Kalyan Jewellers India Ltd
NSE:KALYANKJIL
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Q1-2026 Earnings Call
AI Summary
Earnings Call on Aug 7, 2025
Strong Growth: Kalyan Jewellers reported consolidated revenue growth of 31% and profit after tax growth of 49% for the quarter.
Margin Improvement: Margin gains were driven by a procurement pilot project with leaner vendor credit periods and higher-margin sales of platinum and silver.
New Regional Brand: The company will launch a new regional jewelry brand before year-end, with plans for 5 stores and INR 300 crores of initial working capital.
Procurement Strategy: A pilot to shorten vendor credit periods showed strong ROCE and will be rolled out fully to the new brand, with plans to expand to Kalyan Jewellers after further planning.
FOCO Expansion: 43% of revenue now comes from the capital-light FOCO model, supporting rapid showroom expansion.
Candere Update: The Candere brand is showing strong growth (75%+ revenue uptick at store level) and is expected to be PAT positive or neutral by fiscal year-end.
Festive Demand: Management is upbeat about upcoming festival demand and notes no slowdown in tier 3/4 city footfalls.
Ad Spend Leverage: Advertising expenses are expected to remain at about 1.5% of revenue, down from last year due to operating leverage.
Kalyan Jewellers delivered strong top and bottom-line results, with consolidated revenue up 31% and profit after tax increasing by 49% year-over-year. This growth was consistent across India and Middle East markets, supported by ongoing store expansion and strong demand trends.
The margin improvement this quarter was attributed to a pilot project that reduced vendor credit periods, resulting in better cost efficiency and higher ROCE. The strategy also benefitted from higher-margin platinum and silver sales and some operating leverage. The company plans to fully implement this procurement approach in its new regional brand and eventually expand it to the main Kalyan Jewellers business.
Kalyan Jewellers is preparing to launch a third retail format focusing on regional brands, targeting customers loyal to local jewelry styles. The first regional brand will launch before year-end, with five stores in one state and an initial working capital requirement of INR 300 crores. Expansion will follow the FOCO model, and management expects this new format to be PAT positive from its first year.
The FOCO (Franchisee-Owned, Company-Operated) model now accounts for 43% of revenue. This capital-light approach has enabled the company to open over 160 showrooms in India over the past three years and is central to Kalyan's expansion strategy going forward.
The Candere e-commerce business saw significant growth, with store-level revenues up over 75% following a brand campaign and showroom rollout. Despite a loss this quarter, Candere is expected to end the year PAT positive or neutral as the format stabilizes.
Despite volatility in gold prices, Kalyan reports robust demand, particularly in the South and in tier 3/4 cities. Management is optimistic about the upcoming festive season and sees no signs of a slowdown. There is no expectation of pent-up demand surge if gold prices fall, as wedding-related purchases remain steady.
The company has paused further debt reduction while awaiting the release of INR 200 crores of real estate collateral from banks. New projects, particularly the regional brand launch and procurement changes, may require additional capital, but management is confident in balancing debt and equity funding.
Advertising and marketing spend is expected to remain flat as a percentage of revenue, at about 1.5%, as the company benefits from operating leverage. While absolute spend may rise slightly due to inflation, it will not increase in line with revenue growth.
Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of Kalyan Jewellers India Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Agarwal. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and thank you for joining us on Kalyan Jewellers India Limited's Q1 FY '26 Earnings Conference Call.
Today on the call, we have with us Mr. Ramesh Kalyanaraman, Executive Director; Mr. Sanjay Raghuraman, CEO; Mr. V. -- Viswanathan Swaminathan CFO; Mr. Sanjay Mehrottra, Head of Strategy and Corporate Affairs; and Mr. Abraham George, Head of Investor Relations and Treasury.
I hope everyone had a chance to view our financial results and investor presentation, which were recently posted on company's website and stock exchanges. We will begin the call with opening remarks from management, followed by an open forum for question-and-answer session.
Both -- before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking, as a disclaimer to that effect was included in the earnings presentation.
I would now like to invite Mr. Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers India Limited to give his opening remarks. Thank you, and over to you, sir.
Thank you. Good evening, and let me welcome everyone to the call. I'm extremely satisfied with our performance in the recently concluded quarter, while the consolidated revenue and PAT growth for the quarter have been approximately 31% and 49%, respectively. Stand-alone business recorded revenue growth of 31% and PAT growth of 55%.
