Senco Gold Limited (SENCO) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Senko Gold Ltd. Q4-FI26 earnings conference call hosted by Asian Market Securities. 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 the conference call, please signal an operator by pressing star then zero on your touch-down phone. I now have the conference over to Mr. Vikran Kashyap from Asian Market Securities. Thank you and over to you, sir. Thank you.

Good morning, everyone. On behalf of Asian Market Securities, I welcome you all to the quarter 426 earnings conference call of Senko World Limited. Today on the call, we have Mr. Subankar Sen, MD, and Mr. Sanjay Bhanka, Group CFO. I now hand over the call to Mr. Swankar Singh for his opening remarks.

Thank you, and over to you, sir.

Thank you very much. Good morning to all. You know, it is really nice to, you know, come and this is the first conference that we are having the investor call for the new financial year. And we're very pleased to report a strong quarter four crossing 1,997 crore revenue with EBITDA of Rs. 274 crore and with a BAT of Rs. 157 crore for the quarter four FY26. And we are very happy to let all of you know that financial year 2526 has been a record-breaking year for Senko Gold and Diamonds from a revenue perspective also, where we have recorded a sale of rupees 8,430 crore, which is almost a 33% year-on-year growth, which is a great acceleration over last year. This kind of a performance, yes, there are two, three factors that have led to the great performance in terms of growth in revenue. One is that the gold prices have moved up by almost 60% from the beginning of the year. But in spite of the increase in gold price, you know, our faith and the trust that the customers has posed on us, the new store openings that we have done, the continuous focus that we have done on innovating with new designs and creating jewelry, which will continue to be something that the customers can buy and afford, has been the crux of the matter. We have been continuously focusing on driving efficiencies, optimizing stocks, and ensuring that within the resources that we have in this uncertain overall price scenario, we should keep the products that the customer can buy within their budget, and that has led to this amazing performance by the team. From a macro standpoint, if you've seen that, especially quarter four, the gold price and the silver price has been extremely volatile. There was a time in January when the international prices surged to an all-time high of $5,600, and again, within a few days, it retracted back to $4,400, $4,500. So it's been an uncertain time overall. And if you look at from an INR point of view, the prices was average about 151,000 rupees. So it's been itself a quarter with extreme price volatility. But in that, we have, you know, balancing between the various kinds of risk, the risk of, you know, price going up or down, the risk of managing liquidity with the pressure on margin calls. We've kept a steady mind and a steady head and kept our hedging ratio at about 40 to 50 percent. To balance between all kinds of risks. Now, we have seen that in spite of the fact that the gold prices have been volatile, the wedding season was a big trigger, especially for January, February, March, which led to the kind of sales that we have seen. We had the occasion of Valentine's Day or Mother's Day, which drives the diamond jewelry sales for us. And in this high gold price scenario, we have been focusing on 9-carat and 14-carat jewelry, whether it be in gold or in diamonds. I'm happy to let all of you know that Senko was one of the first players in the industry to have launched the nine-carat jewelry the moment government announced their... You know, permission for doing hallmarking of 9 karat because we firmly believe that jewelry is something that every consumer should be able to wear, and by making it much more affordable, it will only increase our customer base and make sure that the young generation as well as those who come from various economic sections of the society will continue to be able to buy gold and silver. In terms of the expansion, you know, we have been expanding into new geographies. We've opened stores in Rajasthan, in central Maharashtra, in western UP, whether it be with company-owned, company-operated stores or even franchises. And that will be the focus area that, one, is that our core strength, East India and Bengal. We have seen that Bengal is going through a very positive change with the... So we are very positive that Bengal will continue to be an engine of growth. Even in East India, we see that there is a huge potential. There's a lot of growth happening. They're focusing on tier two, three, four towns and cities and opening more franchises in the smaller towns. And along with that, our pan-India expansion with a focus on North India and Central, that will be the core focus. So with these three-pronged planning, we will be able to continue to expand. for the future. We have seen that, you know, this lightweight design portfolio that we are building up, creating almost more than one and a half lakh designs for the year has been one of the factors that has helped our customers who are our old customers, loyal customers, keep coming back to the stores. Usually in this particular financial year, what we have seen is that along with new customer acquisition, one of the reasons for growth has been that our existing customers Thank you. We have kept coming back to us. We have worked on how to make our old dormant customers active through our various schemes, offers, and that has something that has worked us intuitively also, where we had a phenomenal performance for our festive season for Dhan Terat, and that was also a build-up that we did towards our Akshay Tirthiya season in the month of April as well. We also are extremely happy. to, you know, discuss with the board and propose a final dividend of 20% in addition to the earlier interim dividend of 15% that we had announced. Very important, currently, if you have seen our Honorable Prime Minister Srinarendra Modiji talking about how we need to make sure that And means in which the consumption of the import, it's not really the consumption which is important, but the import of gold into our country should happen in a very, you know, rationalized manner. And towards that action, we have been last... For five months itself, we've been promoting old gold exchange in a big way, coming up with new campaigns, giving benefit to the customers. And in the last year itself, we have seen that our old gold exchange on the overall transaction has gone up to about 50% of the total revenue. And that is what creates sustainability. There is an ESG. We have an aspect to it also that we are promoting recycled gold, and it will indirectly help the economy in reducing their import. We firmly believe that there is a lot of gold already imported in line in the economy, and we just need to ensure that the household gold can be used in a very optimized manner and used for our exchange, and that will also drive our business. So that is the reason why we have been able to have our diamond volume growth also increasing by 9% by, you know, ensuring that the consumers can also exchange their old gold to buy diamond. And we've seen about a 32% value growth in the diamond jewelry sales also. So it is not only that people are exchanging old gold with new gold also, but we are also encouraging how they can exchange their old gold to buy diamonds. As far as the future is concerned, you know, Senko Gold and Diamond has always looked at, you know, every scenario and looked at the opportunities. We will continue to remain optimistic no matter what. I understand that after, I must tell all of you that in the month of April, we have seen a very... Strong, robust growth compared to last year's April of about close to 40% to 50%, and this particular May, after the announcement, there has been a little bit of a slowdown, but again, at the same time for the whole year, we will continue to remain positive. This time it is going on, which is an inauspicious season to buy gold. So that would be another reason of the current slowdown. But our focus of 18% to 20% growth for the whole year and working on an EBITDA of about 7.5% on an average and a patch between 4% to 4.5%. That will be the kind of guidance with which we will continue to look at the future. 18% to 20% stores is what we would like to open. And the focus for our team is that how we can offer more and more franchises because that will enable that. Our scalability and the penetration into the entire two, three, four towns and cities continues to grow. And the other aspect, I think that, you know, we've been doing a lot of data analysis. We've been using various tools and ensuring that how do we optimize our stocks? At this high gold price scenario, it is getting the exact weight, exact designs, and exact products that the consumers will be buying is the key to success. That will give us the best return on capital, profitability, and the growth. So we will continue to work towards optimization of stocks and focusing on exactly the right thing and the right list at the right time. So with this, I would like to end my introductory speech, and I would like to thank all of you, all the investors, for firmly believing in our company, on our performance, on our thought, on our vision, and, you know, the jury-making. And building the brand is our passion and our love, and we will continue to work hard towards achieving our goals and aims and grow the business. Thank you very much.

