SKY Gold and Diamonds Limited — Q2 FY25 earnings call

Call held 19 Nov 2024

Management summary

Sky Gold Limited delivered an exceptional Q2 FY25 performance, achieving its highest-ever quarterly revenue and PAT, driven by strong demand and strategic initiatives. The company reported significant YoY growth across all key financial metrics for both the quarter and the first half of the fiscal year. Strategic capital infusion, expansion into new product categories, and strengthening of the core team are set to further accelerate growth, with ambitious revenue and margin targets outlined for the coming years.

Highlights

  • Q2 FY25 Revenue stood at ₹768.8 crores, registering a growth of 94.2% YoY.

  • Q2 FY25 PAT reached ₹36.7 crores, marking a remarkable growth of 405% YoY.

  • Q2 FY25 EBITDA was ₹38.8 crores, growing 154.3% YoY, with margins at 5% (up 119 bps YoY).

  • H1 FY25 Consolidated Revenue was ₹1,491.9 crores, up 93.3% YoY.

  • H1 FY25 EBITDA was ₹76 crores, up 124.4% YoY, with margins at 5.1% (up 70 bps YoY).

  • Company successfully raised ₹270 crores for product portfolio expansion and subsidiary growth.

  • Monthly production volume averaged 345 kgs in Q2 FY25, a 38% YoY increase from 250 kgs.

  • Exports contributed ₹63.9 crores, accounting for 9% of total quarterly sales.

Key financials

2 periods

Q2 FY25

  • Revenue
    ₹768.8 Cr
    YoY +94.2%
  • EBITDA
    ₹38.8 Cr
    YoY +154.3%
  • EBITDA Margin
    5%
  • PAT
    ₹36.7 Cr
    YoY +405%
  • PAT Margin
    4.8%

H1

  • FY25 Revenue
    ₹1,491.9 Cr
    YoY +93.3%
  • FY25 EBITDA
    ₹76 Cr
    YoY +124.4%
  • FY25 EBITDA Margin
    5.1%
  • FY25 PAT
    ₹57.9 Cr
  • FY25 PAT Margin
    3.9%

What they filed

Q1 FY27: revenue up 78.0%, net profit up 138.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue769 998 1,058 1,131 1,484 +93%1,768 +77%1,912 +81%2,013 +78%
EBITDA39 57 63 71 100 +156%122 +114%141 +124%157 +121%
Net profit37 37 38 44 67 +81%81 +119%91 +139%105 +139%
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

Revenue

  • FY25 Consolidated Revenue Revenue · FY25 · High confidence ₹3,300 crores
    Our FY25 revenue guidance stands at INR3,300 crores which includes INR2,700 crores from our core operations and an additional INR600 crores from our subsidiaries which we acquired recently.

    — Mangesh Chauhan, Managing Director & CFO

  • FY26 Consolidated Revenue Revenue · FY26 · High confidence ₹6,300 crores
    Already we have given a blended of INR3,300 crores this year and FY26 is INR6,300 crores. So, INR1,300 crores from subsidiaries and INR5,000 from the parent companies.

    — Mangesh Chauhan, Managing Director & CFO

Margin

  • Gross Margin Margin · long-term · Medium confidence 7% to 8%
    We aim to achieve 7% to 8% gross margin through an optimized product mix and export, while maintaining a long-term EBITDA margin of 5% to 5.5%.

    — Mangesh Chauhan, Managing Director & CFO

  • EBITDA Margin Margin · long-term · Medium confidence 5% to 5.5%

    — Mangesh Chauhan, Managing Director & CFO

  • Subsidiary EBITDA Margin Margin · next quarter · Medium confidence 5.5%

    Previously 4.5% → 5.5%

    So, they were at 4.5% EBITDA. So, we are also expecting them to take into quarter to 5.5% EBITDA because we have infused already the fund base amount, some amount in both the subsidiaries and we have started launching some new verticals and new designings in that.

    — Mangesh Chauhan, Managing Director & CFO

Profitability

  • PAT Margin Profitability · short-term · Medium confidence 3.5%
    So, we are targeting to 3.5% by reducing our interest cost.

