SKY Gold and Diamonds Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

Sky Gold Limited delivered an exceptional Q3 FY25, achieving its highest-ever quarterly revenues and operating profits, driven by strong growth momentum and strategic client additions. The company is diversifying into diamond jewellery, expanding capacity, and improving its capital structure through Gold Metal Loans. Management provided an optimistic outlook, revising revenue guidance upwards for FY26 and FY27, and detailing long-term margin and efficiency targets.

Highlights

  • Q3 FY25 Revenue grew 116.7% YoY to ₹998.0 crores.

  • Q3 FY25 EBITDA increased 217.6% YoY to ₹57.3 crores, with margin expanding 182 bps to 5.7%.

  • Q3 FY25 PAT rose to ₹36.5 crores, with margin improving 172 bps to 3.7%.

  • 9M FY25 Revenue grew 102.1% YoY to ₹2,489.8 crores.

  • Monthly production volume averaged 447 kg in Q3, up 66% YoY.

  • Credit rating upgraded to 'IND A-/ Stable' by India Rating.

  • Onboarded Aditya Birla Novel Jewels' Indriya brand, CaratLane, and P.N. Gadgil.

  • Revised FY27 revenue guidance upwards to ₹7,200 crores (from ₹6,300 crores).

  • Targeting 4 tons/month capacity by FY27 and cash flow positive by FY27.

Key financials

2 periods

Q3 FY25

  • Revenue
    ₹998 Cr
    YoY +116.7%
  • EBITDA
    ₹57.3 Cr
    YoY +217.6%
  • EBITDA Margin
    5.7%
  • PAT
    ₹36.5 Cr
    YoY +309%
  • PAT Margin
    3.7%

9M FY25

  • Revenue
    ₹2,489.8 Cr
    YoY +102.1%
  • EBITDA
    ₹133.3 Cr
    YoY +156.8%
  • PAT
    ₹94.5 Cr
    YoY +251.3%

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

  • Revenue Revenue · FY26 · High confidence ₹5,700 crores
    Yes. So already we have given the guidance of INR5,700 -- we have revised the guidance to INR5,700 crores for the FY '26 and INR7,200 crores for '27.

    — Mangesh Chauhan

  • Revenue Revenue · FY27 · High confidence ₹7,200 crores

    Previously ₹6,300 crores → ₹7,200 crores

    So we have changed our guidance to INR7,200 crores by FY '27.

    — Mangesh Chauhan

Profitability

  • PAT Margin Profitability · FY27 · High confidence 3.5-4%
    So we are expecting from 3.5% to 4%, 3.5% to 4% in between that.

    — Mangesh Chauhan

  • Gross Margin Profitability · FY27 · High confidence 7%
    So gross margins, we are expecting to be at 7%, EBITDA at 5.5% and 3.5% PAT.

    — Mangesh Chauhan

  • EBITDA Margin Profitability · FY27 · High confidence 5.5%

    — Mangesh Chauhan

  • PAT Margin Profitability · FY27 · High confidence 3.5%

    — Mangesh Chauhan

Debt

  • Gold Metal Loan (GML) Conversion Debt · March FY25 · Medium confidence 55-60%
    But we are -- I think we are sure that we'll move by March quarter to at least 55%, 60%.

    — Mangesh Chauhan

  • Gold Metal Loan (GML) Conversion Debt · Longer Term · High confidence 70-80%
    So we are -- we want to go up to 70% to 80% GML.

    — Mangesh Chauhan

  • Gross Debt Debt · FY25 End · High confidence ₹380-400 crores
    I think by the end of this year, we are at INR380-INR400 crores only.

    — Mangesh Chauhan

  • Gross Debt Debt · FY26 · High confidence ₹550-600 crores
    So gross debt will be approximately -- next year, we are planning -- this year is INR400 crores, so INR550 crores to INR600 crores.

