Senco Gold Limited (SENCO) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Sanko Gold Ltd Q1FI27 Earnings Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call? Please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Amit Kurohit from Ilara Securities. Thank you, and over to you, sir.

Good morning, everyone. On behalf of Ilara Securities, we welcome you all for the Q1 F527 conference call of Senko Gold. I take this opportunity to welcome the management of Senko Gold, represented by Mr. Suvankal Sane, Managing Director and CEO, along with him, Mr. Sanjay Bankaji, Group CFO and Head IR. We will begin the call with a brief overview by the management, followed by Q&A session. I will now hand over the call to the management for opening remarks. Over to you, sir.

Thank you. Thank you very much. Very good morning to all the participants. Ladies and gentlemen, we are very pleased to inform that as we begin the financial year 26-27, with a very positive mindset, we have been able to have a great performance in quarter one, achieving record sales and crossing 3,000 crores on a single quarter. The momentum that we had achieved in the financial year 25-26 in terms of the performance continues to remain, and as a focus, as a thought process, we have always believed that at the beginning of the year, it has to begin with a bang as a growth-oriented company, and we have tried our level best to achieve such a performance as we begin the financial year with a great quarter. If you really look at it in terms of the revenue on a consolidated basis, you've seen that we've grown by almost 67%, and it shows that there has been continued and renewed trust for the customers, for the brand. At the retail level, we've grown by more than 50%, which has been a wonderful performance, and especially we need to keep in mind that this particular quarter had great opportunities and also certain challenges that we had to overcome. Specially with almost 65% to 70% of our business coming from the eastern India and the state of Bengal, this particular quarter we were faced with elections and we had to plan from the previous quarter itself venture that we achieved great performance for Baila Beshak and Akshay Titia. And I'm happy to say, and I would like to congratulate my team, that the planning and the execution that had started two, three months back before the quarter had begun was greatly executed and performed. We also need to understand that in this particular quarter, there have been certain headwinds in terms of, you know, adikmas, there have been headwinds in terms of the weather, the heat wave. But in spite of that, we had a wonderful month of April, where we almost clocked sales of 1,500-1,600 crores. And in the month of May and June, we've seen that against all these headwinds, we still continue to have our sales, but the sales did fall to around 500-600 crores on an average on each of the months. However, there were certain supports in terms of the summer weddings, which were there, and we were continuously coming up with many schemes, discounts, offers to have the customers keep coming into the store. There were certain challenges in terms of footfalls, but with all our innovative schemes and attractive old gold exchange programs that we gave, I would say that it also helped a lot in terms of converting the customers' old gold into the sales of diamond jewelry, and all together, we had a wonderful quarter ahead. Now, we need to see that along with the overall 50% year-on-year sales that we had in quarter one, our same-store sales growth grew by almost 39%, which means that our existing stores continues to have strong relationship with our customers, engaging with them, and trying to make sure that with our innovative designs and new collections, we keep attracting the customers. One observation that I would like to make is that at these high gold prices compared to the last financial year, there have been a shift of the customers moving towards lightweight, more delicate designs, jewelry which is more for the daily wear, gifting items, and jewelry which are more design-led rather than normal, simple, standard, old-fashioned jewelry. We must mention that the diamond jewelry value, we got sales increase of almost 43%, and in terms of volumes, we could grow by 18% in terms of diamond jewelry, which gives a very strong signal in terms of design and development and the shift of the consumers and the long-term impact that these trends would have towards our margin in terms of our effort to increase the start ratio. But another aspect is... is that the lower ticket-sized items were more in demand. There was a... I would say the consumer's inclination to buy jewelry against all the headwinds were there, but what they really wanted is to have jewelry within their budget, and we continually focused on analyzing the data, analyzing the consumer trends, and providing jewelry accordingly, and we kept building up our 9-carat, 14-carat, lower-carat jewelry and lightweight jewelry throughout the quarter. Another aspect that we must keep in mind is the old gold exchange, which was almost 43% of the total sales. And on the appeal of our Honourable Prime Minister that we must try our level best to reduce the gold imports into the country. I think that as an industry, we all stood together and we put our best efforts to ensure that we could encourage the consumers to exchange their old gold. And that has also been a great driver in terms of the overall numbers that we could achieve and upgrade and help the customers to upgrade their old jewellery. We've seen that the gold price year-on-year has gone up by 61%, and on quarter-on-quarter, it has just gone up by 1%. So that has been one of the overall drivers also when we see value growth in terms of sales. It has been largely led by the value of the gold going up as well. In terms of the new stores that we could add in this particular quarter, we've added three company-on-company-operated stores. We've added four franchises and one Senet showroom, which is focusing on lab-grown diamonds. The company remains to track, and we will make sure that we open 12 to 15 more stores for the remaining of the financial year. They are very much in the pipeline, and I must also mention to all of you that much with our strategy that we are working towards, the majority of the stores that we shall open shall be franchises focusing on the East and the Northern Indian. So, that is one of the strategic focus that we are continuing to do and achieve the results as well. Now, looking ahead into quarter two, we've seen that, you know, in all the overall financial years, quarter one is... Usually, because of Akshay Titya and New Year's in various zones, and the summer weddings, we have a great quarter one, and quarter three and quarter four are led by the festives and the weddings. So, quarter two, in terms of overall sales, is on the lower side. However, quarter two is the particular quarter in which we do our planning, building up of the inventory, so that we are gearing up well for the festive season. And another good thing that we are seeing at the market is that the way... And towards the end of May or June, we had seen the... Our footfalls are the overall sentiments on the lower side, but as we move on to July and August, we are seeing a substantial improvement in terms of the consumer sentiment and the inclination of the consumer towards buying jewelry and building up for their needs and the wedding season as well. And also, one aspect is that, you know, Senko has always stood for innovation and coming up with new collections and designs. As I've mentioned before, that every year we come up with more than 1,50,000 designs. And this particular quarter and this particular year, we shall continue to come up with new designs. One particular thing I would like to really, you know, happily announce to all of you, that along with the women-focused designs that we are coming up in lightweight jewelry, Be it Nine Carat, where we were one of the first to launch and coming up with new collections in Everlight. Very recently, we have also come up with a new design collection for men's jewelry under Aham, which is titanium jewelry with gold and diamonds. And again, I can proudly say that much like the innovation that Senko has always been doing, we are among the first in the industry to have launched titanium jewelry. And the good part about it is that while there is gold and diamonds incorporated in the jewelry, That shall lead to margins, but with the addition of titanium, overall the jewelry prices, the range which we are selling starts from about 20,000 and is about 20,000 to 1 lakh, which is very much affordable by the consumers. One thing as our strategy, as our focus, What we will drive for the upcoming financial year is that we'll continue to prioritize on the lightweight jewelry collection. We are continually analyzing the data, optimizing our inventory, and ensuring how we can improve our diamond jewelry sales and the increase of our franchisee stores so that our margins are protected. We continue to be ensuring that, yes, how we can keep on improving our margins and also to ensure that our return on capital is happening on the best optimal manner. Thank you. This particular financial year, building the plant Senco across the nation so that we can reach out to more customers and open more stores and franchises and grow across with a geographical focus on East and Northern India with our own stores and our franchise stores. So with this, I would like to, you know, request Mr. Banka to say a few words before we start taking questions from all of you. Thank you very much. Yes, good morning, sir.

