P N Gadgil Jewellers Limited (PNGJL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the PN Gadgil Jewelers Limited Q1 FY27 Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ayush Akardia. Thank you, and over to you, sir.

Thank you, Ananya. Good afternoon, everyone. On behalf of Novama, it's a pleasure to welcome you to PN Cardgill Zola's 1-3-20-7 audience conference call. For the management today, we have Dr. Saurabh Gargill, Chairman and MD, and Mr. Deepak Bittai, CFO. I would like to hand over the call to the management for their opening remarks. Over to you, Saurabh.

Thank you. Good afternoon, everyone, and a very warm welcome to the Q1 FY27 Earning Conference Call of PM Gargill Jewellers Limited. I hope you have had a great opportunity to review our financial results, investor presentations and quarterly updates, which are uploaded on the exchanges and on the company's website. At the onset, I would like to thank our customers, employees, franchisee partners, vendors, vendor partners and shareholders for their continued trust. Their confidence has enabled us to deliver our highest ever first quarter, beginning FY27 on a strong note. The Indian jewellery industry remained resilient throughout April to June despite record gold prices. Demand was supported by weddings and an outstanding akshetitya with festive sales growing 80.3% YOY to 251.4 crores. Customers continue to gravitate towards lightweight jewellery, studded products and old gold exchange trends and that continues to favour trusted, organised players with strong brand and transparent pricing. Against this backdrop, P&G delivered a revenue of 2,413 crores, up 41% YOY, EBITDA grew 57% YOY to 192.4 crores, with EBITDA margin at 8%, while Profit After Tax grew 52% YOY to 105.3 crores, with a Pat margin at 4.4%. This performance reflects the strength of the P&G brand, healthy consumer demand across categories, and a continued focus on disciplined execution and operational excellence. Operationally, the quarter was about trending our existing network while preparing for the next phase, site identification, franchisee onboarding, and execution planning for the expansion pipeline. We ended the quarter with 78 stores. Looking ahead, we remain committed to opening around 25 stores. During F5-2027, taking our network to approximately 103 stores by the year-end. A few launches are planned in Q2, while the bulk of expansion is planned across Q3 and Q4 through a franchise-led approach across both legacy and lifestyle formats, deepening our presence in Maharashtra while expanding our reach in Uttar Pradesh, Bihar, Central India, and ACR. Despite elevated gold prices, our performance remains in line with our previously communicated guidance. Supported by a 194-year-old legacy, disciplined execution, growing Pan-India presence, and a continued formalization of the jewelry industry, we remain confident of delivering sustainable growth throughout FY 2027. With that, I'll hand over the call to our Chief Financial Officer, Mr. Deepak Vijay.

Thank you.

With the question and answer session, anyone who wishes to ask a question may press star and 1 on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking the questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Yash Suntalya from Edwise Public Alps. Please go ahead.

Hi. Thank you, Terry, for taking my questions, and congratulations on a good set of models. Am I audible?

Yes, you are audible, Yash.

Yeah, so my first question is on gross margin, like YOY and gross margin is pretty much flat. While if I see the change in mix, we have seen a very good mix changing towards retail, which is like one of the highest margin product, highest margin revenue for us. So how to understand this flat margin?

So, if you see, you have to also compare the adjusted gross margin, wherein we have given the hedging gains separately. So, if you remove that, the adjusted gross margin, we have increased it by under 40, 50 bips, compared to last.

Got it. Got it. And one more follow up on the same. Basically, I really want to understand how to read the retail margin for the business, right? Because in retail also, there is a huge sale of less studied or maybe plain gold type jewelry. So what is the ideal retail margin for our business when the studied ratio is in the range of 10-11%?

So, ideally, we, so, you know, the stud have a different margin as compared to the metal, gold, metal, jewelry, plain, jewelry. These are different, slightly very, very different. With an stud ratio of 10 to 11 percent, we should be in the range of somewhere between 12 and a half to 13 and a half percent is what we should target.

Got it. Got it. And just assuming around 20.

In retail sales, our sales of jewels are increased to now 80%, 20-21% is only bargain coins. So keeping that and looking at standard plain gold and bargain coins in the retail category, you know, the raw coins should be like the percent between 13 to 14%. Give a guidance on the gross margins, you know, considering the impact of hedging gain, which are shown separately in our presentation.

Got it, got it. Makes sense, sir. Makes sense. And one last question, like, with our store expansion happening, ideally, what our understanding is the other expense will also increase with the same amount, but in this quarter, the other expense has only increased by 5%. Thank you. So, any specific efficiency?