    — Mangesh Chauhan

Finance Cost

  • Finance Cost Percentage Finance Cost · Future · High confidence 0.65-0.7%

    From 1.2-1.3% today

    Yes, it will help to improve by 0.5%. 0.5% will be approved, so, 1.2%, 1.3% we are there. So it will come down to 0.7% or 0.65%.

    — Mangesh Chauhan

Raw Material Sourcing

  • Raw Material from Clients Raw Material Sourcing · Next 2 years · High confidence 30-40%
    So in next 2 years, we are expecting 30% to 40% from this client.

    — Mangesh Chauhan

Exports

  • Export Revenue Contribution Exports · FY27 · High confidence 13-15%
    And in 2 years, we are expecting it to take it to 13%, 14% or 15%... And this 8% to 9%, we are taking we are expecting to go to 13%, 14% or 15% by FY '27.

    — Mangesh Chauhan

Capacity

  • Production Capacity Capacity · FY27 March · High confidence 4 tons per month

    From 1 ton per month today

    So we will go up to 4 ton capacity. Now we are at 1 ton capacity. We will go up to 4 ton capacity because by FY '27 March after that, we'll leave the facility and we'll make now our competitor enlarges the capacity -- he's making 2 ton and he has a capacity of 2.5 to 3 tons.

    — Mangesh Chauhan

Product Mix

  • Lab-grown Diamond Revenue Contribution Product Mix · Next 3-6 quarters · High confidence 5%
    lab-grown will have a place of 5% in next 3, 4 quarters or 6 quarters.

    — Mangesh Chauhan

Volume

  • Monthly Production Volume Volume · FY26 · High confidence 650-700 kg

    Previously 550-600 kg → 650-700 kg

    So we are expecting to 650 kg approximately, 650 to 700 kg.

    — Mangesh Chauhan

  • Monthly Production Volume Volume · FY27 · High confidence Beyond 1,050 kg
    And for FY '27, it will be beyond 1,050 kg? Yes.

    — Mangesh Chauhan

Market context

  • Cash Flow Status Cash Flow · FY27 · High confidence Positive
    So immediately we will be not requiring much capital to fund them, and we'll be cash flow positive by 2027.

    — Mangesh Chauhan

Risks & concerns

  • Gold price fluctuations impacting demand

    medium

    Retail demand sees a short-term 10-15% impact for 10-15 days when gold prices rise, but normalizes quickly, with a shift towards 18 carat jewellery.

    Analyst acknowledged

  • Lab-grown diamond price correction

    medium

    Lab-grown diamonds are a devaluating asset, but the company mitigates risk by procuring only against fixed orders and maintaining limited inventory.

    Analyst mitigated

Areas of evasion (2)

  • Specific Q3 volume split between standalone and subsidiary
  • Exact inventory and debt position by end of December (offered to send details later)

Q&A highlights

2 direct
Capital employed and receivable cycle reduction strategy Direct
So already you can see we are concentrating on debtors day, and we are expecting it to come to 15 to 10 days because 50% business from right now from here to FY '27 March, we are targeting 30% business should come from their raw material, we don't have to fund that raw material and debtors also. So blendedly it will come down.

Addresses a key investor concern about working capital efficiency and how new client models (client-provided raw material) will improve it, impacting ROCE and cash flows.

Asked by Srinath Krishnan

Risk of lab-grown diamond price correction Direct
Sure. So I will throw a light on that because lab-grown is a devaluating asset every time -- every quarter rates are falling... but as a manufacturer, all the industry works on that model, we also procure that only order to the lab growing companies, that quantity only, which we get the fixed order of that. So we will keep in the stock of this inventory.

Directly addresses a sector-specific risk for a new segment the company is entering, explaining their strategy to mitigate price volatility by operating on an order-based model with limited inventory.