While Sir has given a detailed background. We would like to clarify that the total growth is 67% while the retail growth is 50%. And this retail growth of 50% has been observed in a secular trend across all the zones. So we have seen very good growth. Even in the newly launched central region where we have seven stores or in Delhi NCR we have got a good growth. So overall we have a very good growth. The ASP has seen almost a 40% YUI increase, what we last year quarter one. The ATB has seen an increase of 38% YUI. So when we look at EBITDA at 7% range, while obviously the comparison is against Q1, but every quarter has its own unique characteristics, particularly in the industry. So, Q1 Laxia was covered by Price Rice, and we had clarified in Q1 Laxia that while the result is 10.1%, but look at our sustainable EBITDA between 7.5 to 7.8, and that's what, even with the quarter one results, we gave the same guidance. So, the 7% EBITDA margin for the quarter is a very good margin, which we feel, at 213 crore. And the pact for the year is 101 crore consolidated. It is partly, the pact is partly lower against stand-alone due to the impact of our two, our three subsidiaries, or out of our three subsidiaries. The factory subsidiaries, which is a captive powerhouse for design, captive powerhouse for supplying jewelry, that is doing very well and that is enabling us to launch almost 100 designs per day. However, the Senes brand, which is in the direction of startup, and it's still working towards the Labyrinth Diamond, Perfume, and Leverage. Any new brand takes time, so there's a partly impact of Senes and the Dubai entity due to which the patch is lower, but patch is still at 3.3%. So, what you want to reiterate is that the Quateras should be seen in larger perspective, we continue, we have already optimized our inventory, which has led to improvement in the inventory days. We have already taken various action to obtain operating leverage, and overall for the year, we continue to remain optimistic to give a guidance of 7.5 to 7.8 percent EBITDA level. So with that, we can initiate the early call and invite you all to ask your queries.

Thank you very much. This is how begins 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 remove yourself from the question queue, you may press star and 2. Participants who requested your handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Viraj Mehta from Enigma Investments. Please go ahead.

Yeah. Hello, Mr. Sennel Bankaji. Thank you so much for the update and very good performance. Sir, my first question is regarding the guidance that you gave for the year. We are still sticking with 20% growth for the year, which will mean that for the rest of the year, we will not grow at all. So, like, what am I missing here? Like, you have had a spectacular Q1, in spite of whatever headwinds that we had. Now that we, azikmas and election is behind us, why are we so negative for the rest, growth for the rest of the year?

