). This was due to a significant 25-30% fall in solitaire diamond prices, shifting consumer preference towards gold as a store of value. However, diamond sales have shown a strong recovery, growing 59% year-on-year in the last three months (December-February), indicating a positive trend for Q4 FY25. The company is also exploring lab-grown diamonds as a fashion segment.

Store Expansion and Growth Strategy

Senco Gold is on track to open 18-20 new stores in FY25, with 14 already opened and 5-6 more in the pipeline for February-March. The expansion includes 8-10 company-owned and 8-10 franchisee stores. For FY26, the company plans to open another 20 odd stores, maintaining a similar mix. The strategy focuses on strengthening presence in East India (60-70% of new stores) and expanding in North India (20%), with the remaining in West and South.

Impact of Gold Price Volatility and Interest Rates

Gold prices reached an all-time high of ₹8,800 per gram, leading to a minimal -1% volume impact in gold sales YTD. However, sudden price jumps can cause consumers to adopt a 'wait-and-watch' approach for personal purchases, though wedding season demand remains robust. Additionally, the company anticipates a higher cost of funding for metal gold loans, with interest rates potentially rising from ~3% to 6-7% in February-March, impacting overall numbers by ₹7-8 crores.

New Initiatives and Brand Building

Senco Gold launched Sennes Fashion as a new subsidiary in Q3 FY25, with plans to open 3-4 stores for lab-grown diamonds, leather bags, and perfumes under this brand. This initiative aims to diversify into lifestyle businesses with a long-term perspective. The company continues to invest in marketing and brand building to position itself as a premium brand, avoiding aggressive discounting even if it means losing some sales.

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