Let me take some time to reflect on the targets that we had set around the key objectives of revenue growth, improvement in cash flow, return on capital and rewarding shareholders. Over the last 3 years, we have opened more than 160 Kalyan showrooms in India, predominantly through the capital-light FOCO model. Share of FOCO revenue has grown to 43% as on June 30, 2025. Our revenue CAGR for the last 3 years have been approximately 37% for India and 35% consol. We have also been able to substantially reduce our non-GML working capital loans over the last 2 years. And as you are aware, we also have realized cash via sale of movable noncore assets. All of these have helped improving the return profile meaningfully.
Now the key focus areas going forward will be realize and monetization of real estate collaterals presently with the banks. Secondly, creation of retail formats beyond Kalyan Jewellers and Candere and supply side restructuring to drive meaningful improvement in the margin profile of Kalyan Jewellers. We have already done considerable work on some of the areas that I just mentioned. We have started documentation with the banks for the release of collaterals worth INR 200 crores. Given this development, we have decided to put a pause on further debt reduction till we get the release of the first tranche collaterals. Over the last 12 to 18 months, we have also been giving shape to our plans to expand distribution network beyond the mainstream Kalyan Jewellers. Candere was identified as a second format with predominant focus on lightweight lifestyle jewelry. And as you are aware, we added more than 70 Candere showrooms in the last 18 months.
We launched the brand campaign for Candere during the current financial year and plan to add 80 Candere showrooms in India this year. Footfalls at the showrooms and conversions have shown more than 75% increase since launch of the brand campaign. Candere should end PAT positive neutral by the end of the current financial year. With Candere stabilizing, we have decided to launch the third format, which will essentially be an entity that will house regional brands offering exclusively localized jewelry, competing with strong regional brands. We have drawn up plans to launch the first regional brand under this entity during this calendar year.
Apart from changes in the merchandising, go-to-market strategy, we have also adopted a key change in the procurement plan for the new format by focusing on a lean credit period, ensuring better cost efficiencies. Even though the strategy will be fully implemented in the new format from day 1, we have already successfully completed a pilot project with this strategy in Kalyan Jewellers. We are exploring ways to implement it fully as a lever for significant margin improvement in the main format Kalyan Jewellers in this financial year itself.
And now talking about the ongoing quarter, we have started off well despite continuing volatility in gold prices and we are at a higher base. We are upbeat about the upcoming festive season across the country and are gearing up for the launch of fresh collections and campaigns.
Thank you, and I will hand over to Sanjay. He will take you through the numbers.
Thank you, Ramesh. Good afternoon, everybody. I'm really happy to be talking to you after this great quarter that we had. Our company reported a consolidated revenue of INR 7,268 crores in the just concluded quarter, a 31% growth over the corresponding quarter of the previous year. Consolidated EBITDA came in at INR 508 crores versus INR 368 crores in the corresponding quarter of the previous year. And consolidated profit after tax came in at INR 264 crores versus INR 178 crores in the corresponding quarter of the previous year.
Moving now to talk about the breakup of the numbers between India and the Middle East, starting with India. India revenue came in at INR 6,142 crores for the quarter versus INR 4,681 crores in the corresponding quarter of the previous year. And India EBITDA for the quarter came in at INR 434 crores versus INR 309 crores when compared with the corresponding quarter of the previous year. India profit after tax was INR 256 crores compared to INR 165 crores in the corresponding quarter of the previous year.
Talking now about the Middle East business. Revenues in the Middle East for the quarter came in at INR 1,026 crores versus INR 809 crores compared to the quarter -- corresponding quarter in the previous year. And EBITDA in the Middle East came in at INR 73 crores versus INR 62 crores for the same quarter of the previous year. The Middle East business posted a profit of INR 22 crores in the quarter compared to INR 19 crores in the corresponding quarter of the previous year.
Lastly, talking about Candere, our e-commerce business, we posted a revenue of INR 66 crores in the quarter versus INR 39 crores in the corresponding quarter of the previous year. Candere recorded a INR 10 crore loss in the quarter versus a loss of INR 2 crores in the corresponding quarter of the last year.
With this, we are done with the summary of the financials and the numbers, and we now open the floor for questions. Thank you.
[Operator Instructions] We take the first question from the line of Gaurav Jogani from JM Financial.
Yes. Congratulations on a strong set of numbers. Sir, my first question is with regards to this new pilot that you have mentioned regarding this procurement plan with a leaner credit from the vendors. If you can, sir, elaborate more on this? And how much of this benefit during this quarter in the gross margin was because of this pilot project that you did?