No, I totally appreciate your question, and if you... We have seen our overall performance over the past 2-3 years. We have always been a little conservative in terms of giving the guidance, and our range that we usually give to all of you is a growth of 20-25%. We have had a wonderful first quarter, and I am sure that this performance of quarter 2, quarter 3, quarter 4 will continue to remain. But we believe that after the end of quarter three, we will be giving you any kind of, you know, revised performance. But yes, if you really look at it from a 20% plus guidance that we give you, maybe we'll say 25% plus guidance for the rest of the year and whatever it averages out. You're totally logically saying whatever you are saying, but for the whole year, from last year's performance of 8,400 crores, we can comfortably say that we should be crossing 10,000 crores for sure, and our internal team endeavor is to have higher numbers as well. So, this is just something that you please appreciate that we'll be conservatively guiding, and as the year ends, we will keep updating you with our performance.

Sure. And so you said April, we had a spectacular month, but obviously May and June because of various reasons, plus also, you know, little global uncertainties and Prime Minister also being a little conservative on gold. We saw decline in sales both in May and June. Can you give us like, but you said that July and August were very good in terms of footfalls. So just I'm not asking for an absolute number, but like, have we have we gone back from 500 a month or 600 or 700 a month to close to 800,000 a month in July, August, or at least July.

So, I would say that, you know, as a breakup of the quarterly numbers of Q1, we had, you know, almost 55% of the contribution of the total quarter coming in month of April, and the remaining 45% coming in the month of May and June. So that is how the overall quarter looked like. And I would say that from the month of July, we are seeing that July, the footfalls were there, the consumer sentiments improved. So compared to June, we've seen a stronger traction in July and August. But again, I would say from July, August, we are up by 8% to 10% right now. And this will continue to be in this trend. And again, the buildup. Good, again, happen greatly in the month of October and November. That's how the seasonal trend looks like.

So July, just to be sure, July, you're seeing 8% to 10% growth over last year's July.

No, last year July, no. I'm talking about July having an 8-10% over May-June. In comparison to, just to update you guys on, compared to where we stand previous to last year, we are about 25% growth or so. So this is something that… Okay.

So, July was still 25% growth. Okay. Okay. And, sir, as far as, so, and please break this up for me, Banka Ji, is last year when we did 10% margin, I'm assuming a reasonable portion also came from inventory gains in Q1 of last year. So, if I have to think about just operational, and this quarter, obviously, there was no inventory gain because the price QOQ was like 1%, so it doesn't really matter. So, if I have to think about operational profit, would it be fair to say that probably 70-75 crore of PAT last year is now 100 crores of profit, which purely came from operations, why or why?

Yes, and exactly, so... If you see the earning call last year, we state that. Ascribe to the inventory gain. Absolutely. We have adjusted EBITDA inside every quarter, but we can very comfortably assume that the adjusted pack for last year Q1 was around 2075 crore, and 100 crore for this quarter should be seen from this perspective. So, while this fact is 7%, but once again this adjusted fact has to be computed, and there are certain factors, sorry, the EBITDA reported a bit like 7%, but adjusted EBITDA will be a factor of the hedging factor, the discounting, and other competitive factors, custom duty gain as well. So, that's how we have to see. So, effectively, we should look at 7.5 to 7.8 as a sustainable EBITDA, and it will occur, which will accrue over 2 to 3 quarters normalized.

Right. And so, just last thing on margins is, when you say 7.5, but in one of your leanest quarters, you have done 7%. Obviously, December quarter is going to be double digit, just operationally EBITDA margin. So, why are you, like on top line also, you're conservative, on margins also, you're conservative, like, I mean, something is not adding up, right? Because with such sales growth, your cost is not going up in the same region. Shouldn't your margins be higher?

See, so as Amdi Sarai just said, we are usually conservative in giving our guidance, this being first quarter, and even last year the same trend was observed. We were giving a lower guidance, but actually top line as well as bottom line was higher. So since this is the beginning of the year, and since we have done a detailed planning, we will look at sustainable EBITDA margin of 7.5 to 7.8 only, and if anything more happens, it will be partly due to the other dynamics. So, price rise, discounting, improvement in stat ratio. But, sustainable, let's look at, sir, 0.5%. Right.

Sir, thank you.

Thank you so much. Thank you. The next question is from the line of RPGs from Antics of Brookings. Please go ahead.

Yeah, hi, sir. Thanks for the opportunity. Sir, my first question was on your other experience. Essentially, it has been in the region of, you know, 123, 124 crocs, generally, and it has suddenly gone up to 229 crocs. So, why has, and, you know, if I have to just take the other expense, normal run rate, then you could have achieved a far higher margin. I mean, I can understand a gross margin impacted by, you know. I mean, the decrease in stock in trade, I mean, the decrease in inventory, that has an impact. But when I look at your overall margin, this has made a big difference. So what is the reason behind it?

