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    Senco Gold

    SENCOGood
    Consumer Durables·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

    8

    • 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

    2

    • Rising interest rates on metal gold loans

    • Customs duty impact

    Key financials

    Metrics

    6

    Periods

    3

    Headline

    2
    • Consolidated Revenue Growth
      27%
    • Diamond Jewellery Growth (last 3 months)
      59%

    9M

    1
    • Consolidated Revenue Growth
      22%

    9M FY25

    3
    • Adjusted EBITDA Margin
      6.2%
    • PAT Margin
      2.1%
    • Stud Ratio
      10.5%

    Guidance & targets

    12
    CategoryTargetPriority
    Profitability
    EBITDA Margin
    7% to 7.5%
    		High
    Profitability
    EBITDA Margin
    7% to 8%
    		Medium
    Profitability
    Gross Margin
    14% to 15%
    		Medium
    Revenue
    Top-line
    ₹6,200 crores
    		High
    Revenue
    Full Year Turnover
    ₹6,300 crore to ₹6,400 crore
    		High
    Revenue Growth
    Year-on-year growth
    18% to 20%
    		High
    Revenue Growth
    Year-on-year growth
    18% to 20%
    		High
    Revenue Growth
    Q4 FY25 Growth (YoY)
    6% to 7%
    		Medium
    Store Expansion
    Total new stores
    18 to 20 stores (8-10 own, 8-10 franchisees)
    		High
    Store Expansion
    Total new stores
    20 odd stores (8-10 own, 8-10 franchisees)
    		High
    Revenue Growth (Value)
    Full Year Growth
    18% to 20%
    		High
    Revenue Growth (Volume)
    Full Year Growth
    Low single digit
    		High

    Risks & concerns

    5
    RiskSeverity

    Falling diamond prices and impact on consumer sentiment

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

    medium

    Rising interest rates on metal gold loans

    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

    high

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

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

    medium

    Customs duty impact

    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

    high

    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

    3

    “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

    3 min read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.