Yes. So there has been a margin improvement and predominantly major reason like what you said is because of this pilot project, tough to quantify. But yes, there has been some improvement because of that. And the margin improvement, we should not give full credit only for that pilot project, which was implemented. There has been revenue from platinum, silver, et cetera, where the margins were on a higher side, predominantly because of the metal price. Silver and platinum revenue comes approximately about 2%, 2.5% of our revenue, wherein the margins were higher.
So that plus the pilot which we did, both together actually helped to increase our margins. And of course, EBITDA margins, if you are mentioning, some operating leverage also was there at EBITDA level.
No, Ramesh, I just wanted to know that because you have done this pilot, how are you planning to take this ahead? And how is the impact of this would be on the overall working capital cycle? Because if we are planning to pay the vendors a bit earlier in lieu of some discounts, so how this can have an impact on the overall working capital cycle for us?
Yes. So this pilot was actually done because we wanted to implement this from day 1 in the regional brand, which we are going to launch shortly, maybe before this calendar year because we want to go in that direction in terms of procurement for the regional brand. The pilot was also done to exactly know the savings, cost efficiencies, which can happen if we do a leaner credit arrangement with the vendors, which was successfully done.
Now to make it implemented in Kalyan Jewellers fully, it is again a big project. And we will -- we were just trying to plan how to implement it at Kalyan Jewellers. And if that is implemented, yes, there is going to be meaningful increase in the gross margin, and that is what we are trying to target for.
Ramesh, any time line that you...
The pilot project that we ran, the ROCE for the capital that we allocated for the project was actually higher than the corporate ROCE as of now.
Okay. Okay. Okay. And any time lines you would like to share that by what time this project can be implemented at the Kalyan Jewellers level?
No, first, we will do it from day 1 in the regional brand. The regional brand launch is where we are going to do it from day 1 fully, and that should come before the calendar year. And during that time, we will give you a overview about how we are going to do with the Kalyan and the time lines, et cetera.
Sure. And Ramesh, my second question...
The pilot which we did will continue. So you can have some margin improvement because of that for the full year. But to expand that pilot project, we will need to give you -- you will need to give me some more time because we will have to implement that in the regional brand, which we are going to launch and then start implementing at Kalyan. It's a big project. So we'll have to give me some more time for us to come back on the time line.
Sure. And second on this regional brand strategy, if you can elaborate more? Will this be under the Kalyan Jewellers brand or the brands in each of the regions would be different? How the strategy would be here?
So here, the target is to be completely regional. So there will be a new company which will be formed, which will be having multiple brands, and each brand will be in a particular state, and it will be very regionalized by its name, by its inventory, by its campaigning, positioning, et cetera. And that is how we are going to do it. In this new subsidiary where we will have multiple regional brands, the first regional brand, we will be launching before this calendar year. And we will launch the other regional brands only once this gets stabilized. So for this year, we have plans only to launch one regional brand in a particular state. Post that getting stabilized, then only we will go to the next region.
Ramesh, just one thing here. Would this brand will be purchased or I mean, you will be creating this in-house?
We will not -- it's not inorganic, we will create the brand.
Okay. Okay. And just lastly, you also mentioned in your opening remarks about the pause for debt reduction. So the debt reduction pause would be largely because of the funds that will be utilized in this pilot project or the project towards the new brand as well as on the improvement -- gross margin improvement initiatives. That is the reason there?
The reasons are mainly because we were looking at a situation where we want to start the documentation with the banks to bring out the collaterals for the reduced loan, which we have already done, which is now on track. So now we want to take a pause so that we will -- we can wait for that collateral to come out. In between, we will use the cash generated in this financial year, predominantly for the pilot project, which we have done, we have implemented already. We have used the -- all available resources for this pilot project. And future also for the new brand, it will be a multiple of what you call, it will be equity also, it will be debt also. We might raise some debt also for that company in the subsidiary.
The next question is from the line of Nihal Mahesh Jham from HSBC Securities.
Yes, sir. Congratulations on strong performance. Sir, I had a first question on this adjusted term that you're speaking. So just to understand right, we are implementing this first in Kalyan. And if it works right, then we plan to roll it out with the regional brands. And only after it works with the regional brands, do we plan to take the entire Kalyan model on this leaner credit period? Is that the right understanding of the time lines?
The pilot project, it's already implemented at Kalyan. So we already started by maybe March last year, okay? And full quarter -- this full quarter, April, May, June, we actually did the pilot project at Kalyan. Now we will implement it fully from day 1 in the new regional brand. Once that is launched, then we will take initiatives to launch it fully at Kalyan Jewellers.