So, thank you. Thank you very much for the question. So, you know, in terms of other expenses, I would attribute it towards the effort that we have put in terms of increasing our businesses. So, there could be marketing-related expenses. There are a lot of expenses in terms of renovation of our stores that we did because it was a lean season. And there are also certain efforts we've done in terms of our customer offers and schemes. And because of that effort, there are certain expenses that have been booked to mitigate certain risks. So I would say that, yes, in terms of your other expenses, it has looked higher. And if we could control it more, then our margins would look much better. But again, I would say that let us look at the whole year, and I'm sure that these kinds of other expenses will not be happening every quarter, and that would be one of the reasons why our margins would also look better as the year progresses.

So, okay. So, we should not take this kind of other expenditure because I was also looking at your marketing expenditure on the PPT. It has seen a growth, but the main driver has been other, I mean, all the other expenditure. X the marketing expenditure. So, we should see a subsiding, I mean, it was more particular to the quarter, and going ahead, we should see other expenditure subside on normal.

And then to update like the way for our name jewelry brand, we've had one of our brand ambassadors and then we have launched a new collection. We've taken a new brand ambassador spending money to build attraction and attract the new generation customers. Similarly, for the youth-oriented and young generation every day, we will continue to have those kind of efforts to have more younger consumer segments coming to our store.

So, so yeah, so my question is that whether this other expenditure acts of the marketing cost, the marketing cost when I see a PPT, it has declined by 19%. Whereas, you know, from about 43 crores, it has come down to 35 crores. Here it has grown from 80 crores to 195 crores. So would this run rate continue or would it have subsided, right? It would be more about a quarter.

Correct, correct. Exactly. So, this kind of a run rate would not continue and it would be subsiding in the upcoming quarters.

Okay. The second question was on the finance cost where there was a lack of availability of GMN and then that led to the increase in cost. So, what was the reason for the lack of availability of JML and what is the scenario currently?

No, so if you remember during the month of March and April, you know, there were certain issues, which we also discussed during that particular quarter calls, that banks were not being able to provide with the gold, imports were stuck, and there were a lot of discussions happening around that. And there was a panic because it was anyway, the season was peak season, and we would have Akshay Sitya sales around, and we need to make sure that the raw materials were available. So that was a situation that happened during the month of April. And with the duty changes that were supposed to happen, there was a lot of uncertainty from the bank side also, all triggered by the fact that this geopolitical scenario was leading to any kind of effort. So, that was the reason why the gold metal loan was not as freely available during those first two months, and we had to depend on procuring gold from the local markets. And that's the, you know, in order to mitigate that risk, we had to reduce the metal gold loan at that point of time. And now that things are stabilizing, I think we're all praying that the geopolitical uncertainty and whatever rift is happening moves towards a solution. And with the crude oil rise coming down, hopefully the pressure on the economy will also come down and importing gold shall not be such a big problem for our nation at that point of time.

Okay, so now it is

much easier available and we will start building up the Metal Gold Loan portfolio once again.

That's it, Thomas.

Thank you. Thank you, ladies and gentlemen. To ensure that every participant gets an opportunity, please restrict your questions to two for participants. The next question is from the line of Saurabh Vedia from Sanikshar Capital. Please go ahead.

Hi, thanks for the opportunity. Am I audible?

Yes, you are audible.

So, two questions. The first one is, what is the current hedging ratio? Second one, on the inventory side, have the supply chain issues been dissolved, and what is the current inventory position? And also, the weighted average cost of that inventory.

So what we have explained that while the supply chain issue was for GML unavailability, but gold was available. So let's say if you look at the old gold was available from the customers, while it is 43% blended for own and such as a store, from the own store it was more than around 55%, and then we buy ready-made jewelry, traded jewelry, that is around 30%, balance either we take from GML. or from the, from the bullion vendors. It's only a matter of any function of the finance cost, but that unavailability was not a concern as far as the availability is concerned. So we have been looking at our inventory days and inventory turnover versus the peer in the industry, and it's really an opportunity for us to improve the, we have implemented a gold rate based software which we are evaluating the store performance, and based upon that, performance of store one by one. We have reduced the inventory in terms of kg and value both, and that's how it has led to improvement in the inventory days, and we will continue to improve the inventory efficiency in line with the industry bench benchmarks.

What is the current history? I might have missed on that part.

Currently, it is coming to around 152 days. I think that is stated in the presentation as well. Perfect. 152.

We will continue to improve it further. Perfect. And how is the difference? So, why did retail and reported sales diverge by 19%? Thank you.

Sorry, how is it our connection? If someone can please clarify what was the question, we could be...

Is it not clearly audible, sir? Am I audible now?

Yes, sir. So, first is on the part of how has been the demand in the quarter so far, and secondly, bookkeeping question is this. Okay, why did the reach? And what is the average by 19 percent?

I think you are talking about the business update, right? So, referring to business update, there I think we have reported 62 and actually 67. So, as we have said, when we do the reporting, we are slightly conservative in reporting the number. That's why, and at that point of time, certain adjustments are pending. The right, the sales, right to return, all the accounting adjustments are pending. So that's how there is a gap between reported of business update of 62 versus 67 of now. These are the present numbers, the limited review numbers. So what we give in the business update is the closure number. That can always vary upward or downward slightly.