So, thank you very much, sir. As you brief, I would like to quickly recapitulate that in Q4, we achieved revenue growth of 45% YOY. EBITDA growth of 116% YOY and bad growth of 151% YOY. In fact, gross margin in EBITDA were higher against our earlier guidance of 7.5% to 7.8% for the quarter as well as for the whole year, which we have explained. Due to the price rise in gold and silver as well, and a part of it is also due to the improvement in the product mix, premiumization, our movement to north, outside Bengal, where our ESP later is very high. So basically, for FY26, we achieved highest level top line with 33% worldwide growth and 24% CAGR over. And as you've already said earlier, that coin and bullion sales, it was marginal at 6% only, so balance is entirely jewelry. Similarly, spread ratio was in the range of 11%, while we achieved the value and volume growth, which are explained in the presentation. But since the entire site itself has moved, that's why the spread ratio has not moved. On the working capital front, our total inventory increased 61% by white, 5 to 9, 6 crores. There are two, three reasons for this. One is that the gold price increased, and due to that the GML and all those things increased. Similarly, there was an increase of inventory for seven new showroom launch. Then we have increased the inventory at the existing store. But most of them is in terms of value terms, not on volume terms. Our gross margin continues to be among the best in the industry earlier, and even now, on account of price rise. It is also due to our 75% handmade jewelry. And while EBITDA, we have reported at 13.7% for the quarter, and 11.5% for the whole year. But we are still giving the guidance of 7.5 to 7.8 for the future as well. Inventory days have increased to 186 days. Two regions can be studied. As you said, our inventory will always build up during September and March. These are the two primary regions. Extra region is that for us in East, Poyla Baisak is one of the most important festivals. While Akshay Trippi is a prime India phenomena, but Poyla Baisak was one region. Secondly, considering the elections and possible disruptions in the logistics, we have to build up it. We have an extra inventory for the month of April, and that is reflected in the performance of April as well. In April, during the Akshet Vitya and Tolima Belsa, we grew by 67%. So we achieved a very high sale, and I'm saying at the primary level of around 1,500 crores. So there was 67% growth in Akshet Vitya season. So that explains the region of the inventory buildup. Moreover, this stellar performance for the year, it has led to substantial improvement in ROE and ROC. to 25% and 22%. But a word of caution that this is for the current year, as we are looking at the sustainable EBITDA of 7.5 to 7.8. So maybe in future, the ROE and ROC may be in the range of around 15 and a half to 16% for the whole year. And we remain very optimistic and confident About our targets of 20 million, 20 percent growth. 7.5% EBITDA, 4.5% PACT. With that, I think we have given you broad guidance, and we welcome you to ask any question, and it will be a pleasure to respond to you.

Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their 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 will wait for a moment while the question queue assembles.

The first question comes in line after that with Nafa. Please go ahead.

Hello, so congrats on a great set of numbers. So I'd just like to get some light on, you know, what is a guided, you know, mix in the future towards, you know, the old jewellery, you know, mix that's, you know, currently going on. It's been phenomenal that, you know, you've been able to drive around 50% of the Q4 revenue from the, you know, old gold exchange program. If I could just get a light of, you know, how much mix would potentially, you know, come up in the future, and possibly if there could be a tentative margin, you know, for that segment, that would be really helpful.

So, thank you very much for the question. I think that a whole world exchange of minimum 50% of the overall business to come from that, what we are seeing should be something that should be a benchmark and we should work towards getting it. There are possibilities of increasing it maybe further, maybe from 50% to 55%, but I would say that 50% to 55% is the range. We will closely monitor. We are all trying to create our campaigns, all our schemes, offers, reaching out to our customers with that in mind. And as far as the impact on margin is concerned, I do not see that there will be such a direct impact on margin for now. Over a long period of time, yes, you know, initially what used to happen is that as an industry, when we used to exchange old gold, there was certain melting losses that we used to charge the customer. But currently, we are not charging any kind of melting losses or, you know, the whole cost of procuring the old gold from the customer for exchange purposes. So there are small, minor risks of maybe 0.1%, 0.2%. But I guess that in the overall team of things, we shall not be seeing much of an impact on the margin because of the exchange of old gold. And also, one has to look at the broader picture. If you look at how the old gold exchange has been behaving over the last three years, four years, so three, four years back, the old gold exchange had been about 25 to 30 percent. Then it moved up to 25 to 40 percent, and now it is about 50 percent. So I guess that it really did not have such an impact in the margins. Yes, as an organization, I think we need to bring in more efficiency in terms of ensuring that the old gold is mobilized in a far way. as much as possible, so that it can be used up, manufactured, and replenished into making jewelry as fast as possible. So that is one aspect we'll all look at, but I do not see much of an impact on the margin.