So in this quarter, I'm guessing approximately, say, a small proportion of our procurement in Kalyan would have been done via the leaner credit model. Is that the right understanding?
Correct. Correct. Correct. Yes. Yes. Correct.
And would it be possible to share what was the ballpark proportion of the procurement that was done in this model?
Yes. So the capital allocated for this pilot project, okay, the ROCEs were actually higher than our corporate ROCEs. As I said, all the resources available with us actually we utilized for this pilot project.
Got that. And as you said that the implementation of this model will lead to an improvement in the overall ROCE profile because generally, sometimes we have seen that while margins improve by extending period, paying off here, but eventually, it seems to be a ROCE drag with some other companies who have implemented this. In our case, we are saying that the ROCEs will also improve despite the increase in working capital.
Yes. So the ROCEs actually for the pilot project, which we invested was higher than our corporate ROCE.
Understood that. And because, sir, the balance sheet for this quarter is not visible that if we had to implement this across the entire Kalyan network, what would be the increase in working capital or fund that would be required?
So lean credit means it's not completely out of credit, okay? So…
Open payable days, so which would then automatically...
Yes. Yes. So it will be in the range -- this might need around INR 1,500 crores to INR 2,000 crores.
INR 1,500 crores to INR 2,000 crores. Sure.
Yes. Yes. So whether it can be done on phases, whether it can be done together, the structure of how to bring in the capital, et cetera, that's why I wanted to take some time, and then we are still working on it from day 1, but we will adapt this in our new format.
Got that. The second question was on the new subsidiary that we are launching. So there also, as you said that the first pilot will be one state this year and depending on how that progresses, you will move to the next state. So is there any thought on what could be, say, the requirement of capital, how many ballpark stores we are thinking of launching in each state? Just want to understand that along with this in terms of the capital requirement for the next few years. That is where the question is going to.
Yes, I understand. So for that, what we are trying to do is that we will be opening only in 1 state for the next 12 months. And we will open only 5 showrooms. That is the target for the next 12 months. Initial, we might need about INR 300 crores of working capital. But post that expansion for that format is again FOCO. So we don't need additional capital there.
Understood. So it will be the initial model and then you move to the FOCO model like in Kalyan?
Exactly. Exactly.
Got it. Sure. Sir, last question, I'll come back on the queue that we've obviously managed to deliver a strong SSG this quarter despite gold prices being elevated at least for the most part of June. Now for the month of July also, we've seen that gold has not seen any sort of cool off. So if you could just comment on how the demand trends there have been? And is there a case being built that in case there is a reduction in gold prices, you feel there's a lot of pent-up demand where you can see a strong comeback in growth in the ensuing quarters in case gold corrects?
Yes. So again, last, even when the gold prices were high, our SSGs were, what, 18% last -- in the last quarter, okay? So there is no pilot demand wherein because we were at 18% SSG in the last quarter, okay? That's what we have to understand. The revenue moves from week-to-week or month-to-month depending upon the volatility in gold prices. So when the gold price is too high and when it is very volatile, people take a pause and see where it gets settled down and then come back to shop, right? And marriages cannot be postponed because the price were high. So there is no pent-up demand which can come because the gold price comes down, okay?
And if you talk about July, July started up good, okay, first 2, 3 weeks are good. And last week, August, 1st week and July last week, it is not actually comparable to last year because there was a higher base in the last financial year because of the customs duty reduction. So footfalls are still strong, like July, first week, second week. But the only thing is July last week and August 1st week when compared to last year, the base is very high in the last year. But we think that quarter should be okay because this year, we should get around what, 9, 10 days of festive demand, Navaratri, because Navaratri starts in this quarter itself this year.
The next question is from the line of Harsh Shah from Bandhan AMC.
Yes. Sorry, I just joined a bit late in the call. With this -- sir, I wanted to understand this pilot -- this new pilot a bit more. Are we essentially saying that we are also going into backward integration? I mean, will we also, I mean, replace the likes of Emerald also or how does it work basically in terms of this localized -- whether we -- from that point of view?
No. So backward integration. So just actually, if I want to make it very clear, it is a 3 step, okay? Step #1 is to do this leaner credit period kind of planning for our vendors. That is the step number one. Step number two, what we have -- what we will ideally do is actually make a hub for all our contract manufacturers. It's like a jewelry park, which already we have procured land in our hometown Thrissur, Kerala from the Kerala government. Kerala government has allocated land for us, where we will actually bring in all our South contract manufacturers. There it will not be a margin driver, but more of efficiency driver. And again, younger generation to come in, et cetera, because facilities will be there.
