P N Gadgil Jewellers Limited (PNGJL) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to P&G, Guard Guild Dwellers Limited Q2 FY27 Earnings Conference Call, hosted by Nuama Institutional Equities. As a reminder, all participants will be in the lesson-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the 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 Adhukya from Nuama Institutional Equities. Thank you, and over to you, sir.

Thank you, you, sir. Good afternoon, everyone. On behalf of Nuama, it is a pleasure to welcome you to PN Badgain's Journal, 2PF.27, on his function call. From the management today, we have Dr. Thawram Badgain, Chairman and MD, and Mr. Leepa Pujai, CFO. I would like to hand over the call to the management for their opening remarks. Over to you, Thawram.

To begin with, they are confident and deliver a strong this July to September, largely coinciding with Chaturmas. Despite this seasonal moderation, consumer demand remains healthy. These evolving preferences continue to create opportunities for trusted, organized, expanding 186 BIPs to 3% YOI at margin of...

Sorry to interrupt, sir. Your voice is breaking. Sorry, sir, your voice is breaking. There is cracking sound coming from your lines. Sir, I'll just disconnect and reconnect. Ladies and gentlemen, please wait while we reconnect the management. Ladies and gentlemen, thank you for patiently holding. We have the line for the management reconnected. Over to you, sir.

So now with TNG Legacy, U and Silver Style, we now have one house and three brands that engage with every generation of jewelry buyers. In Q2, these developments have been currently worked with over Synergy for Synergy integration across our capabilities and stores in India.

Sorry to interrupt, sir. Your voice is again breaking.

Can you pass the mobile, please, now?

Okay, sir. I'll reconnect you. Ladies and gentlemen, please wait while we reconnect. Ladies and gentlemen, thank you for patiently holding. We have the line for the management reconnected. Over to you, sir.

We remain on track to open around 23 new stores in FY27, taking our total store count to approximately 103 by the year end. Expansion will gather pace over the next two quarters, driven primarily by the franchisee-led model across both legacy and new formats. Our Ayodhya store is already operational, while the Prayagra store is scheduled to open on 4th of November, 2026. Of the planned addition, 8 to 10 openings are targeted in Q3, while the remaining openings are planned for Q4 and F527, supported steady progress toward the expansion targets. We have also strengthened our risk management framework, raising the hedge coverage to approximately 80%, making our earnings more resilient to gold price swings. Backed by a 195-year-old legacy, a sharper brand portfolio, and a strong balance sheet, we remain confident of delivering sustainable, profitable growth throughout the year of FI 2027. With this, I'll hand over the call to our Chief Financial Officer, Mr. Deepat Vijay.