Thank you, sir. So, I mean, what's interesting is that, you know, the current scaling up that you're doing in this segment would be, you know, aligning well with the import restrictions, you know, that's being, you know, imposed by the government as well, and I wish you the best, and thank you.

Thank you very much.

The next question comes from the line of Viraj with Enigma.

Please go ahead.

Yeah. Hello, sir. Thank you so much. Sir, my first question is regarding the current inventory. With the customs duty height that we have seen, what impact will it have on the inventory gain? Because I'm assuming there will be further inventory gains will have this quarter because the pricing of the same gold would have gone up. Is that correct understanding? And what would be the quantum of that for us?

Yes, you know, as far as the impact of custom duty, it will have, you know, there is an inventory gain that has happened because of the duty impact. But we will keep getting the gain as and when that inventory will be sold. So, you will see the gain happening, maybe not in the full first quarter itself, you might see the gain happening in maybe in two quarters, but because of the action taken by the government, just like there was a one-time kind of loss, you might say, that had been taken when the duty was reduced in the previous times. So here again, there should be those kind of gains sitting on the inventory, and with the sales of inventory, we will be able to get some mileage out of it.

Right. And, sir, what I wanted to understand is when you are saying you will have only 20% growth for the year, because we have already seen 50-60% growth this month, and for the quarter, whatever, 20-31% growth, that would mean that for the rest of the year, we are expecting very low single-digit growth. A, that is very counter-intuitive to what a lot of other jewelry players are talking about in terms of, we understand the volume degrowth, but the value degrowth we are talking about seems much higher than everyone else. Can you talk about the reason why you feel much less optimistic about the growth this year?

Well, actually, I'll tell you, you know, we've always taken a conservative approach. Even in the last financial year, we've been, you know, guiding the investors on around 20 to 25 percent growth. And by the end of the year, we have achieved a growth of 35 percent. So, this is something that, you know, while others are looking at the trend, and there are logics also that today the gold prices are already, compared to last year, average is on the higher side. So, in a similar manner, we are guiding you on a very conservative approach of about 20 to 25% growth. But, you know, internally, we will all endeavor to, you know, overcome and have a higher growth rate. But for you all, I would rather say that a 20% to 25% growth for the business in terms of value. Yes, volumes will get impacted because of the higher gold price. We are seeing that the average weight range of the products that are being sold is lighter. So that is there, and I think that's been how the consumers would behave. But from a guidance perspective, we would like to give you a 20% to 25% growth range.

Right. And so, you specifically mentioned that post-announcement by the Honourable Prime Minister, we have seen subdued demand. Can you quantify in terms like what are the trends you are looking in the sense, is May post, especially post-announcement, are we seeing a decline in revenue or like has the growth tapered down to 15-20 percent? And just a ballpark understanding of how the impact has been. I'm not looking for an exact number, but I'm trying to understand how the impact has been on the consumer.

So, see, it's been about 7 to 10 days, and consumers have, you know, taken our Honorable Prime Minister's announcement. Time to buy also started. Bhangraji said that he had a very good performance in terms of growth in April for Akshay Titya. And if you look at the month of May, YTD, just to give you a perspective, that in terms of performance of May of this year versus last year, it is, you know, growth is in almost, it's the same performance as last year's May. So all in all, YTD, you will still see a growth. But in the last seven, ten days, the footfalls at the stores have come down. We could also see the heat wave being a great impact in which the consumers are, you know, not getting much out of the house, and only in the evening they are out. They are also thinking that, okay, let us not buy right now if there is no emergency. The wedding season is not right there. In June, July, we will again see the wedding season and the various gifting linked to weddings will start again. So, But we need to look at the long term. Yes, last seven, ten days has been a little bit of a slowness in the business, but our planning and. Our back-end tracking and designing and manufacturing and preparing for the future has not stopped because of that. We need to just make sure that we are ready with the product that the consumers will buy when they will decide to buy. So, yes, we need to ensure that in that high gold price, what is the weight range, what is the product, what is the design that will sell, and we are doing our homework in this time when things are a little slow. But in the long run, again, I want to tell you that in a very optimistic manner, we should be able to see that consumers coming back and business will grow at around 20-25%. So that's how I would like to look at it.

And so my last question is regarding margins. You mentioned that, you know, we have 25% growth. I'm assuming we are opening only 10 stores, so there'll be 5% growth due to stores. But majorly, I would say 18-20% growth will be SSG-led growth. Now, in an environment where your SSG is increasing, and I'm assuming your gross margins remain the same, In that scenario, shouldn't your normalized margin range, if you take out inventory gains, even for last year, our margins would be higher than that. So, like, in an improving SSG, in a format like yours, we have generally seen margins always uptick. But we are talking about the same margins that we had even when we had almost 40% lower revenue than what we will have this year. So, how does that work? Like, why will we not have any operating leverage?

Siddharth Ji, while we are certainly looking for operating leverage, but if you look at the competition, The organized, as well as unorganized, both. The organized players of south and west are entering into west. We are entering into west. Then there are local players who don't do hedging, right? So if you look at the competition, go to any market, go to Boriwali market, go to any Delhi Rajivali market, the local, there is one player in Delhi who is offering huge discounts. So, we have to work within the constraints of market, and hence we have to balance. So, primarily, we are not looking at any substantial, I would say substantial improvement in margin year on year, despite operating leverage at full play, and let's say 10 to 15 bits max, we are looking at, as the competition will continue to intensify.