There will be a -- meaning it will be -- have more infrastructure facilities where youngsters will also be motivated to come and join their, what you call, family business, et cetera. Third step is what you are telling is manufacturing. That will be the third step, which will -- meaning it's not going to be in the near future. So our near future will be lean credit period, cost efficiency, margin increase.
So in the second step, sir, which you mentioned as in the land which you purchased and the jewelry park, which you are intending to set up there. So there basically you are saying that whatever contract manufacturer guys you work, they -- you would want them to kind of have probably work in there.
Because -- yes, we will facilitate them to come and work at our infrastructure so that the facilities are good, okay? They can also grow more along with us. It will be an inspiration for the younger generation also to join them. And it is actually an initiative for them to grow their business again along with us because they don't have to invest on infrastructure, they don't have to invest on IT, they don't have to invest on anything else, okay? We will identify such vendors who want to grow with us, and then we will park them in our hub.
Okay. So this hub, sir, will cater the requirements of one state or the South market initially?
So we are now planning for predominantly Kerala, but South market.
South. So basically, let's say, in 12 months' time, I mean, indicative 24 months' time, you would probably have the entire South market covered by this hub?
Not the entire, but yes, yes.
Majority, okay.
But South is what we target for, because South itself comes with the different products, like South, maybe the precious stone vendors might not come to Kerala. So it is not fully South, but predominantly South.
Okay. Okay. But when you are facilitating them in the infrastructure, et cetera, would you not kind of even cut down on the margins which you give to them, let's say, if you are at 6%, 8% margins, let's say, if you give to them, would you not kind of now come down to 4%, 5% there?
Yes, there will be an OpEx also there, no. So that will not be a major margin driver. Margin driver will be the #1 and 3, one being the first step which we will take. The primary focus is there, the leaner credit period. Then it will be the step 3 wherein we go to manufacturing. Step 2, more than margin efficiency, it will bring more efficiency on the turnaround of the inventory, et cetera. That will be the focus there.
Okay. But when would you go to step 3, sir, in terms of manufacturing? Because at one side, you are calling your partners and asking them to work with you and then your next step is basically to take their own business, right?
No. So step 2 is for contract manufacturers who are very small today, wherein they will have only 5 workers, 10 workers, et cetera, okay? Those products, they are making for us in our premise, okay? We already are dealing with them as contract manufacturers only.
Got it. Got it. Got it. Got it.
The step 3 is for manufacturing products, which we are now procuring from wholesalers or manufacturers.
Okay. Okay. Step 3 is basically where the likes of Emerald, et cetera, where you kind of work with is you kind of take it in-house?
I didn't get you there. Can you repeat the question?
So step 3 is basically where you work with vendors like -- big vendors like Emerald, et cetera, is what you want to take in-house?
Yes, yes, I don't want to name anybody. But yes, the step 3 is where we will actually do something where we procure products from manufacturers/wholesalers. And our primary -- again, I repeat, the near future target is not that. Near future target is leaner credit period.
Okay. What -- could you -- I mean, sorry, I just joined a bit late. Could you explain this leaner credit period in detail again? It would -- can you kind of help me with that here?
Yes. Yes. So here, we -- you know that Kalyan, we have 2 formats today, Kalyan Jewellers and Candere.
Correct.
So we want to enter into the third format wherein it will house regional brands. The brands will be specifically created for that particular region. That is the third format which we want to create. And in that basket of brands, the first regional brand, we want to launch before this calendar year. So in between that, what we -- there the procurement pattern also need a leaner credit period in those regional brands for which we wanted to try a pilot in Kalyan Jewellers initially before bringing it to our new regional brands. So we started that pilot project by, say, Feb, March in the last financial year for Kalyan. Of course, this quarter, we got fully at Kalyan. And what we -- the takeaway is that the capital allocated for this pilot project, the ROCEs were actually higher than our corporate ROCE. So now the plan is to…
And how this plan compared to your India ROCE, sir? I mean, corporate would include both India and…
Yes, India corporate only. Yes, India corporate.
India corporate only. Okay, okay, got it.
Yes.
Sir, you're saying, and the plan is now?
The plan…
Sorry to interrupt, Mr. Harsh.
Yes, the plan is now to execute it full year at Kalyan. That's it. For which we will give a detailed -- it's a big plan, right? So we will come back with a solid plan as to how to implement at Kalyan.