Thank you, Dr. Gargill, and good evening, everyone. Let me take you through our financial performance for the quarter ended September 30, 2026. Thanks. Consolidated revenue from operations grew 22% year-on-year to 2,660 crores, driven by strong retail performance. Retail revenue increased 31% year-on-year to 2,061 crores, supported by a healthy SLSG growth of 25.5%. Franchisee revenue also recorded a strong growth of 25% year-on-year, whereas e-com reduced 84% year-on-year, primarily due to strategic recalibrations of the product mix, as we deliberately reduced the share of low-margin coin sales and shifted focus towards higher-margin jewelry products to enhance the quality and profitability of the channel. Retail now contributes 77% of our total revenue, compared with 72% in the corresponding quarter last year, reinforcing its growing contribution toward business and margin expansion. Also, the share of retail revenue from northern and central regions increased to 2.7% in Q2 FY27, from 0.7% in Q2 FY26. Our gross profit grew 32% year-on-year to 339.8 crores, with gross margin expending by 89 bps to 12.7%. Our EBITDA increased 57% to 224.6 crores, with a margin expending 186 bps to 8.4%, Excluding an unhedged inventory gain of 5 crore, adjusted EBITDA grew 60% to 209.6 crore, with an adjusted EBITDA margin improving to 8.2% from 6.3% in a year above. This reflects the strength of underlying operations and demonstrates that our margin expansion has been driven by operational improvements rather than gold price movements. Profit after tax grew 53% year-on-year to 121.1 crores, with a pact margin at 4.5%, while adjusted pact increased 57% to 117.4 crores, with the adjusted pact margin improving to 4.4 from 3.3%. Basic earnings per share stood at 8.7 rupees compared to 5.8 rupees in quarter to FY26. 6. Our premiumization strategy continues to deliver encouraging results. The retail stud ratio improved to 11.9% compared with 9% in quarter to FY26 and 10.96% in the previous quarter. Diamond jewelry recorded growth of 21% in value and 11% in volume, reflecting healthy demand in this category. The gold jewelry grew by 47% in value and 4% in volume. Gold bar and coins reduced by 24% in value and 48% in volume. Gold bar and coins now account for 15.8% of retail revenue, down from approximately 22% in the previous quarter. 68% of the gold bar and coins purchases are converted into jewelry purchases this quarter, compared with 53% in the previous quarter. Customer engagement remained strong, with footfalls exceeding 1.78 lakhs, a conversion rate of 88.6%, and an average transaction value of 1.22 lakhs. Together, these trends reflect our continued focus on improving product mix, driving jewelry-led sales, and enhancing the quality of our retail revenue. As we enter the seasonally stronger second half, capital allocation will remain focused on high return store expansion, festive and wedding season inventory, the integration of silverware style, digital investments, and steadily higher hedge coverage. Within net worth of 2,855 crore as of September 30th, we are well capitalized to fund this growth. With that, we conclude our opening remarks and would now be happy to take your questions. Thank you.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Yash Son Natalia from Edelweiss Public Alternates. Please go ahead.

Hello. Hi, team. Thank you for taking my question and congratulations on a good set of numbers. So, three questions. Number one, I wanted to understand basically we have... Hello, I'm audible, right?

Yeah, yeah, Audible. Please go ahead.

Yeah. So, first question is basically why we have seen a good expansion on gross margin, why over high, and some decline QOQ based on how mix has changed. But do you think there was any of the festive shift on gross margin? And also, what is the impact of the festive shift?

So, on the gross margin, you have picked up right that we have increased our gross margin on an year-on-year basis, and there is some dip on a Q1Q basis, primarily driven by the franchisee shares, increased to 17% from 12% in the Q1Q number. So that's the reason why the gross margin has reduced by 50 bps on quarter to quarter. On the festive shift on gross margin, we are not very clear what exactly is your question, but concerning the sale part of the festive mix, the Navratri season has shifted into Q3 this year, which was in the last quarter to in the previous year. So, that's the shift which has happened on the sale, but I've not really understood your question on what you wanted to understand on the gross margin bet.

So, basically, on YOY base, while our gross margin has improved a lot, but if I exist for other segments and how the mix has changed, and also, basically, the hedge profit has been, unhedge profit has been very much similar. So, I wanted to understand with the stud ratio increasing from 9% to where we are, I thought the gross margin could have improved more and festive have somewhere impacted the margins.

But festive will happen in next quarter.

To an extent, the festive sale which would have happened last year in Q2 has this year pushed to Q3. So, from that perspective, we're just saying that festive margin, festive sales will be shown in the third quarter this year. But otherwise, the only mix, the only change has been the franchisee, where we have seen our franchisee go to 21%, 17% from 12%. So, that explains the 50 bps difference in gross margin.

Got it, got it, sir. And basically, if it's in this quarter, how would our revenue growth would be adjusted for festive with some broad numbers?

If you look at the entire season of the 10 days of Navratri, around 200 crores would have been revenue from those 10 days. So that revenue has been pushed to Q3.

Okay, got it. Sir, my second question is more on capital allocation, like what we are saying Basically, we are trying to grow more on the franchise model going ahead. And now we are also entering different brands and different segments of the jewelry business. So how should we think about how our internal capital will go into all these businesses, where we will go more in a cocoa format and how the capital will flow into the business?