Asked by Bharat Gianani

Progress on onboarding Tanishq and Reliance and impact on guidance Partial
So I think we are right now in a good position because we have supplied 2, 3 times to the CaratLane and we have become a regular vendor to the CaratLane... Now Tanishq is the only remaining part, so we are very nearby... No, I'm not we are not taking consideration in the guidance. Right now also, we have not taken much consideration of the CaratLane, also Aditya Birla because they are in the initial stage.

Reveals progress on onboarding major clients like Tanishq and Reliance, which are significant growth drivers, and clarifies that current guidance does not yet fully incorporate these potential large clients, suggesting further upside.

Asked by Manan Vandur, Nilesh Jain

3 min read 7 chapters

Detailed narrative

Exceptional Q3 FY25 and 9M FY25 Financial Performance

Sky Gold Limited reported outstanding Q3 FY25 results, with revenues soaring 116.7% year-on-year to ₹998.0 crores. Operating profits (EBITDA) demonstrated even stronger growth, increasing 217.6% to ₹57.3 crores, leading to an EBITDA margin expansion of 182 basis points to 5.7%. For the nine months ended December 2024, the company's revenue grew 102.1% to ₹2,489.8 crores, and PAT increased by 251.3% to ₹94.5 crores, underscoring robust operational execution and market demand.

Strategic Client Onboarding and Market Expansion

The company successfully onboarded significant clients including Aditya Birla Novel Jewels' Indriya brand, CaratLane, and P.N. Gadgil, enhancing its footprint among major jewellery retailers. Management indicated that these new partnerships, alongside aggressive expansion plans by existing clients, are crucial for future growth. Sky Gold is also actively pursuing collaborations with Reliance and Tanishq, with Tanishq being 'very nearby' to onboarding, which could provide further substantial volume increases.

Diversification into Diamond Jewellery and Rebranding Initiative

Sky Gold is strategically diversifying its product portfolio by entering the 18 carat natural diamond jewellery and lab-grown diamond jewellery segments. This quarter saw a doubling of natural diamond carat sales to 883 carats and an increase in 18 carat production to 49 kgs. To reflect this broader focus, the company plans to rebrand as 'Sky Gold and Diamonds Limited,' with lab-grown diamonds targeted to contribute 5% of revenue within the next 3-6 quarters.

Upward Revision of Revenue Guidance and Long-Term Margin Targets

Management revised its revenue guidance upwards, now targeting ₹5,700 crores for FY26 and ₹7,200 crores for FY27, an increase from the previous FY27 target of ₹6,300 crores. This revision is attributed to the successful addition of new clients not previously included in the guidance. The company also provided long-term margin targets for FY27, aiming for gross margins at 7%, EBITDA margins at 5.5%, and PAT margins between 3.5% and 4%.

Enhanced Operational Efficiency and Capital Structure Improvements

Monthly production volume in Q3 FY25 averaged 447 kg, marking a 66% increase year-on-year. The company's credit rating was upgraded to 'IND A-/ Stable' by India Rating, which is expected to reduce the cost of funds and collateral requirements. Sky Gold aims to convert 55-60% of its loans to Gold Metal Loan (GML) by March FY25 and 70-80% in the longer term, projecting an improvement in finance costs by 0.5%.

Capacity Expansion and Working Capital Management

To support its ambitious growth trajectory, Sky Gold plans to expand its production capacity from the current 1 ton per month to 4 tons per month by FY27. A significant portion of future business, estimated at 30-40% in the next two years, is expected to come from clients providing raw materials. This model will substantially reduce the company's working capital requirements and debtor days from 25 days to 10-15 days, with the company projecting to be cash flow positive by FY27.

Export Growth and Resilient Demand Outlook

Exports contributed ₹71 crores in Q3, achieving a 12% quarter-on-quarter growth, and are targeted to constitute 13-15% of total revenue by FY27. Management noted stable demand from key markets like UAE, Singapore, and Malaysia. Despite recent gold price fluctuations, overall demand for wedding jewellery remains robust, with any retail impact being short-term (10-15 days) and quickly normalizing, particularly with a growing preference for 18 carat jewellery.

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