Yeah, so I'll take this question. So, yes, the other expenses have not moved in the same proportion as the sales. You know, a couple of reasons.

Followed by the spin. Ask a question. The next question is from the line of Smith Kala from RSPN Ventures. Please go ahead.

Thank you for the opportunity and congratulations on a good set of numbers. So, my first question was in line with the sale of coins, etc., which were elevated in the last quarter and which have cooled down this quarter. So, it will be, it is my request to the management that can this number be given separately in the presentation and what is the difference between the other section in the segmental reporting which we give in the PPT and the 21-22% which we are mentioning of gold coins, etc. as a part of retail revenue.

See, in retail, what I mentioned as bars and coins is what we talk about pure gold, what we say at the stores. So, this time we have gone and mentioned, we have given the details of that, that the average ticket value is less than 5 grams of the coins and bars sold at the retail counter. And out of that, more than 50% have converted into jewelry. So, this has been a productive sale for us. The others, which I mentioned here, is primarily the corporate sales, what we do, you know, if our company is in bulk order. So that's a very small minuscule number. That's why they put it in others. But going ahead, we will have three categories, like I mentioned, retail, out of which roughly around 78 to 79 percent would be jewelry, 20 to 21 percent would be bargain coins, and then the second level would be the franchising, and the third arm would be e-commerce.

Okay. That was helpful. The next question from my side, same as a continuation to the question of the previous participant on the other expenses. We have seen a big reduction as far as other expenses concerned while you alluded the reasons for the reduced primary, no new store openings, etc. So, on a normalized basis, what are the kind of other expenses what we are looking at as a percentage of sales?

So see, in the guidance given by us, we will be on the same line. Q1 was a little low because we had planned this quarter to really focus more on the existing show network. We had reduced marketing to a large extent since there are no further brand building required in new areas, and we are focusing a lot on ongoing activities. You know, it was also a season when we didn't really have to spend anything more on travel or other side, but going ahead with the annualized other expenses which were planned for the year, Deepak Filters give number to you, should be on track.

Should I wait for the number?

Just a minute.

I'm just adding the number together.

It will be in the range of...

In this moment, I will be reconnecting the previous participants. Just a moment sir, we are reconnecting.

Thank you.

Hello.

Hello. Hello.

Yeah.

Am I audible? On the other income bit, I understand our accounting for the hedging takes place at the gross margin level. So, the difference in the other income from 31 odd crores in Q4 versus 10 crores in Q1. So, what plays that?

Other income is primarily the interest part on the fixed deposit which we have.

But this fluctuation is so vast, interest should be, I assume, interest should be more or less equally distributed across quarters?

Yes, so this will be equally distributed. So the FDs which we have put on mortgage has come down from last year, and that's the major difference.

Because the difference is huge, from 31 crores odd of other incomes to just 10 crores in this quarter, so...

No, there is... Last quarter, there is no... Just give me a second.

Yes, yes, I was talking about Q4 only, 31 crore, yes.

So we have dropped down the FBs from the balances also.

The money, the money which was utilized, all the money which was redeemed from the FDs is sitting on cash on the balance sheet, is it, in Q1?

It's on the cash also, and we have put some money for the margin for the hedging part also.

Okay, and we will be doing around 7% of EBITDA margins for the full year. Is that your guiding point?

Yes, that's right.

Okay, thank you, right, so all from my perspective.

Thank you. The next question is from the line of Raj Shah from Three Head Capitals. Please go ahead.

Hello. Are you able to hear me? Yeah, yeah. Go ahead.

Yeah. Sorry. So, I was asking, say, I mean, in terms of our standalone stores, we are currently at 65. So, two, three years down, I mean, PN Gradual, Fracture Stores, what kind of store addition that you see going forward in terms of our standalone store? And what will be the mix of Coco and Franchisee one?

So, right now, we are.

Good morning, everyone.

We should be at a number of around 177 stores, out of which 113 would be the P&G legacy stores, and around 64 would be lifestyle stores. That is the plan for three years.

Okay, understood. And majority of the new store expansion should come under FOCO, I mean, 60-70% of that, of the new stores, right?

As of March 2029, we are looking at around the 75 stores would be COCO, and around 40 stores would be FOCO. So, this year, the plan would be to expand more on the FOCO, because last year, we had expanded more on the COCO side. But going ahead, it will be, after that, the next two years, would be a combination of COCO and FOCO.