See, like we had mentioned in our last investor call, Also, that the company had done the cocoa stores primarily in Q4 of last year to establish presence in UP, so Q10, Q4. So we had done four stores in UP, Lucknow, Kanpur, Gorakhpur, and Banaras. We also had done a company store in Patna and also one in Indore. This was to really establish the brand there, to build confidence there. And then the plan was to, you know, further expand by the FOCO route. So that is what we are following this year. So this year, it's going to be more FOCO-led in Q3 and Q4. But going ahead next year, from next year onward, we plan to do 50-50 allocation between COCO and FOCO. And that too, also in the legacy and the U by PNG format, it will be 50-50. So what we're talking about, adding around, you know, 30-35 stores. Out of its 17 to 18 stores would be legacy. Half the balance would be U by PNG. And again, in this, it would be half COCO and half FOCO. So what we're trying to say from all this is that Intel accrual should be more than enough to fund the COCO expansion and we'd not be required to raise any further debt. And by 2030, we are expecting that this debt, you know, should come down by 20-25%.

Got it, got it. Very clear, sir. And, sir, my last question is on our expansion towards UP and other states. So, basically, while you already mentioned the stud ratio is over 17% over there, so can you just help me understand how has been the asset turn or inventory turn in those parts of the region, all the stores which are the most mature over there, and what are the margins of broadly stud ratio in those stores?

See, roughly the stores around, you know, average age would be around a year, 11 to 12 months. And on average, the stock term there would be at 1. So, like we had projected there that each store should be doing around 50-55 crores of revenue. And that is where we are. So, our, you know, planning is on track. And we are, in fact, we are a little higher. We are at around 1.1 stock term, so around 60 crores. But this is what we had expected there. Start ratio, we had projected 15%. We are upwards of 17%. Margins seem like the margin is anyway solid. Growth of around 25%.

Got it, got it. Sir, just a follow-up. So, basically, debt, the region, and all the economics is very different from what we do in Maharashtra. So, how you are internally benchmarking, what would be the numbers you are envisaching once the stores mature over there, what will be the turnover and the stud ratios you are expecting?

The turn, again, should be the same. We are looking at 2.5 to 3 stock turn per store. And then, after year 4, we should be looking at 3.5 to 4 stock turn. So, that would transfer into around 200 crore when the store is fully mature. And I think the start ratio which you are projecting there should be a range of around 22 to 25%. And this is where we are. Right now, we also have 17%. I think that's clearly achievable. Also, on the stock turn-wise, we are already at 1.1 stock turn. So, I think we are on track to be able to achieve the numbers which we are aiming for.

Got it, got it. Thank you for taking all my questions. Best of luck.

Thank you. Before we move to the next question, a reminder to the participants to ask a question, you may press star and one. Next question is from the line of Prince Chaudhary from Pinkwell. Please go ahead.

Hello. Hello. Am I audible?

Yes, please go ahead.

Congratulations, sir, for the great sets of numbers. My question is on the U brand. So, just wanted to understand that, you know, currently we have an inventory turnover of 0.8 times. So, what will be the peak inventory turnover we can expect from the U brand?

So, I think U, like we know, is more diamond-focused. It's got around 70% diamond and 30% gold. And the composition of the entire inventory should be maturing at, I think, around 1.8 to 2 stock turns.

Okay.

And, sir, for our legacy, we have seen that, you know, our inventory turnover has come to 3.7 times. So, can you specify the reason that why the inventory turnover has dipped if we see the following quarters?

I think we are always given this that, you know, the inventory stock term primarily as we expand would somewhere rationalize at this level. The average industry stock is around two to two and a half. We are well above that. And I think our focus also is to go more on jewelry, to go less on the bars and coins. And that also is ensuring that our jewelry, the product mix is focusing more towards jewelry. And I think at a store level, company level 3.7 to 4 is a very good stock turn, which I think in the industry should be one of the best.

But sir, I just wanted to know that early, are this inventory turnover sustainable or going forward since we are in an expansion mode, we'll see, you know, reduction in inventory turnover also. So what can be sustainable?