So, we need to balance between growth and profitability, right? So, yes, while what you all are saying is a very, you know, logical way where things will move ahead in, you know, for a profitable growth, but at the same time, you know, in the market forces scenario, we need to ensure that we keep acquiring new customers. We make sure that our customers keep coming back to us with not only new design offers. We provide value for money offerings to the customers. So balance between growth and profitability, it is a good thing to have a sustainable, you know, EBITDA and a sustainable profit and keep investing for the future and keep growing. So that's how one has to look at it.

Right. So, thank you so much. So, essentially, I'll just end this conversation. You are saying we'll do anywhere between 10 to 10,500 crore revenue, and we're looking at 4.5% tax margin. That's roughly where we'll end, and we'll grow post that 25% next year. We'll see how it happens. Is that a fair understanding after all this conversation?

Yeah, absolutely. That is what our guidance is doing. While internally, we will continue to target for more, but I think conservative, these are the conservative estimates.

Okay. Thank you so much, sir, and best of luck.

Thank you.

The next question comes from the line of Amish Kanani with Noonwise Investment Manager. Please go ahead.

Can you hear Amish, sir? Yeah, hi, sir. Congress and a good set of numbers. Sir, growing within West Bengal in tier 3, tier 2, tier 4 towns, as you mentioned, What is growing beyond West Bengal? How do you see opportunities and what are the priorities? Do you see deep within West Bengal, given the kind of political environment has been, do you see that as a more opportunity, say on a 12-18 month basis, or do you see, you know, Diversifying business beyond West Bengal would be, you know, more important in terms of, you know, building a very strong and stable franchise, which you said north and central.

So, I think, you know, we need to understand where our strengths lie, and we need to understand that where is the opportunity for future growth. So, for being in, you know, Bengal and eastern part of India for more than 80, 85 years, you know, there is a strong loyalty and there is a strong emotional connect with the consumers here. And as a brand emerging out of this part of the country, we should continue to work towards how we can keep on penetrating into the smaller towns. And I must tell you that considering the changing scenario and I would say the positive growing scenario in Bengal and East India, our one core focus will be to continue to focus on growing in eastern part of the country and play to our strengths. So that will be one area, and I would give it a weightage of almost 60%, 50% to 60%, and a weightage of 30% to 40% I shall be giving towards the north and the central, because we all know that, you know, the market size, the future growth opportunities, the growth and development in those consumer bases will be there. Our endeavor to increase our diamond jewelry. Increasing Asgard ratio shall also be achieved through a very strong brand presence and growth. One is to take the low-hanging fruits of where we are already strong, and one is to look a little into the future and grow further. So, I would say a 60-40 weightage ratio is the optimum way to grow and put our energy towards.

And just to complement what MDS said, we have grown in last year into the newer markets. We have gone into Rajasthan to the franchising route, so that's an immense opportunity in becoming a new launch. In Maharashtra, Mahapur, we have launched. So those opportunities, we continue to explore. But we have a very strong pipeline for FY27, which is skewed toward Bihar and UP.

Okay, sir. Okay. That's very heartening to note. And, sir, you know, normally, you know, this wedding and festive season, and you mentioned about Trutia and all, so the question is, sir, this year, vis-a-vis last year, any trends in terms of overall, you know, wedding dates come festive season activity, you know, on one annual basis? And if at all, there are some variation that we need to keep in mind on a quarterly basis, which should, you know, impact either on the positive or negative side for us in the, you know, revenue growth, you know, outlook. And, you know, are we more heavy for wedding versus, you know, the festival and wedding-less festival put together versus, you know, normal, say, you know, normal business or any things that, you know, we should know which gives us better appreciation of a quarterly trend, you know, of the numbers. Thanks.

So, see, as you said, Akshan Pritya was extremely good for us, and despite the readiness for election, we achieved around 66% growth, and the growth across all the zones. So, let's say, West Bengal, East, North, even Central has grown. We did not find any major variance in the trend while we have launched 9 carat, but 9 carat continues to get attraction. Obviously, there is a growing skewness towards the lightweight jewelry, and a major part of our jewelry are anyway lightweight. Our diamond jewelry growth has been happening, so we did not find any major change other than the movement towards the old world. And as you said, as the custom duty has increased, as the appeal for PM has been for the old world, I think that momentum of old world is only going to increase along with the 9th carat and lightweight jewelry.

Yes, and just to define that lightweight jewelry would not only mean jewelry that you see people wearing everyday office or casual wear, even when it comes to, you know, buying jewelry for traditional locations and weddings, consumers are looking at how they can reduce the overall weightage or they reduce the purity of the product from 22-carat hallmark to 18-carat hallmark and make it within their budget. So, lower purity, making the weight light for even the heavier-looking product. And we at Tenco, since we are working with the Carriers very closely, our effort is that how do we keep on making the product look heavy but way light. So, there is all ways that in which we are trying to provide the product and making the design.

Sure, sir. One, just as a follow-up, sir, is there any trend in the ticket size where we should, you know, so there's a lot of debate between, you know, price rise of 40%, but volume tree growth and all. Should we be looking at a ticket size per customer or per fall, you know, which we convert as a good proxy of growth? One, in terms of, you know, value growth, and second, you know, within that, you know, one, the expansion of stores, you know, as an additional, you know, kind of growth. So, you can give us some sense there as a follow-up. That will be helpful. Thanks.

So our ATV, you know, if you look at it, our average ticket size has grown by almost 30%. So consumers using either the money that they have or the old gold that they have, they are buying the jewelry based on their budget. But the average ticket size has increased by 30%. So, that's the way to look at it, and see, we are talking of now, we have seen it over 25, 30, 40 years, that the gold prices were much lower, then also people were buying jewelry. Now, at these high levels, people will buy, but obviously, the quantities will differ, and that's the way the volume has to be looked at, right?