Understood. So, sir, what kind of gross margins do we see three years out? I'm understanding gross margins will be lower, but will we consequently have lower employee and other expenses, so our EBITDA margins might be improving trajectory, but in terms of gross margins, what kind of margins do we see three years out?

Yeah, so while we will have an...

It's a nice question.

In terms of our borrowings, currently, what is the mix of GML in our borrowings, and how do you see this borrowing moving from here, I mean, because the organic store expansion might be lower, I mean, we do FOCO more, so, the operating cash flow that we generate, should it be used to run down the borrowings, or how do we see this mix going forward?

So, our borrowing...

Next question is from the line of Naveen Dravedi from Motilal Oswal. Please go ahead.

Yeah, good afternoon, everyone. Sir, one question on the Adikmas, which I'm sure that would have impacted your quarter one performance also. Can we expect the Adikmas, which would have kind of postponed the wedding season, can benefit in the coming quarters?

I mean, Adikmas was not a big turnout this year. Primarily, silver prices hovering at a high level. Silver is an item sought after during Adikmas. So, Adikmas had seen routine sales. It was not like a standout season. Weddings, like you said, because of additional munch, weddings would be a driver. So, Q2 or a large portion of Q3 should benefit from the wedding which have been postponed by a month.

And in terms of our SSG, if I look at our overall growth rates are 41%, correct? And retail growth is 56%. So when I look at the SSG, is it only pertained to retail growth rates, which is like 46% which we have reported?

Yes, this is retail SSG.

Sure, fair point. And in this quarter, we had shared the hedging gains for this quarter and the last year also, correct? Can you also share the similar numbers for the last year, how these three quarters has kind of, for the remaining three quarters and for the FI26?

So, I think we have, in the last call, we reported the numbers for quarter three and quarter four as 45 crores and 20 crores of gains. In quarter two, the upside and the downside was not much, it was netted off, but that number is in the range of around about five and a half crores, six crores. That's what I remember on top of my head.

45 crore was quarter four, correct?

Quarter three, quarter three. Quarter three was quarter five crore. That's where the margins were very high, that particular quarter, with all of the 45 crores we inserted in there.

Yeah. Sorry, I missed out with quarter four. Now we are talking about going back to our hygiene. 80-90%. And what are the timelines to kind of achieve those percentages?

So 80, I feel, should be doable before the, before Diwali or maybe quarter three. We can target 80 to be around about quarter three. to be fully edged.

Fair point, fair point.

On the other expenses side, also like you kind of communicated about reaching to 400 crore kind of a number, so is it only the marketing heads which kind of will give you close to 100 crore plus sort of a cut versus last year?

You mean the overall marketing, you are talking overall other expenses?

Yeah, you mentioned about last year we did close to 500 crore plus number. So, love you.

Last year, two, three triggers, why it was very high.

Thank you. Thank you.

Sorry to interrupt. Your voice is coming with a lot of disturbance. Could you please try maybe speaking near the mic?

Yeah. Navin, are you there? Yeah, I'm there. I'm there, but yeah, your voice was not very audible, yeah. No, no, I said both of them.

The one-time expenses. Is it okay now?

Because from our side, there is no disturbance.

Now it is perfect, sir. Please continue.

Yeah. Sorry, I have answered the question. Anything else from your side?

Just two things from my side. Last year, we did close to 75 crore inventory gain. So, if I look at on a profitability side, there would be like 50-60 bps kind of a benefit, at least on the net profit margin. So, I think the underlying margin would be close to 3.2 to 3.3 on a yearly basis. How are we seeing this, because given now expenses line will kind of will see taping down, and given now there is up and down in the gold side also has played out, how are we seeing profit margins this year?

So, as we are growing more on the hedging, so the hedging gains will slowly burst. Hello, Naveen.

Hello. Yeah, yeah, so I was asking about our net profit margin percentage.

The net margin should be in the range of around 4.2.

Yeah, we should be upwards 4, between 4.1 to 4.25 is what we are targeting. This is underlying without any kind of hedging gains. And we are also ensuring.

The next question is from Subhanu Bangal from 3Head Capital. Please go ahead.

Yeah, good afternoon. Hope I am audible. Sir, my question on the lifestyle format, like current our status mix around 32%, but in the same, hope I am audible, hello?

Yeah, you are audible. Go ahead.

Yeah, in the same segment, many of our listed pairs are keeping the stat ratio above 50-60% or so. And they are doing around 30-35% gold margin. But my question on why we are keeping the start ratio around 30-35%, although we are opening this format for our start mix business. And second, what kind of GM we are doing currently? GM means gold margin we are doing. And third, last year we wanted to open around 100 stores by 2030. In the light side format, are you on track to achieve this guidance?