This is sustainable because as we have seen the stores also maturing, the store which I expanded two years ago, we'll head toward maturity and new stores will start coming up. So, when we had said during the early IPO days that the 5.66 stock turns will somewhere mature at 3.5 to 4. And that is where we are seeing. So, this stock turn is sustainable as we go ahead.

And then how we are seeing the demand in the festive season? Like, Navratri, you have mentioned about, but what is your expect towards Diwali and the wedding season?

Navratri has been good. And so, the season looks positive as we speak. The prices, you know, have remained soft, and that has been also a temptation of people to enter the market. So, we are positive that Diwali should be a, you know, Diwali season, the entire 1st November, 1st 15 days should be good. The indications are, there are a lot of bookings, a lot of interest from people to, you know, make the purchases. So, I think we are all confident that Diwali and the wedding season look to be good.

So, sir, we will see more of volume growth now when we see the SSG growth in the coming time because the prices are softened also.

We always maintain that when prices come down, you'll see more volume. When prices go up, you'll see more value. So, by that logic, yes.

This is the last question that we have raised the fund recently. We have done the QIP. So, like how we are going to deploy that fund and can you just share the timeline for that expansion?

Yeah, I just take that. So, what we have done on the QIP, we have deployed some funds into the working capital, which is to take the care of the effective inventory-led demand on cash. And the balance from the accruals, which we'll do over the next couple of years, are 170 odd stores, which we have given a guidance earlier, by FY29, which is completely led by the accruals, which will generate from the profits. So we are pretty much into the shape, and to achieve that, we don't see any deviations on that right now.

So, current money is parked in bank FDs. So, around 600 crores is in bank FDs right now, I'll be speaking.

Also, if you will see our quarter on quarter, my FDs, the balance in my FDs last quarter, it was 554 crores. This is round about 1,191 crores in quarter to end. So, we have increased our FDs also by 637 crores in between two quarters now.

Thank you, sir, for answering the questions.

Thank you. Next question is from the line of Piyush from SmartSync Services. Please go ahead. Good afternoon, sir.

I am audible. Okay. So, my question is regarding the geographic expansion. So, nearly 90% of companies and stores are still considered in Maharashtra and Goa, while expansion into northern and central India is becoming the key growth driver. So, how do sales productivity, operating margin, and inventory requirements in this near market compare with the mature Maharashtra stores? Also, you are moving towards the franchise elite expansion, and how much the improvement in capital efficiency and store-level returns can we expect?

From the inventory point of view, we don't foresee any major changes in terms of the investment. The only difference will be because the newer markets are primarily led on the stud side, so the investment will be a little lesser in terms of the gold kind of volume which will be put into these new stores. So that will be a little lower, like 10% of what we do in the Maharashtra stores. That is the impact on the investment side, on the inventory percent. On the impact of the newer geographies into our business, as we have said, right now, we are, Maharashtra contributes around about 91% of our total sales. That will change to around about the newer geographies will be around about 30 to 35 percent by F530. That's the internal projection we have had. And the stud ratio, which is in the 11.9 percent at the company level right now, will increase to 17 to 80 percent at the company level. And at the northern India and the central regions, it will enter into 25 percent is what we have forecast. So, that's how we see. So, the margin expansion will happen from the stud and into the newer geography. Right now, the share of the northern and central region, as I have already said in my commentary, is around about 2.7 of retail. Now, this 2.7 of retail doesn't move too much into the numbers at a total level right now, but once the northern region is in the range of 30 to 35%, this will show in the margin expansion and the EBITDA expansion. Okay, sir.

Thank you. My second question is regarding the 700 crore QIP. So, you have raised the 700 crore QIP, and consolidated borrowing has increased by the approximately 385 crore since March. So, while quarterly finance costs have also rising significantly, so you explain how the QIP profits and incrementing borrowing are being deployed.

So, I'll first explain to you on the March versus quarter to what comparison you are doing on a 385 crores of the gross borrowing, which is increasing. That's the right number. That has primarily increased because of the GML loans, which we have increased, which is in line with our edging strategy. We are increasing our GML loans. That is the reason. On the gross number, but if you'll see our FDs, the FDs and the collateral which we have given to the banks has also increased by 552 crores. So, net net, my net borrowing has reduced by 167 crores, including the QIP funds.