Exactly. That's very hard to do. All the best, sir, and thanks a lot.

The next question comes from the line of Kaushik Modar with KB Capital Markets. Please go ahead.

Can you give a sense of how Senness is doing? I mean, with artificial diamond, that's a different vector altogether. So, can you give a sense as to what was your initial aim for Senness, and how is it progressing on the goal you must have set for having a completely new brand and new setup?

Right. Thank you. Thank you very much. So, see, Tenless was a brand that was created keeping the lifestyle changes of the consumer, and, you know, it was also one of our strategies that how do we connect with the young consumer? So, while we are sitting on our strong, loyal customer base, our constant endeavor is that how do we keep on innovating ourselves and create new lines, new products to connect with the new generation consumer with their changing lifestyle. So, it is something that, you know, along with Senko or compared to Senko, the volumes and the value is much lower. It is still in a state of, you know, getting invested and we are building the brand. And we all know that while diamond and increasing the surge ratio is one of the strategies that the jewelry industry... And increasing the start ratio will not only happen by increasing the share of diamond sales, but also other gemstones and lab-grown diamonds. It is, you know, we are putting our energy effort, we've got now 11 to 12 stores right now. We are facing the awareness levels of the consumers with regards to lab-grown diamonds and lifestyle products. The base is still very low. There is not much to talk about except the fact that we... We believe that in the future, this, along with the other kind of jewelry that we sell, so from a Senko perspective, we are selling gold, diamonds, platinum. We are also selling silver and fashion jewelry. So along with that, this will be another line of business of selling lab-grown diamonds, and also the fact that consumers will look at other products complementing jewelry, and as a result, we have launched perfumes. And leather bags and leather accessories, and we will continue to work on building that base for the future. That's how I would like to, you know, kind of share my thoughts with you.

Just to compliment, so while we have 11, 12 exclusive service stores, we are also selling service products from Senco stores. Because sadness business as a whole, it is at EBITDA level, it is positive. So broadly, that's a great news because when you build a great brand, one can invest in brand up to anything up to 50 to 100 crores. And within the second year itself, sadness business as a whole is EBITDA positive. But we are in a long-term journey in this, in this stainless brand as a house of design.

Okay. And see, the point is, in order to grow the market, 9 carat and 18 carat, how much percent of your sale comes from such kind of lower than 22 carat gold?

As on today, I would say that it won't be the exact figure, but I would say anything between 15 to 20 percent, 15 percent for sure, which will be lower. If you look at diamond jewelry and gold and everything put together, it will be around 15 percent approximately.

That's not in such time. That's quite a significant number. So are you doing something to promote that kind of thing? Because I don't see awareness being built up that this kind of jewelry is available. Are you doing something? I mean, what are the steps you have taken towards that end?

So I can only let you know that in all the various communication campaigns on our advertisement medium, And digitally, we are continuously sharing to the consumers that 9-carat jewelry is available. Because even for traditional jewelry design, people are looking at 18-carat option and not just 22-carat option. So maybe we can take a point out of your, you know, suggestion that maybe we are doing and maybe we need to do more or, you know, make sure that people are more aware of it. But the reality is that, you know, most of the diamond jewelry that we are selling, and even gradually the lightweight gold jewelry that we are selling, And my last question,

see, Titan, I mean, the leader in your business, is operating, say, at 11%, 10%, 12% margin, and you are operating at 7.5% to 7.8%, as you said. Why this difference? I mean, what will make you bridge that gap?

So, you know, one of the biggest reasons for it is that their share of diamond and studded jewelry. That is what has been, almost, you can analyze the data, you know, it wouldn't be right from my side to say what it is, but that is the biggest difference, and we are working towards, you know, increasing our sales of diamond jewelry. We are, you know, creating a lot of innovative designs in lightweight or even for party wear, cocktails, and trying to give the most value for money proposition to our customers. And sitting in Calcutta, we have the strength of carigari, of artisanship, of creating those designs. So we are working towards it, and I guess actually they have been leaders and they have been, you know, established in the market for a long period of time. And we are also very respectful of the same, and we want to, you know, get inspiration and do the best that we can to keep on growing the way they have done.

So, I also happen to be from Kolkata, so I wish you all the best.

Okay. Okay. Thank you.

Thank you.

The next question comes from the line of Pallavi Deshpande with Samik Shah. Please go ahead.

Yes, I just wanted to understand, you know, in the nine months we had said about the hedging gains contributing to 2.5% of the margin giving a boost. How much would it be for the 12 months? And second question would be GML, you know, it's reduced, so any particular reason for that?

Hi, Kalluriji, good morning. Thank you for asking this question. Yeah. So if you look at the number, I think, and the guidance which we are giving, it is partly self-explanatory. So if you look at the gross EBITDA margin of 13.7% for the quarter and 11.5% for the whole year, and when I'm saying that my margin guidance is 7.5 to 7.8, So broadly, broadly, at least in the range of two and a half to three, is due to the price rise again. And it is also, so while it cannot be exactly extrapolated, because, you know, it is simple to explain, but this is broadly in this range. But there is a weighted average cost impact, right? Then there is silver also has increased. Prevamization, you are saying that the ASP and ATV has increased versus last year almost, so this is an impact of that, but you can broadly take 2.5% to 3% for the whole year.

Right, sir, so then that extra 1% is because of our better, you know, product, more handmade and all that, so that should continue, right, so my point is this margin guidance seems conservative because 11.5% minus 3% will give me 8.5%.

Yes, this is, see, why we are still guiding, because it's a very dynamic market, and market to market, we have to see the competition, and how they will behave in the next quarter, how the market will take up the PM's appeal, old to gold. That's why it is so dynamic. It is fair for us not to give an aggressive. So, that's why we are still retaining a 7.5. While we will, as we said, we will certainly aspire to increase the margin, to bring in more operating leverage. So there is a balance between the brand building, serving the customer, and still taking the markets here.