So, your first question on the light side, why is the study ratio?

Sir, your voice is cracking up a lot.

It is the same phone. I am going to see right now. There is no change. I don't know why it is cracking.

Yes, sir.

Is it audible now?

Could you please say a line? I will check.

No, is it audible now?

Yes, it is. It is audible now. Continue, please.

Yeah, so on the light style, as I mentioned last, we started light style more on the gold side, looking at around 80% inventory of gold and only 15 to 18% in studded. But through the journey, through people's experiences, we realized that studded has to go up, and that is how we have been slowly working on the merchandise mix. Eventually, we plan to take it to 80% started inventory at the store level and 20% gold inventory. And that will also enable us to reach a 60% started ratio in that category.

Yeah, yeah, I'm here.

So once that happens, the margin again would be, you know, like the industry around 30-35% margin on the light style format. And on the store size, we have right now spoken up to March of 2029, where we are looking at reaching around a 65 to 70 store mark for light style. And as we go ahead, you know, in the next few years, we should be aiming to reach the 100 store mark for light style.

Okay, and what was the current growth rate

in the right size, around 18 to 20%.

And when we can expect this started mix can go up to 80%?

I think the next two years, because right now we have seen the entire merchandise mix. So our current ratio, started ratio is around 34%, which is the next two years to expect to... We're doubling from here.

Yes. Great. We will go up with the change of merchandise.

Okay, great. Best of luck, sir.

The next question is from the line of Nitin Chen from Fair Value Equity Advisory. Please go ahead.

Yeah, thank you for the opportunity, and congratulations on an excellent quarter. So, my first question is, in the retail segment, like we have done very well this quarter, despite the adhikmas, but both franchisee and e-commerce, they have been slightly muted. So, what reason you would attribute to this?

The franchisee, like we had mentioned in the update, we were looking at finalizing franchisees working on the store setups. So the franchise number will pick up in Q2 and Q3. So we have around on the legacy side around 10 franchisees planned for the entire year and around 5 on the lifestyle format. So the number will pick up as we move ahead. And your second question was on e-commerce. Yeah, e-commerce, we have taken a conscious decision of focusing more on the jewelry side and reducing the bars and coin sales there. So, it's more of a company to focus on jewelry, both studded and plain gold on the e-com side. So, e-com will see better margins, but may see a little slowdown, a little decrease in total sales.

Great. Also, the inventory ratio we have today is close to 4x, but according to the presentation, it was nearer to 8x, almost 8x two years ago. So, what do you think has caused this big dip in inventory ratio?

The ratio is around 7 times, but hello? You know, the ratio was around 7. That primary was when we were doing the refinery sale and there was a lot of B2B sales. After that, everything has been rationalized. We had also given a guidance of, you know, the stock selling at around 3.5 to 4 and that is where we are today. So this was as per the guidance given and after ending the refinery sale and the B2B sale.

Great, that's very helpful. And my last question is on the promoter shareholding. So, right now, it's greater than 75% and it kind of seems to be an overhang on the stock. So, do we have plans to bring it down in the near future?

The plans are there. Definitely we already have an enabling board resolution into the effect. So we are monitoring the market and at a suitable time we will definitely come up with the QIP to get the shareholding to the desired level.

Great. Thank you so much. Now, just one last observation. So, recently I was in Ayodhya for the darshan of Sriram Mandir, and I saw a hoarding of PNG jewelers just right outside the Mandir. So, the area had very good footfall and excellent visibility. So, congratulations on the management on that.

Thank you. You're opening a store, Sriram, Ayodhya. So, next time you go there, you can also see the PNG store there.

Great. Thank you.

Thank you.

Thank you. The next question is from the line of Yash Sontalia from Metalwise Public All. Please go ahead.

Hi, thanks for the follow-up. So, I, sorry for the confusion, but I again wanted to ask on gross profit margin only on the YOY basis. So, hedging gains are very similar on YOY basis. So, and ideally, like you already alluded, we have done a really good job on increasing the retail revenue and the mix of jewelry in the retail and also reduces the discounts or the off schemes we provide. So, ideally, this should have increased our gross margin. So, what is the reason the gross margins are flat?

The hedging gain last year was on a lower base. And the same, similar hedging gain we have on the bigger base this year. So when you put the adjusted margin net of the hedging gain, you will see the bits increasing.