Okay, so the company borrowing levels and interest rate and debt reduction strategy over the next two years? Yes.

So, the borrowing, as Saurabh has already mentioned earlier, that we plan to reduce the borrowing by F529, F530 in the range of 20% to 25% and upwards of that. That's the goal which we have set up for ourselves.

Okay, sir. Thank you so much. Yeah. Thank you.

Thank you. Next question is from the line of Raj Shah from Fident AMC. Please go ahead.

Yeah, hi, thank you for the opportunity, and congrats on a good set of numbers. So, I just wanted to understand the quarter-on-quarter decline in employee costs that we are seeing, and also, going forward, I mean, there was a very high base of marketing costs last year. So, how do you see the other expenses from here on?

So, on the employee expenses, there is a small drop of roundabout fiscal growth. That's mainly because of the variables which were there, that the difference of the variables across the two quarters and quarter one last year, quarter two last year and this year. So, that's the difference on the variable payouts. Can you repeat your second question, please?

Yeah, second question. So, I mean, this quarter, other expenses were like, your operational expenses were like 85-86 crores. And last year, because we had done a lot of advertising in UP, etc. So, last year's base for H2 for other expenses looks quite high, close to 190 crores for the third quarter. Will you see a decline in Q3 because of that?

So, in the quarter one call also, we have mentioned that our operating, we have recalibrated all our operating expenses, majorly in the other expenses category, which comprises of promotion, discounts, which comprises of the advertisement. So, if you compare quarter on quarter, last quarter it was 85 crores, and this quarter it is 86 crores. So, we are pretty much in line with what we have committed in the quarter one call. You have pointed that H1 versus H1 last year versus this year, we have also improved, and that's primarily because of the advertisement and the campaign discounts, which we have said we will kind of rest in life.

So H2 also similar moderation, we will continue to see, right?

Yes, yes. We foresee that the similar moderation should happen in H2.

Understood. And lastly, any indication of what kind of growth, I mean, you are looking at in H2 of this year, results last year, in this festive season, and the entire H2 of the world?

At a company level, we are targeting the revenues to be in the range of 13,000 plus. That's the guidance we have already given in the market, and we see that this guidance is achievable as of now from the numbers which we have seen.

Okay.

And that margin of 4 to 4.2% is what we have given the guidance.

Okay. Thank you. Next question is from the line of Prolin Nandu from Edelweiss Public Alternatives. Please go ahead.

Yeah. Hi, Saurabh and Deepak. Thank you for taking my question. My question is on the UP expansion that you have done, right? Now we have four stores in UP, and you mentioned that they are already ahead on the turnover side, right, in terms of inventory terms. So, just wanted to understand sort of what have we done right in that market, right, because for a Maharashtra-based jewelry player to move to UP, it's not a very easy and a similar kind of a market. So what is it that is going right? And, you know, even this 1.1 times turn that you have achieved, how does it compare to some of the other peers in the same attachment area? And one of our forte or one of the strengths that we have in Maharashtra is that we have a very large share of made-to-order, right, and which helps us increase our turns as well. What is the situation in UP? Are we also seeing similar kind of a trend in UP as well? So, some more qualitative color on what is working for us in UP will help.

Thank you. Yeah, a long question. See, you're asking a lot of business secrets, which I can't say on this, you know, what we have done right there. If you go back, you know, we had said that this is your strategy. I mean, everybody had a question on why UP? And at that point also, we had said the Peshwa strategy, our market research there, looking at the brand positioning there, looking at the customer connect, which we already enjoyed there, the right campaign we used there to introduce the brand, to use legacy as the focus to enter those markets, which has really resulted well. We have also been able to get the right merchandise at the stores. And I think it's a combination of these things. We had also said that we will keep on tracking it, and it's been now four quarters, and the result which we had projected, we have been able to surpass those. So I think that is what has really worked in our favor. We also, this was a very planned move. This was a strategic move. We had purposely, you know, not gone into markets where we felt there was not a position for us. Our organized family dweller tag has worked well there. And we further continue to expand in UP. I think by the end of FY27, we should be around 8 to 10 stores in UP. We'll be adding some more stores in Lucknow. We are opening Prayagraj next month in November. So I think the journey is going strong there. The brand is well accepted there. And we are getting a lot of newer customers. Standard ratio has gone well there. Conversions also are on track. So I think as a company, the stride into UP and Central India has been a success. As regards to a made-to-order business, we are also able to service the made-to-order business from our existing network of carrie-gun suppliers in Maharashtra here, though we have set up also a regional office in UP to cater to faster processing of orders. But the order The ratio of the made-to-order business stands around 22% to 25% in UP as compared to around 32% in Maharashtra here.