And what would be the target for marketing expenses? Now 1.9% of revenue. Are we planning to increase that by 50 or 100 bucks next year?

No, I think that, you know, the marketing extends 1.8% to 2.2%, depending on the, you know, we will continue at that kind of a thing, that we will invest for the future. 1.8% is something that will be needed for the future growth, and I think that's how we will keep on growing. The new brands are coming up. We will, you know, keep focusing on the new brands, the lightweight jewelry, various categories. But yeah, 1.8% is what we would like to look at.

And lastly was the GML portion, you know, why we see a decline this year.

So GML, Palluji, declined because of the huge gold price rise, which happened in the month of March. You are aware in the month of March. The fee went up to almost 1,80,000, right? At that moment of time, there was a cash flow mismatch, and a lot of positions had to be squared up. Due to the hedging position taken through GML, the MCS had to be squared off, the GML had to be squared off, then the payment had to be done. And so that's why it has come down, and that is one of the reasons for increase of the borrowing cost. That class of Q4 and maybe in Q1 also, but obviously we intend to increase the GML portion to 50% plus. We are first-time business dynamics, you know, that's why we have to understand them, but intent remains to increase the GML because of my borrowing cost on the GML is 3 to 3.5%. One good thing which I must highlight is that our rating has been upgraded one notch by KRH, and the rating renewal is pending with ICRA, and with the improved financials and improved interest coverage ratio of 4.5, and the return on equity of 20% northwards, I mean, plus 20%, I think we are expecting an improvement in the credit rating which would reflect in the borrowing cost.

Thank you, sir. It was very helpful.

Thank you. The next question comes in the line of Anushka Hora with Mimana Capital. Please go ahead.

Yes, hi. Thank you for the opportunity. So, you said that around 50% of their A's in Q4 came from old gold exchange. So, I just wanted to understand how your order relationship with the manufacturers has been changing. So, do you have more of advanced gold now in respect to the traditional way of placing orders, where they themselves buy the inventory, but has your portion of advanced gold to them has been increasing?

Right. So with the manufacturers, there are two parts, almost 70 to 75 percent of our work is done. But we are also... Thank you. And this has started in the last, I would say, one or two months where we are giving them certain of the gold in advance for their manufacturing process. It's not a very drastic situation right now, but see, gold is equal to working capital in that manner, and we are utilizing this opportunity to give certain of that to the manufacturers, and against that, we'll also get some minor benefit in terms of getting better price. It's not been a very drastic process yet.

Right, that's fair. So how much of your overall production or, you know, volume would you say was through advance

We don't have the exact numbers right now, but we will analyze and we'll get back on that. It won't be, you know, something very large number, but we'll get back to you. And I think that you will not see the impact much happening in the previous. Financial year, but maybe in this current financial year, that could be.

Thank you so much.

Thank you. The next question comes from the line of Siobhanu with three head capital. Please go ahead.

Yeah, hope I'm out of the way. Good morning, Bankaji. Sir, my first, hello. Can you hear me?

Yes, yes. Yes, we can hear you.

Yes. Okay. Can you tell me what kind of gold volume we currently keep today? See, I could not get you kindly to repeat, what gold volume we currently keep in our gold inventory?

See, I think the gold volume, I think we should refer to the published number. We are saying my inventory days is 188 days. So effectively, the inventory days, and what inventory days we are saying is blended. So gold volume approximately cell is around 6 tons. 6 tons. So, you can extrapolate from that how much is inventory. Yeah, 600 is a total gold sales by us. You can extrapolate the number accordingly.

Okay, I understand. As you mentioned, we procured the gold due to political uncertainty in West Bengal. That time, what was the procurement cost?

No, no, no, Hari, what we said is that we built up the inventory ahead of elections, right? The model was same. So, as we explained to the previous gentleman, we procured 50% from old gold, 20% from the ready-made jewelry, balanced from the traders. So, this is the mode of procurement of the gold. Second thinking is how we get it manufactured. So 20% is ready-made jewelry which I explained, and balance the old gold or the GML which we procure from the bank, that is given to Cariger. So 20% traders, 70-75% is Cariger, and balance 4-5% is our own factory, which will increase in future. We want to take the factory manufacturing to 10%. So let's say, if I am selling, if today, if it is 5% of 8,000 crore, that is 400 crore, when it becomes 20,000 crore, 10%, it will become 2,000 crore. So from 400 to 2,000, the size will increase, but percentage will be below in the range of 8 to 9% of total manufacturing.

Yes.

Understood, understood.

And as you mentioned,

we will be mentioned around 50% plus hedging. That means going forward if bullfight increase fast burn from here on, then we automatically gain a margin from this inventory. Thank you.

See, what MDS says, that our policy is hedge up to 80%, right? So, it is a current scenario, while currently it is 50% to 60%, it will be this range, it can go up to 80% also. So, if the hedging increases, it is a good risk mitigation technique. So, if the hedging increases, your sustainable bargain will come, and the non-sustainable one-time gains will not come. But as we have always said, the intent of the company is focused on sustainable margin. Risk protection while managing the cash flow mismatch. So the hedging percentage is linked to the cash flow mismatch.

Okay. Okay. Understood. Thank you. Best of luck. Thank you.

The next question comes from the line of Raj Saraf with Finvestors. Please go ahead.

I just wanted to understand the inventory must be repriced at the duties height to 15% now. So how much effect we are going to have this year apart from the guided editor or any ballpark number if you can give?

Sir, if you can just, again, rephrase the question, then I will attempt to answer you.

Sir, inventory must be repriced at the duty rate from 6 to 15%. So how much effect are we going to have this year apart from the Gajir Editha or Pryat or any ballpark numbers you can give, sir?