Right, and to add to your current quarters performance...

Sorry to interrupt, Saurabh. We joined the queue for follow-up questions.

And your current performance is about 25% growth year-on-year. So that was the answer to your other question.

Thank you. The next question is from the line of Kirsch from Viedna Investments. Please go ahead.

Thank you for the opportunity. Am I audible?

Yes.

Yeah, so my question was regarding the operational thing. So when the management, when you guide for 7.5 to 7.8% EBITDA margin and around 4% of BAT margin, so like is the hedging part also included or only the operational margins will be those?

So 7.5 to 7.8 assumes a perfect situation. That there is no gold price rise, there is no gold price fall, and everything is properly hedged, right? So, it's assumed that there is no price rise or price fall, and everything is perfect. So, now, depending upon the percentage of hedging, 50 or 80 or 100, the results can slightly vary, and that's exactly our intent. That based upon our present hedging level, how can we ensure and deliver 7.5 to 7.8 to you, we have delivered that in the past also.

So 7.5 to 7.8 will be only operational, right?

Only operational, correct, absolutely.

Okay. Second was on the inventory hedging only. Like, how do you decide what levels of hedging will you do for the quarter? Because, you know, the margin swing has been, like, quite wide. Like, it was 10% for the Q1 FF 26. It has come down to 7%. So, like, what factors do you consider for this hedging?

So, we've been talking about our hedging strategy, and we have been guided by the board policy. So, where we are keeping our hedging percentage on approximately 50%, because we have seen in the last financial year that there has been extreme volatility, and we said that we need to manage the risk of liquidity and the price movement. So, for now, till the gold price is really stabilized to a certain extent, we have been doing our hedging for approximately 50%. So, that's been the thought process, and we would like to maintain, and gradually, with more stability, take it upwards, but for now, the hedging percentage should be around 4%.

Sorry to interrupt, Piyash. Please rejoin the queue for follow up questions. Ladies and gentlemen, please restrict no questions to two per participant. The next question is from the line of Omni. Please go ahead.

Yeah, hi, sir. Congress on good operations. Sir, you know, I just also wanted to understand, you know, April was very good, and May and June was a little softer. The question, sir, is that, and our operating margin has come down to 70%, sir. The question, sir, is, one, you know, there was this increase in customs duty, which also resulted in some inventory gain and losses. So, if you can explain. Can you explain us, you know, the hedging part of the, you know. Hello. Yeah, sorry, sir, I'll quickly repeat my question. So, what we have seen is, you know, April was very good, and then, you know, May and June was softer. The question, sir, is, one, we had built quite a... A bit of inventory, you know, ahead of, you know, the quarter. So one, how have we used the inventory and how have we used the hedging part of, you know, the overall, you know, gold sales, because of which, you know, this 7% EBITDA margins have come. How much of it, if at all, is there an inventory loss that we have had because there was a customs duty increase, whether we were able to gain out of this or kind of lose it. There's a reference in the presentation or a press release that. So if you can give us some flavor of this 7% margin, is it despite the losses and or hedges and the price volatility?

So, first of all, you know, what we would like to clarify is that the build-up of the inventory that we did for the business of, you know, Paila Baishak and Akshay Titia was a great, I would say, initiative, and it did help in achieving the numbers in the month of April in terms of our sales. So, it was that which really helped. Grow our business, make sure that stock was available when consumers were in a mood to buy. So that was one part of it. And over the quarter, what we have seen is that with the... The demand not being as much, we tried to ensure that whatever inventory we had built up and whatever inventory was selling, to focus on that and to sell the inventory build up and lowering it down. And I think that as we ended the quarter, we could see that our stock turnover ratio has improved substantially. But again, we need to keep in mind that as we move towards the festive season of October, so towards September onward, we will be building up the inventory for the festive season. And over a period of the festive season, we will again try to lower it down. So that's the general strategy with which we shall be following in terms of building up of the inventory and then further on use the season to sell it. And I would say, Mankarji, that this 7-7.5% is the operational...

Sir, primarily, what we are saying is that, obviously, that, which I have clarified, that 7.5 to 7.8 is the operational EBITDA, and whenever the gold price rise, there will be some gain, and in case of any gold price fall, there will be some losses. So, if you have seen our comments, we have said that this quarter, gold price fall had Gold price fall, competitiveness, discounting, they had impacted the margins and increased by the...

You said our retail sales was 50% higher, our reported sales is more than 60% higher, and the average gold price as reflected in our press release is up by more than 60%. So the question, sir, is are we seeing a grammage reduction in sales, and should we be worried about despite our network growing?

