Detailed Narrative
Strong Q4 & FY25 Performance Driven by Diamond Growth
Senco Gold reported a robust Q4 FY25 with total sales growing approximately 21% year-on-year. Gold jewellery value increased by 20%, although volume saw a 6% decline due to rising gold prices. Diamond jewellery was a significant growth driver, achieving 38% value growth and 21% volume growth in Q4 FY25. For the full FY25, standalone adjusted PAT stood at INR 207 crore, with adjusted EBITDA improving 12.2% to INR 427 crore.
Improving Stud Ratio and Non-East Market Penetration
The company successfully increased its stud ratio to 10.9% by the end of FY25, up from 10.5% at the 9-month mark, driven by new designs and collections. The non-East business demonstrated strong momentum, growing 23% to approximately INR 1,230 crore and now contributing 18% of total revenue. This expansion is supported by 16 new store openings in FY25, including 6 franchise and 9 company-owned stores, with a focus on Tier 2, 3, and 4 towns.
Strategic Focus on Lightweight and Diamond Jewellery
In response to high gold prices (upwards of 30% YoY), management is observing a consumer shift towards lighter-weight, 14-carat, and 18-carat diamond jewellery. The company introduced new collections like Berry, Ice Cube, Ombre, and Rose, and saw a 26% growth in solitaires above 0.20 carats in FY25. This strategy aims to fit jewellery within consumer budgets and maintain demand, with diamond volume growth targeted at 15-20%.
Inventory Management and Capital Efficiency
Inventory days increased from 151 to 166, attributed to growth and readiness for seasonal demand like Akshaya Tritiya. The company aims for a comfortable debt-to-equity ratio of 1:1 to 1.2 and anticipates an additional working capital requirement of INR 300-400 crore, with maximum incremental borrowing of INR 350 crore for FY26. Management emphasized managing growth through internal accruals and continuous inventory efficiency, with old gold exchanges now contributing 39-40% of overall sales.
Profitability and Growth Outlook
Senco Gold maintains a positive outlook, targeting a top-line growth of 18% to 20% for FY26, with Q1 FY26 already showing 18-19% value growth. They aim to achieve an EBITDA margin of 6.8% to 7.2% and a PAT margin of 3.5% to 3.7%. The company also projects a return on equity (ROE) of 17% to 18% within the next 3 to 4 years, reflecting confidence in their long-term growth strategy and ability to navigate dynamic market scenarios.
Melorra Partnership and Future Initiatives
The company has entered a master franchisee agreement with Melorra, viewing it as a strategic initiative to connect with new-generation customers and boost diamond jewellery sales, particularly lightweight, everyday wear items. While specific financial details and future investment plans for Melorra were not disclosed, management indicated ongoing due diligence and a future decision. The Everlite store format, focusing on INR 20,000-50,000 price range and 50-60% diamond-studded jewellery, will see 3-4 more additions in FY26.