Sir, I will say inventory is not repriced. See, it is inventory is valued at cost or net reliable receipt lower. So inventory is always valued at the cost. Cost means weighted average cost. Now, weighted average cost is usually lower than the market cost. And in the weighted average cost, hedging losses, the realized and unrealized losses, as well as the mark-to-market impact for the gold, metal, and MCX, both are added. I can only confirm to you, I'm reconfirming to you, that inventory valuation is as per index 109. It is audited by the auditors thoroughly. They check the valuation, and inventory valuation, which includes the realized and unrealized losses to the extent of inventory unsold, which will realize in future, it is lower than the net reliable value. So, if you are looking at a value of 5200 crore of inventory, which is approximately 4500 crore of gold and 500 crore of diamond and platinum and silver, the realization price is more in the month of April and May. Now, if the realization prices, if the gold prices go up, which it has gone up in April and May and June, then the gain will come.

Sir, just want to understand as a layman, when the duty was reduced from 14-15% to 6%, we have an impact of 57 odd crores in our balance sheet or our P&L. So right now the scenario has been reversed. So definitely if you are not fully held, we are going to have an inventory gain. At that time, sir, we are having lesser inventory. Now we are having more inventory. So what is the quantum of gain that is real, what you say is realized gain or anything, we will have this year.

No, I have understood. See, I don't want to give a ballpark number. I am trying to tell you that this 9% gain, very simple. 6% to 15% is 9%. 9% on the gold value of 4,500 crore, you can assume 450 crore or 400 crore, but it is not that simple. So, from a rough out-of-enveloped calculation, it will be 9% of 4,500 crores. But whatever is the gain, because it goes into weighted average cost on daily basis. So, the inventory is getting repriced on Delhi basis till 30 June, until 30 September. So, this inventory will get sold in quarter 1 and quarter 2, but it should be in the range of effectively it should be at least 6 to 7 percent, but We don't know what is going to happen in future. It will also depend upon how the market is giving discount on the gold price. Please understand. If I am selling gold at a certain price, and if in the market, the near market, my competition is giving less, then I can't take that much gain. So the gain will get reflected in quarter one and quarter two, and we'll disclose what gain has come due to custom duty impact.

Sir, that's the, I clearly understand, sir, and then the competition kicks in when the gain is so much that I clearly understand. Just wanted to highlight this, sir. Now, sir, we have seen in the past that the negative result of duty reduction, which will eventually come next year, as I guess, and then we have a duty, a negative duty effect of 57,000 rupees, I think, in FY25. So, how are we preparing for next year, if the duty is reduced from 15% to 6% and 5% in next year? Are we going to have inventory more or how to mitigate these kind of scenarios going forward, sir? Because that is eventually going to affect us negatively in coming year.

You asked a wonderful question. What has come as a one-off gain, now we have to be more cautious, not only for us, for the entire industry, to be cautious, and whichever time it happens, it will be sudden. So, at that moment of time, The gain will convert into loss if the hedging is not done. Now, hedging can only be done through the MCX. So, last year also, the price fell, the price fall, the impact could not be mitigated. The impact could have been mitigated only if the 100% of the position was covered through MCX. Slightly complex subject because you would read that the hedging is done through GML and MCX. So in the GML, even in the current year, we will continue to pay custom UT at 15%. That means that risk is uncovered. So, if my 100 kg of inventory is there, and if I have purchased 50% through GML, I would have paid the customer duty, which means that I have to take 150% hedging to cover the risk of gold price rise. Thank you for raising this question. You can ask me one-to-one. We are cognizant of that, but I don't think that it will be possible to cover the entire raising position through MCX because now MCX margin has increased to almost 25-26%. That is becoming a challenge. We'll issue more details on this during quarter one as to what actions we are taking for possible reduction in future.

That's exactly my point, Varsha. The inventory hedging is now very important because eventually we are going to grow more in coming year also. So naturally this 5200 inventory is going to increase in coming years also. So, that time, having inventory heads at an amount of 50% will cost us more in our balance sheet and our pay P&L going forward. So, that's my concern, please.

Well, rightly, rightly, sir, we are certainly thankful to you, but we are aware about this risk and we will take adequate measures. So that the repeat of the previous custom repeat call does not happen. Fortunately, we have a game, a one-time game. I think that a part of it will certainly have to be sacrificed, if I am very plain and blunt.

Okay, sir. Sir, how is the trend now in coins and gifting jewellery right now? Because some of your peers have also mentioned that now the government has taken a duty high, so the gold, coins, and any investment purpose buying is now being discouraged. So, wanted to know the trends going forward in the last 10 days also when the Prime Minister announced that Let's call out, and even the going forward trend you have seen in the past with your experience.

So, see, coins and bars is around 5% to 6% of our overall business only, right? And, you know, previously it was about 2% to 3%. It has gone up to 5% to 6%. So, I think that, you know, we will see some amount of slowdown in coins and bars, and people will not invest as much. But again, from our business perspective, selling more coins and bars doesn't add much of margins to the business. So this is more of a customer service that all the dwellers do and not really a margin-adging situation. So we'll see and we will be guided by what the government takes and the policies that are taken. Our focus is to re-drive more and more jewelry and designs and how do we fulfill that need of the customer, and we will focus more on that. And so that was your thing on the question on the impact of the current situation on coins and buyers. And as far as gifting is concerned, I think we need to look at the lower-caratage jewelry, 9-carat, 14-carat, so that consumers can use it for gifting to their loved ones and make things within the budget. So that is something that we'll keep looking at and keep creating new designs in that segment as well.

The last question is...

Sorry to interrupt. Mr. Raj Saraf, I would request you to please come back in the queue for further questions. Thank you. The next question comes from the line of Arvind Dureja, an individual investor.