See, grammage reduction is not effective at all. I think when we talk about grammage, we talk about converting grammage into 24-carat purity. We will start talking about the mixed purity, right? So, in a mixed purity, certainly grammage has increased. Okay. Now, in a 24-carat purity level, there's slight, I think, around 1% reduction in India. But as we've always iterated, the jewelry retail, jewelry business is not about the volume. Customers do not consume gold by volume, but by value. So, and the current volume, not only for Senco, but for India at large. I'll be right back. That number largely remains the same. And within that, only company has grown four to five times. So we look at Grammage as a lesser part of our business. We focus more on making charges, which are a percentage of value and not per gram. I hope it clarifies your query.

Yes, sir. I appreciate it. Sir, last group picking question, sir. Cash flow from operation, is it possible to share for the first quarter? It should be positive because we have used it.

The cash flow from operation will be saving in S1, but as you would have seen for the last year, it's an accounting, I don't want to call it anomaly, it is accounting optics. So if the GML is lesser, so it will be impacted by the GML. So this quarter, since the GML borrowing is lesser, to my understanding, cash flow from operation, from accounting perspective, will be negative. So, let the quarter to span out, and when we publish, price flow will become clear. So, it is more of an accounting concept, not the business reality. The business is rating the same, 67% growth is there, customers are coming, we are making profit, the only thing is that we are investing and plugging back the money in the business Thank you.

Thanks a lot, and all the best.

Thank you. The next question is from the line of Arvind, an individual investor. Please go ahead.

Hi, good morning, everyone. I just have a couple of questions. First of all, regarding the inventory days, congratulations, it has come down meaningfully. But can we expect it to, at least if not reduce further, but can we expect it to maintain at these levels?

See, Arvindji, while we are taking all effort to... I say, larger range, larger designs, and that becomes possible only with a... We have a tightrope balance. So we prefer to see return on equity and return on capital employed as the most important and sole criteria. And these factors like inventory days and the subsidiary criteria. So we take your question and concern with utmost respect and importance. But we will like to grow and not at the cost of one or two parameters and focus on improving overall shareholder wealth creation in the form of return on equity.

Okay, well, I hope you also like benchmark your performance with some of the listed peers. And if I look at their inventory turns, it's closer to 3 or 3 plus for some of the newly listed companies like P&Gardgill. And their return ratios are significantly higher, closer to 25-30%. So, I mean, where are we lacking?

No, no, sir, we don't want to comment on our competitors. See, every business has certain unique customer phase, certain unique product design. We are also tracking all our competitors with utmost respect and with equal curiosity. So, at this juncture, we can say that I don't think it is lacking. It is a business model, market, business strategy. While these terms may appear generic, but let me assure you, sir, that we look at all factors and in the initial part you said that we implemented a very AI-based software where we are looking at inventory, productivity, by jewelry, by range, by design, by metal, by customer base, everything possible that we are doing. But we have to look at the, we are creating the traction in the market. That is all I need. I will be too much on this forum.

Okay. Thank you, Mr. Bhangta. And finally, I want to...

Sorry to interrupt, Mr. Alvin. Please rejoin the queue for the follow-up question. The next question is from the line of Yash from Edelweiss. Please go ahead.

Hi. Thank you, team, for taking my questions. I have a few questions. I hope I am audible.

Yes.

Yeah, so my first question is, sir, basically the gold prices ran up a lot in last one year. So, on a steady state basis, what is the inventory we envisage to have per store and what is the revenue per store we are looking for? Like, what is the inventory we will have focused on?

So, see, this is a very strategic question, but just to give a broad idea, based on the market and based on the, you know, where we are, the inventory that we keep can range between maybe 15 to 18 kgs to about 35, 40. So, it all depends on the market potential and the market requirement, and also what is the competition that or where they are keeping what. So, it will be dynamic. You cannot fix it to one particular number, but it will be an average of the range that we spoke about. And at the same time, let us assure you all that we are also conscious that we do not want to block our inventory unnecessarily. We are looking at the consumer budget. We are introducing various types of purity, 9 carat, 14 carat, 18 carat, along with the traditional 22 carat, just so that we could fulfill the requirement of product as per the budget of the customer. So, this is one aspect of it. And the second aspect is that along with the gold jewelry, there has to be a substantial availability of the diamond, platinum, and these kind of modern, high profitable jewelry are kept at the store as well. And we are also, we've got a whole optimum stock store-wise that we maintain and we try to fulfill. So, this is how one has to look at the overall picture.

Yes, see, there is an inventory value which is appearing in the balance sheet on March 26. Out of that, let's say 10 to 15 percent, if you exclude, bring in transit or in various stages of tagging, etc. That, if you divide by the number of stores, you can find out average inventory per store. But that, once again, will be a slightly narrower approach because the inventory which you maintain is, we have talked about your hub and spark model. So, the inventory at our own store, let's say in West or in Mumbai, that is also mint for my Nagpur store. Or something in Indore may be mint for Goliath store, or one in Patna may be mint for Hagalpur store. So, in a narrower approach, you can take 10-15% inventory being in transit and tagging, and divide that by number of stores, but in larger context, the inventory per store... It's more of a strategic number.