Sure, Sarav, that's very encouraging. Thank you so much for that detailed answer. Now, as you mentioned, you know, you plan to double the store count by end of the year, right? And UP is a fairly large market, right? So, a lot more can be done in that state and initial signs are encouraging. So, within UP and within the stores that we have opened, are there any differences in terms of, you know, are some of the stores in tier 1, tier 2 down doing better than, let's say, Kodakpur or some of the other stores? And again, what is the kind of clientele that we are attracting, right? Is there a certain kind of clientele which is coming to us because of whatever kind of activity on the ads, on our legacy and all that we have done?

See, currently, we are all in the bigger towns of UP. So, like we speak of Maharashtra, when you look at Mumbai, Pune, Nasik, Nagpur, Sambajinagar, we are right now in all the major towns of UP. But to rightly say, UP is a big state and we can still go in district places as we move ahead. That is the plan of expansion where the UP can add a lot of more stores. When you look at our customer profile, what we have been looking at is that we have been seen as a legacy player there, almost 200 years of legacy, and a mix of organized and a family setup. So the customer profile is almost similar to a Titan profile, a Tanish profile, and what customers are coming at us, people who are looking at quality or looking at organized setup and looking at great design and great self-store experience. So that is where our focus has been. We are not a discount-led brander. We are focusing more on service, on design, and a great customer experience.

Great. That's it from my side. Thank you so much and all the very best.

Thank you.

Thank you. Next question is from the line of Madhav Agarwal from SKP Securities. Please go ahead.

Hi. Thanks for the opportunity. Sir, if you can share if you have any guidance for FY29, any revenue target, if you have in your mind.

We had done a three-year plan, which is more of an aspirational plan, but, you know, it will be difficult to right now pen and number to it. On a broad level, we should be at around 17,000 crore plus. And I think our CAGR for FY27-29 should be around 25% year-over-year.

Okay, and sir, if you can share like when you make these estimates, so let's say like when we are sitting today, so for your mature stores, say stores which are, you know, 2 years, 3 years older, so for those stores, what are your estimates on a like same store Assuming that, let's say, the gold prices, there is no increase in gold prices, let's say, when we are sitting today. So, on a same-store basis, for a matured store, what are your internal estimates, broadly, if you can share?

So, see, when a store matures, the SSG there would be in the same single digits, 7-8%. But, you know, as the store, the newer store, the SSG would be quite higher. Like we have mentioned in year one, if we do a one-stop turn year two, we are looking at 1.8 to two-stop turns. So that's almost like, you know, double 80% growth in a SSG for a new store in year two. Year three, from 1.8, we look at reaching 2.5. So that's how we are doing the entire calculation. So just to answer your question, you know, based on this calculation, by FY29, we should be around 21,000 crores is what we are projecting. I think by this estimate, and I think our estimates are basically based on our store openings, what we are looking at in terms of areas, the legacy store and new format. So, it's a detail working on that.

All right. So, this 7-8% that you have mentioned, so this is like, this is, you are mentioning, like, without any surge in gold size or within this estimate, like, you pencil in, say, a 5% surge in gold size?

So, this is single digit without any gold price surge. So, if the gold price surge happens, then the volume comes down. So, we have kept it flat for now.

Okay. Got it. Thank you.

Thank you. Next question is from the line of Smeth Kala from RSP and Ventures. Please go ahead.