    — Mangesh Chauhan, Managing Director & CFO

  • PAT Margin Profitability · FY26-27 · Medium confidence 4%
    But going forward for FY '26- '27, we will target 4%, 100% will go up to 4%.

    — Mangesh Chauhan, Managing Director & CFO

Export

  • Export Contribution to Sales Export · this year · Medium confidence 12%-13%

    Previously 9% → 12%-13%

    So, I think this year we will be at 12%-13% and next year we will be at 15%.

    — Mangesh Chauhan, Managing Director & CFO

  • Export Contribution to Sales Export · next year · Medium confidence 15%

    Previously 9% → 15%

    — Mangesh Chauhan, Managing Director & CFO

Debt

  • Gold Metal Loan (GML) Utilization Debt · December quarter · Medium confidence 50%-60%

    Previously 25% → 50%-60%

    So, I think by December quarter, we will be at 50%-60%. So, already we have come to 20%. Last quarter, we were at 10%. Now, we are running at 25% GML this quarter. So, by December quarter, 60%, 65% will be at GML.

    — Mangesh Chauhan, Managing Director & CFO

  • Gold Metal Loan (GML) Utilization Debt · March quarter · Medium confidence 80%
    I think we will be at 50%-60% of GML by December quarter and 80% by March quarter.

    — Mangesh Chauhan, Managing Director & CFO

Volume

  • Monthly Production Volume Volume · till end of year · High confidence 375-400 kgs

    Previously 350 kgs → 375-400 kgs

    So, we are at 350 kgs per month run rate in H1 and we are having [inaudible] 375 kgs, 400 kgs per month till end of the year.

    — Mangesh Chauhan, Managing Director & CFO

  • Monthly Production Volume Volume · FY26 · High confidence 550-600 kgs
    So, by FY26, it will be 550 kgs to 600 kgs per month.

    — Mangesh Chauhan, Managing Director & CFO

  • Monthly Production Volume Volume · FY27 · High confidence 750 kgs
    And by FY27, we are expecting to go to 750 kgs per month.

    — Mangesh Chauhan, Managing Director & CFO

Capacity

  • Subsidiary Capacity Utilization Capacity · future · High confidence 70%-80%

    Previously 30%-33% → 70%-80%

    Subsidiary companies is about 30%-33% utilization both the subsidiaries. ... Yes 100%. That's why we have infused capital also in that. And we are ramping up because we already have designers, production heads and all.

    — Mangesh Chauhan, Managing Director & CFO

Other

  • App Launch Other · December quarter · High confidence live
    I think by December quarter, it will be live totally. So, it will help the purchase manager of the stores, the sales heads and all can visualize each and every verticals and products. And they can order online.

    — Mangesh Chauhan, Managing Director & CFO

Risks & concerns

  • Fluctuating gold prices impacting inventory and margins

    medium

    Management stated that inventory is fully hedged on MCX, and they hedge every sale and purchase daily to mitigate price risk.

    Analyst acknowledged

  • Higher receivable days impacting working capital cycle

    medium

    Receivables increased due to high gold rates and customer leverage, but management expects improvement with new cash-and-carry clients and growing exports.

    Analyst acknowledged

  • Competition from organized and unorganized sectors

    low

    Management highlighted competitive advantages through quality, diverse designs, design secrecy, and German/Italian technology.

    Analyst acknowledged

Q&A highlights

3 direct
Subsidiary revenue contribution and capacity utilization ramp-up Direct
So, we are expecting a totally blended INR1,000 crores revenue in the next quarter, from the parent company INR700-INR750 crores what we are going by the run rate and from the subsidiary INR150 crores-INR350 crores. ... Subsidiary companies is about 30%-33% utilization both the subsidiaries. ... Yes 100%. That's why we have infused capital also in that. And we are ramping up because we already have designers, production heads and all.

Clarifies the expected financial impact and operational scaling of recently acquired subsidiaries, which are key to future growth.