Got it, got it. So, sir, I will tell you where I am coming from. Basically, the region we gave 20,000 crores revenue with 300 stores by 2030. So, which broadly means doing around 60-65 crores revenue per store. And at 22.5X inventory turns, that means around 25-30 crore of inventory per store. So I was not able to understand the math over there.

So no, that number is correct. So there are many stores which have cost 200 crore. We have stores in the range of 50 crore, 100 crore, 150 crore, 200 crore and 250 crore also. And in one of the call, I think I gave a blended number of 37 crore average. So, I mean, you can take the total and divide by number, you will get the number. So, it's very, very conservative number. I'm saying that this region which you have given is very much achievable given the growth. Obviously, it will entail increase in the inventory as well. So, well, let's say currently when we are looking at a 5,000 crore inventory. To achieve the 20,000 crore top line, you will certainly require 8,000 to 9,000 crore of inventory. And if you do the peer benchmarking for the competitors who are doing around 20,000 crore, you will find a similar number. You can find inventory of around 12,000 crore for a 20,000 crore. So, instead of giving those details, we have said that we will be looking at improving the return of equity and return of capital employed to 20% range. Inventory will be sufficient of that efficiency.

Makes sense, sir. Thanks a lot for the answers.

Thank you.

Thank you. Ladies and gentlemen, to ensure that every participant gets an opportunity, please stick your questions to one per participant. The next question is from the line of Vaishnavi from Anantrati Investments. Please go ahead.

Hi, thank you for taking my question. So just one question, if I may have missed out on the answer already, I'm sorry. I just wanted to understand that this margin, the EBITDA margin that we've reported in this quarter, right, what would be this number removing all the one-offs that were there? So let's say removing the custom duty rate or change impact and whatever the impact would have been because of the gold price movement, et cetera, et cetera. What would I, our core business? What the operating margin would have looked like in this quarter? And the comparable margin for the previous quarter as well, please.

See, Vaishnavi, we have said that the sustainable EBITDA margin is 7.8, 7.5 to 7.8. This quarter number, we are impacted by the hedge position. So we have said 50% hedge. It means that there will be certain impact on the relation due to price fall. Then the discounting in the market due to the custom due to increase. Then the old gold scheme which we offer, that also impacts the margin which other dealers have also said. Custom due to gain has come in. Similarly, when we offer customer schemes and advances. To promote the sale, we have to give certain benefits to them. So this 7% is less of all of that. But this is only quarters, so we have to see the performance over 3 to 4 quarters and let us look for the entire year where we are confident to deliver 7.5 to 7.8.

Which I understand. So, for example, if we're talking about pairs, right, Titan explicitly stated what was the positive impact of the custom duty benefit on their overall EBIT. So, if I want to say that what was the positive impact of the custom duty rate change on our numbers, how would I, like, what would that number be approximately?

So, that number we have not called out as yet.

Okay. Is there any chance of us getting this number, sir? Because then that would help us in terms of, you know, building our steady-state business margins going forward without any of the one-offs, and basically how to look at the business on an operating performance basis instead of looking at, you know, instead of all the hedging numbers, etc., all of that also coming in the picture.

So, Vaishnavi, in terms of the one-off gains, we believe that whatever gains would be coming from the duty rise, will be achieved over the coming 2-3 quarters. So, on an estimate basis, maybe the gain that we have achieved in the first quarter, because we had more or less 45 days after the announcement. So, in our estimate, it stays about 12 to 15 crores. That is the kind of range with which we should be expecting the gain to come in. Again, the gain that we have achieved and received will be mitigated or, you know, based on whatever offer, scheme, sit-downs, blah, blah, blah, we are giving. But, yes, from that particular custom duty gain, we can estimate that, yes, this particular quarter could be anything between 12 to 15 crore. So, that's just an estimate that we are thinking is what we have achieved in this particular quarter. And as the quarter's progress, we will see that whatever gains have come in, whether, you know, we'll keep, you know, kind of estimating and calling it out as and when we see.

Because I think previously when the custom duty is...

Sorry to interrupt personally. Please respond to you for the follow-up question. The next question is from the line of Gunjan from GB Investments. Please go ahead.

Thank you, sir. My question is, how does management intend to optimize the 50% hedging strategy going forward, and particularly if the gold prices are expected to rise, and the… Am I audible, sir?

Yes, yes, we are listening to you, madam.

Okay, so my question was, if the gold prices are expected to rise, and the higher import duty, it provides some cushion in the margin, so how is the management planning to adjust the hedging margin?