Yayash, you there?

Yes, yes. So, basically, 20 bips, I understood the base effect, but ideally, what my understanding was, the margins would have improved more with the mixed exchange. But, got your point on that part.

Basically, these new businesses or the new territories, the share of these... New directories in the overall retail mix is around about 3%, you know, so the start ratio might see bigger number there. But to translate into a visible margin gain, this UP and Central India revenue share in the retail mix has to really increase there. So, that's where... We'll have to focus a couple of years down the line when UP and Central India becomes a bigger share of retail margin, you will see the better margin numbers there as compared to that.

Got it, got it. And one last question is on the franchise part of the business, not talking about the growth of the stores, but on the revenue growth, like we only have seen 8% revenue growth, while the same in our own stores, the growth is higher. So why is such high discrepancy and how it impacts the economics for a franchise partner?

So, I'll take the question on the franchisee growth being muted at 8% for this year. So, franchisee, how generally we do? We do one stock. When we start the franchisee, that time it is 100% when a stock can happen because they pay up, we stock up there, that's the part of the sales which we book. Now, the replenishment happens there on a weekly basis and as and when required and also franchisee also sometimes has to pay up the money and then get the stock. So, there could be some timing differences which could come in from when the money is paid and when the stock is completely sold there. So, franchising is... The sales which we record is not B2C, it is B2B. So the stores might still have an inventory or the investor has not paid up the money, they might want to pay a couple of days ahead. So those all mixes happen in franchises. The franchisee, apple to apple, on a quarter to quarter. These differences which will come, but having said that, we understand because franchise is our focus now, will be becoming big. So we have taken access of the systems. From franchisee, we will be monitoring the B2C environment very closely and the customer demands closely, and you will see the better economics coming from franchisee on the B2C level as well. But this has become our focus now, and we are continuously working with the franchisee partners to get access in the B2C data.

Got it. Thanks. Thanks a lot.

Thank you. The next question is from the line of Ayush from Nuwama. Please go ahead.

Thanks. Just one question from my end. We are going good on Maharashtra. Are we seeing any cannibalization in science, particularly in the state? And also, are we gaining any share from the likes of Kalyan and Tanishka? Yeah. In Maharashtra, we are doing good expansion. Are we seeing any cannibalization in

the stores?

No, sir, our expansion is planned in a strategic way. So, you know, whichever area we're expanding, we look at the, you know, the catchment area, which are the customer base there. And only if it makes, if it's the catchment area to serve for a new store, you can launch a store. So, cannibalization, you know, which will impact the existing store and new store is not happening. You know, some natural conversation will definitely be there, but, you know, that's always factor in when you enter a new store that some stores may lose some portion of their sales, but then the stores also address new customers and, you know, be able to still top it up and grow, you know, as we move ahead.

And also to add to what Sarav has said that when we go for the franchisee stores or our own stores in a similar territory, there is a framework and a guidelines which we use wherein there has to be a particular kilometers apart. These stores have two different catchments and they should not eat up into each other's sales. So that is also a guiding factor and a framework when we choose which location to open the news to or the franchisees to.

And I would also, the other question I think you asked was about gaining share from competition. There is definitely, you know, share which we are trying to gain from competition in Maharashtra. Also, the unorganized segment is something which is moving fast towards organized, and that's why getting a lot of new customers. So, our CRM is actively working on ensuring that we keep on having a healthy share of new customers, and also being able to dive deeper into our existing set of customers.

Understood, sir. Just one moment, sir. On our UP expansion, how has been the initial feedback of our stores?

See, UP has gone well on track as per our plans. We have been always mentioning during the last couple of calls that, you know, we had made some projections for UP in terms of stock turn, in terms of started making. I think we are on track for that. We still haven't finished a year, so, you know, some stores are only three or four months old, but, you know, the older stores are also on track. And I think UP expansion looks to be satisfactory, looks to be good. And I think a study which we projected at 15% is already upwards of 18%, which can still see further growth. And I think those markets have accepted the brand well. And that's another reason why we're seeing almost 8 to 10 franchises opening in UP in this financial year.

All right. That's helpful. Thank you. Thank you.

Thank you.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question today. I now hand over to the management for the closing remarks.

Thank you, everyone, for joining today's call and

your continued interest in P&G Dwellers. We appreciate your insightful questions and continued support. Should you require any additional information, please feel free to reach us at our investor relations partner, XB4 Advisory. Thank you, and have a wonderful evening ahead.

Thank you. On behalf of P&G Dwellers Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.