Yeah, thank you for the opportunity and congratulations on a good set of numbers. So, my only question will be, as we mentioned earlier on the call, the gross margins sequentially got hit by 50 bips because increase in franchisee mix. So, as we are going to grow faster on the FOCO side, especially in this year, and 50% in FY28, so how do you see the gross margins and in turn the EBITDA margins shaping up for FY27 or H2 of FY27 and FY28? Right.

So, what happens, we have explained it earlier also, when the, at a gross margin level, the increase of franchise, it dilutes the margin at a gross margin level, but at an EBITDA level, we are pretty much there. Yeah. So that's the reason also, even though the gross margin have shifted a bit on the Q1 Q basis, my other expenses have come down because I don't have a cost to operate those stores into my P&L. That's the cost being taken at the franchisee P&L and not in the P&G P&L. So that's how it plays out. And that's how we have also calculated our kind of forecasted numbers, what sort of just came.

So, is it fair to understand that while the gross margins might reduce because of the increase in franchisee sale, but the increase in franchisee mix will be helping the EBITDA margins to improve?

Yes, because the other expenses, rentals and all will come down on that channel.

Okay.

And the ROCE will have a jump because there is no capital being put there. There is hardly any capital which we employ for the franchises too. So, the ROCE should improve on an early basis once the franchise becomes meaningful.

Okay. Thank you, sir. That was very helpful. And all the best for the future.

Thank you. Thank you. Ladies and gentlemen, to ask a question, you may press star and want. Next question is from the line of Madhav Agarwal from SKP Securities. Please go ahead.

Thanks for the follow-up opportunity. Sir, I wanted to, like, have an understanding from you. So, let's say, like, if you open the, open a franchisee store, right? Like, what I can sense is, if you open a franchisee store today, so, firstly, you will be, let's say, the franchisee store has, let's say, a 53, right? So, firstly, you will be outright selling that inventory to the franchisee to open the showroom. And then for that, like whatever will be the regular sales happening, that will be happening. So, while in the year of opening of the franchisee store, there would be like the revenue jump from that also. Like, is my understanding correct?

Yes, that's the right understanding. We will do one sale on day zero and the store gets opened and then the replenishment happens. But that's a practice that everybody follows.

It's an industry practice.

Right, right. So for you, like, for an average store, how much is the gold inventory?

Around 50 to 55 per hour.

Okay, okay. In volumes, if you can share.

55. Okay.

Hello.

Yeah, go ahead.

You had any follow-up questions? I was asking in volume terms, like in kgs, how much of the inventory is required for a TNG showroom.

See, it depends upon the carrier taste. So, ballpark would be around 30-32 kilos, but it all depends upon the carrier taste we are looking at, 18, 14, 22. So, there is no hard and fast rule, but ballpark would be around 30-32 kilos.

Okay. Thank you.

Thank you. Next question is from the line of Vikrant Kashyap from Asian Market Securities. Please go ahead.

Hello.

Hello.

Hello. Hello.

Yes, go ahead, please.

Okay. Congratulations, sir, on a very strong set of number. My questions pertain to your expansion is to not Marajra again. So, we have started seeing some better contributions from coming from...

Your voice is very feeble and not very much audible, we can't.

Now it is okay, sir?

Yeah, better now.

Yeah, better now. So, I was just asking a question on non-Maharashtra market configurations. So, since we have seen the architecture of greater traction in the subject of the week, so, can you please highlight how would be our show next to it?

We can't. Sorry, we can barely hear you. Your voice is not clear. Request you to please use your hand. The line from the current participant has been disconnected. Ladies and gentlemen, due to time constraint, we will take that as the last question for the day. I now hand the conference over to the management for the closing comments.

Thank you, everyone, for joining today's conference call and for your continued interest in PN Gargill dwellers. We appreciate your insightful questions and continued support. Should you require any additional information, please feel free to reach to our investor relations partner, XB4 Advisory. Thank you all, and have a wonderful day ahead.

Thank you very much, sir. On behalf of Nuama Institutional Equities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.