Please go ahead. Mr. Arvind, your line has been unmuted.

Please go ahead with your question.

Hi, good morning. Am I audible?

Yes.

Am I audible? Okay, thank you. Thank you for taking my question, sir. My concern is related to the inventory build-up. If I look at your inventory terms, it has gone down from 2.6 or 7 to now less than 2. So, what would be the steady state target for inventory turns? Because if the inventory keeps on inching up, and if there are no inventory gains, then our ROC will keep on declining. And there is also market skepticism because of the past accidents in the jewelry sectors. I am not implying that this is the case with us, but this is something that makes the investor worried. Yeah, thank you.

So, Steve, if you look at the inventory days in the previous year, it was around 166 days. This year, since we had to build up the inventory for the festive season of April, it's looking a little on the higher side. Plus, the gold prices that have moved up so much has made us look at what is the exact kind of inventory that is selling and gradually changing from a heavier weight to lighter weight to make sure that the consumers can continue to buy. So, these have been the cases. So, if you look at a benchmark inventory days, I would think that anything around 150 to 160 days is a great inventory days and inventory turns that will look good and is good for the business. And as far as working towards that is concerned, I think that we all need to look at how the market stabilizes, the gold price stabilizes, the consumers also get more comfort. And our effort towards, you know, we are anyway doing a lot of data analysis and producing products. But again, I want to assure you that gold is something that is very much fungible and easily can be manufactured back. The only risk is your manufacturing cost, which is a very low single digit manufacturing cost on an average. So on the broader perspective, unlike other materials, it is not that it will remain, you know, it will lose its value that way. And at the same time, we don't want to lose sales. So for the purpose of sales, we need to make sure that the designs are correct and as per the budget of the consumer. So we are working towards the same. And the last point I would like to make is just to get the inventory days right as a brand, as we are building the brand for the long run. We are also a little conscious of the fact that we don't want to discount ourselves too

So can we expect this to be the bottom? I mean, it will not go beyond what you have already reported, and ultimately, it's going to improve from here on?

Yes, obviously, that should be our effort and endeavor. We know that we are focusing on building diamond jewelry, increasing the sales of that, but this should be on the higher side, and we don't want to increase it more than that. So, this is how we can let you know for now. We don't want to do it more.

Yes, sir, if I compliment it, if I do the benchmarking within the industry, it goes up to 120 days also, so where the stud rate is high, and it is at a lower variety at 160 days, so our intent would be to keep it between 160 to 180. Some specific actions, you know, we have closed some stores, right? So, one is that we are using technology, we are shifting the inventory from intras to intrazone, interzone, own to franchisee, franchisee to inter, all those things we are doing. But yes, we will explore all possible options. To ensure that inventory is, inventory days is in the range of 165 to 180.

So, 165 to 180. Okay. And, sir, you said that the sustainable PAC margin is 4 to 4.5%, right, in the presentation and also the press release. However, if I look at the past three, four financial years, you have never touched the target. So what gives you the confidence that the margin at 4% is sustainable without any inventory gains?

No, because, you know, 4% margin will happen as we keep on increasing our diamond sales. And, you know, we are charging whatever making charges that we are charging to the customer for the designs and the lightweight jewelry that we are selling. So I would suggest that this 4% to 4.5% margin, this year our margins are looking higher because of the inventory gains. But in general, it's been in the range of 3.5% to 4%. So I'm confident that with the gold prices going up, there will be more increase of sales of 9-carat, 14-carat jewelry. And with the gold prices going up, there will be more sales happening of jewelry with stones to make it much more affordable for the customers at lower priority. So with that thought in mind, I'm being a little confident that we should be able to achieve the 4% margin.

Okay, thank you. My final question is, what is the sustainable ROE and ROCE targets?

See, even earlier you said that it should be north of 16%, right? So what you are seeing for the current year is primarily the price rise, but if the price rise does not happen, incidentally, once again this year, custom route impact will come, and if the custom route impact is not negated or if the risk is not mitigated, it may still be high. But I think that... If we have earlier guidance, we will try to reach to 20% over 2-3 years. So north of 16-17% is a good audit.

Without any inventory gains.

Without any inventory gains, of course.

Okay, thank you. And, sir, final question, sorry, but final question. I mean, I understand that free cash flows, you know, have been negative because of the inventory buildup and the rising gold prices. But any guidance? Because some of the peers, you know, are very close to, you know, positive cash flows. But yours is, of course, significantly negative.

So, I am not able to give comment on this. So, we have debated a lot on this, and the numbers are there. So, to me, it does not seem to be easy. That's all I can say. While we are cognizant, and when we see the free cash flow of others, at least for, we are not able to give a guidance on this that it will become positive in next one or two years. See, the dynamics of the price range is impacting things usually, even without disclosing the number. If I say that my inventory per kg at a store has come down, there is a front-end inventory, there is a back-end inventory, what you look at in the financial is total inventory. We'll try to work on it. We are aware about this issue for three, four years.

Okay. Thank you very much and all the best.

Thank you very much.

Thank you. Ladies and gentlemen, that was the last question for today. I now have the conference over to Mr. Suvinkal for closing comments.

Yes, no, thank you very much. You know, it's been wonderful talking to all of you and answering to all your queries. We want to, on behalf of the team, SENCO would like to assure you that we shall keep working towards growing our business, working on ensuring that we work towards increasing the profitability and getting the best return on capital that we would be employing in our business. We know that the world is in a little bit of an uncertain situation. There are a lot of events happening. But, again, as long as we can keep on continuing and focusing on the fundamental aspects of the business in terms of design and in terms of customers, I'm sure that as a brand we will keep going and increasing the business and the brand in the long run. So with that aspect, we want to thank all of you and look forward to interacting with all of you again. Thank you. Thank you, everybody. Thank you very much.

Thank you. On behalf of Asian Market Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.