Asked by Palash Kawale

Gold Metal Loans (GML) and hedging strategy against price fluctuations Direct
So, already our inventory is totally hedged in the MCX, which is available in India to hedge. So, our inventory is already hedged, and we hedge every sale and purchase on a daily basis in the hedging platform MCX. So, whenever GML comes, our hedging part will be lowered, but we have to hedge after the sales.

Addresses investor concerns about commodity price volatility and details the company's risk management framework for its gold inventory and GML.

Asked by Mihika Joshi

Explanation for the higher 'other income' in the quarter Direct
So, we had some - 5 years back we had some shares of HDFC Bank, TCS shares. We have placed to the banks against that we have taken the debt. So, we have replaced them with the FD. As a major listed company, now we don't want to keep any shares in the balance sheet. So, as advised by our advisor. So, we sold out that share this quarter. So, that's why other income came.

Provides crucial context for a one-time income component, ensuring investors can accurately assess the company's core operational profitability.

Asked by Raj Saraf

3 min read 7 chapters

Detailed narrative

Exceptional Q2 FY25 Performance and H1 Momentum

Sky Gold Limited reported its highest-ever quarterly revenues and PAT in Q2 FY25. Revenue surged by 94.2% YoY to ₹768.8 crores, while PAT saw a remarkable 405% YoY increase to ₹36.7 crores. EBITDA grew by 154.3% YoY to ₹38.8 crores, with margins expanding to 5% from 3.9% in Q2 FY24. The first half of FY25 also demonstrated strong momentum, with revenue reaching ₹1,491.9 crores (up 93.3% YoY) and PAT at ₹57.9 crores.

Strategic Capital Infusion and Expansion Initiatives

The company successfully raised ₹270 crores, which will be strategically allocated to broaden its product portfolio, including 18-carat gold and diamond jewelry. This capital infusion also supports subsidiaries like Star Mangalsutra Private Limited and Sparkling Chains Private Limited, aiming to tap into a 65% increased Total Addressable Market (TAM). Management is actively pursuing acquisition opportunities to further strengthen market position and accelerate growth.

Ambitious Revenue and Margin Guidance

Sky Gold provided robust revenue guidance, targeting ₹3,300 crores for FY25 (₹2,700 crores from core operations and ₹600 crores from subsidiaries) and an ambitious ₹6,300 crores for FY26 (₹5,000 crores from parent and ₹1,300 crores from subsidiaries). Long-term gross margin is targeted at 7-8%, with EBITDA margins maintained at 5-5.5%. PAT margin is expected to reach 3.5% in the short term and 4% by FY26-27, driven by reduced interest costs from increased Gold Metal Loan (GML) utilization.

Operational Scale-Up and Team Strengthening

Production volume averaged 345 kgs per month in Q2 FY25, a 38% increase from 250 kgs per month last year. The company aims to increase this to 375-400 kgs per month by year-end, 550-600 kgs per month in FY26, and 750 kgs per month by FY27. To support this growth, Sky Gold is continuously strengthening its core team, including the recent appointment of Mr. Akash Talesara as President of Sales and Business Development, and plans to hire a CFO and two board members.

Export Focus and Digital Transformation

Exports contributed ₹63.9 crores, accounting for 9% of total quarterly sales. The company targets increasing export contribution to 12-13% in FY25 and 15% in FY26, focusing on markets like the Middle East, UAE, Singapore, and Malaysia. Additionally, Sky Gold is developing an app for real-time customer ordering and product visualization, expected to go live by the December quarter, which will further accelerate sales and enhance customer reach.

Working Capital Management and Hedging Strategy

The working capital cycle currently stands at approximately 75 days. While receivables were higher in Q2 due to high gold rates and customer leverage, management expects improvement with the onboarding of new cash-and-carry clients like CaratLane and growing exports. The company employs a robust hedging strategy on MCX for its entire inventory and daily sales/purchases to mitigate the risk of fluctuating gold prices.

Positive Wedding Season Outlook

Management expressed a very positive outlook for the upcoming wedding season, citing a projected 25% increase in weddings in India this year, which is the highest in history. Favorable gold rates, which are down by 5% from their peak, are also expected to boost demand for jewelry, contributing to strong order inflows from clients and retail corporates.

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