No, actually, we have no thought in our hedging margin or anything. We are talking about the margin that we give to banks and MCX. That is one part of it. But from a perspective of a policy, because of this uncertainty and volatility, we believe that a 50%... We have a manageable hedging percentage in this volatile scenario where we can balance between risk of price movement and the liquidity available in the company so that the growth trajectory continues to happen. So that's where we are managing it and keeping it at these kind of levels. That is number one. But again, I would like to say that there were times that the company were hedged at 75%, 80%, 85% also, when the prices were much more stable and overall the margin requirements by these exchanges and banks were at a lower level. So, again, God willing that when things will stabilize and the liquidity availability to the company shall be adjusted to this current scenario of the gold price, we will move towards a higher percentage of hedging. However, for now, we would like to say that it will be up in the range of 50%. So, that is how one has to look at it and plan for the future.

Okay. Thank you, sir. My other question is...

Sorry to interrupt, Gunjan. Please rejoin the queue for the follow-up question. The next question is from the line of Madhuwanda for an individual investment. Please go ahead.

Yeah, hello?

Yes, yes, you are all good.

Yeah. Sir, please, mince. I strongly believe that the management is not shareholder-friendly because I am saying this because your quarterly results throw a lot of uncertainty. Sometimes your margins come at 13%, sometimes 5%, sometimes 8%. And I know the hedging policies and the inventory then. But this is, you need to centralize only because no other listed jewelry company has so much unpredictability. And the result is that your share has been the worst performance in the jewelry searcher despite reporting all-time high revenue and block budget sales and all. So I believe that you should seriously need to become more predictable regarding margin and be shareholder friendly. Thank you.

Yes, we really appreciate your feedback, sir, and, you know, we keep guiding on a 7.5% to 7.8% for the whole year, and we shall continue to work towards achieving these numbers. We shall continue to look at 20-25% growth on the top line. These quarterly, you know, uncertainties is something that we all are having to deal with, but rest assured that we want to be shareholder-friendly. That is our intent, and we also want to be transparent and create a tool and a platform so that we can get the predictability as much as possible also. So, kindly bear with us. The last two, three years, we know how much there has been uncertainty geopolitically, liquidity-wise, both sides have moved. All these things have happened, and we are in a growth phase. So, we really take your inputs, and maybe that is what it is, but our intent is to keep growing the company, keep growing the profits, keep having return on capital for our shareholders, and building on the business. But we will take your points and we will continuously work on it.

Sorry to interrupt, Maroon. Please rejoin the pew for the follow-up question. The next question is from the line of Yersh from Yadna Investments. Please go ahead.

Hello. Am I already there? Yes, you are already there. Thank you for the... Yeah, just on the hedging thing again, so, like, we have been guiding for 50% type hedging policy. So, like, have we considered going to 100% hedging, like, benchmarking ourselves against the bigger players, someone like Titan or Kalyan? I know this is the board policy for 52-70% of hedging, but, like, can we go to 100% of hedging?

Is this something that we would ideally like to happen? If you look at it, you know, the inventory that we have. And, you know, it is about, say, 5000 crores and our turnover is, say, 10,000 crores. So, in effect, you know, if you are protected yourself for six months of sale. So, there are a lot of these methods in terms of the hedging. So, we are saying that we are hedging about 50% of our, you know, inventory. So, we would like to say that we want to mitigate the risk. By hedging 50% of the inventory, if that mitigates the risk of any kind of margin volatility for the quarter or one quarter, two quarters, then so be it. So ultimately, our objective is to mitigate the margin volatility and any kind of risk on the price, and we will move towards that. 100% is a very ideal number, and we would move closer to that. I would say that 75, 80, because this 20% is something that we should always keep in buffer, and we want to disclose it to you as and when, so that, you know, we have the flexibility. So that's from our side, but yes, we would like to hedge as much as possible in the long run.

Okay, thank you.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I would like to hand the conference over to the management for closing comments.

Thank you, ladies and gentlemen, for your time, for all your questions. We would like to reinstate that this quarter two will be a quarter for planning, for ensuring that we are all moving toward building up for a great quarter three. The good aspect is that after a slow May and June, July, August, we continue to see a 25% growth year on year, which is a good sign. And I'm confident that as we move on to the festive season, we shall be seeing higher levels of growth. We can see a renewed interest in the consumers in terms of buying and planning and preparing for the festive and the upcoming wedding season. Another aspect that we would like to, you know, before the closing, like to reiterate that while we are looking at every quarter and extending on our performance and the team is working on it, but broadly speaking with a long-term vision from a 8,400 crore that we achieved in this particular financial year, as a team over the coming four to five years, we are all working towards ensuring that how do we take our company to a 20,000 crore plus company from a 200-odd store, We are having multiple models, whether it be CENCO, it could be Everlight, big format, small format, based on the market requirement and the opportunities. And also, we all know that ultimately we are driving business where we want customer satisfaction as well as driving profits for organization and the shareholders. So, from a current 7.5 to 7.8% that we keep guiding, our endeavor is to take our profitability through maybe higher stock ratio through other initiatives towards 8% and have a bad percentage of about 4.5 to 5%. I think that is something that should be... Thank you very much for all your best wishes and blessings, and we take all your inputs in the right spirit and in a positive way so that we can improve ourselves. And we'll continue to perform with our team. Thank you very much.

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