[Operator Instructions] The next question is from the line of Ashish Kanodia from Citigroup.
Yes. Ramesh, the first question is on this lean credit period, right? How does it change the sourcing in terms of gold metal loan? Will -- once you kind of implement it across Kalyan Jewellers, will the gold metal loan contribution go down meaningfully from here?
No, no, no. So nothing -- does not what you call relate to gold metal loan at all. So you will -- you would have noticed that our payables are usually in the range of 30, 35 days, okay, payable days, which we will have to bring it down by at least by 1/3. That's what we did as a pilot. And we saw a very good margin increase. Cost efficiency was very high that we want to adapt at full in Kalyan Jewellers. This does not relate to gold metal loan. Gold metal loan, in fact, we have already taken it to the September levels.
Got it. And secondly, on the regional brand strategy, now within Kalyan, you already have been doing the hyperlocal strategy and we can see that in how you have expanded in the non-South region. So when you look at the launch of this regional brand, one, what is the rationale because you already have something which is doing a hyperlocal strategy? Second thing is, how should we also think about like the brand pool? Because currently, when you do marketing, branding, it's under one umbrella, one brand. So how do you create the brand pool, specifically when you are competing against a regional brand in most of this micro market, this regional brand have a very strong brand pool?
And third question on -- related to the regional brand strategy, how should we think about the margins here? Because a lot of this regional brand basically cater to the staple product, which anyway is much lower gross margin product. So, yes, this three on the regional brand strategy?
Yes. So 3 things. One is, yes, we are a hyperlocal brand, where Kalyan, you know that 30% inventory, we keep hyperlocal products, okay? That is actually a way to drive what we call business to Kalyan, right? So we actually target customers who -- it's -- to people who are today with regional brand, but they are a bit aspirational. So it is an enabler. The 30% hyperlocal inventory is an enabler to target aspirational regional brands, okay, regional customers.
So now coming to regional -- the 100% regional brand, it is only -- it will be only having those regional products, okay? It will talk to regional customers who are not aspirational. They are very happy with the regional player today, okay? They don't have any immediate aspirations to move up the ladder. And you know that even today, we have 60% revenue from the unorganized segment who are ramping up to organized players. And the first step will be to go to a regional player and then to people like Kalyan. So we wanted to be there, okay? That is about the strategy. And we see a huge vacuum also there, okay? So that is about the brand strategy.
Now if you look at the margin, yes, you are right, the gross margins are lower. It will be almost what Kalyan was in, say, 2010, wherein we were actually a regional brand at that point in time. But the stock turns are higher. The ROCE for that business, I think will be about -- will be in the range of about 18%, 20%. That's how the model created.
Got it. And just last bit is on the EBITDA margin this quarter, right? I mean, given the FOCO model, normally, we should have seen a EBITDA margin contraction. But while gross margin has contracted, there is a decent bit of a EBITDA margin expansion, which we have seen this quarter. Now when you talk about the operating leverage part, if growth continues to remain broadly similar to what we have seen in this quarter, plus/minus here and there, is it fair to say that we should continue to see operating leverage given that the base is already becoming strong? And even if I look at the share of franchisee revenue, it's almost very similar to what it was last quarter. So from a EBITDA -- I understand gross margin may still remain kind of continue to go down. But on a EBITDA margin level, how should we think about on a full year basis?
Yes. So operating leverage will surely continue. And the margins have come down again, like you said, Y-o-Y. That is largely because of the higher share of franchisee revenue. But yes, the impact has been partially negated this quarter by margin gains from the pilot procurement project that I mentioned now, then the higher gross margins in platinum, silver, that's also there over and above the operating leverage when it comes to EBITDA level. So it should continue. Pilot will continue. Operating leverage will continue, but the revenue or the gross margin increase from platinum, silver, we are not sure. It depends upon where the price is.
Sure, Ramesh. That's helpful. Just last question was on the collateral part.
Sorry to interrupt Mr. Ashish, I would request you to go back to the queue as there are several participants waiting for their turn.
Sure.
[Operator Instructions] The next question is from the line of [ Subhanu from 38 Capital ].
Am I audible?
Yes, yes, loud and clear.
Am I audible?
Yes, yes. I can hear you.
My first question is, what is your demand expectation from upcoming festival? Can we expect a better performance than last year?
So demand expectation, I told you that, meaning July was good, first 2, 3 weeks, and now it's not comparable over the last 2 weeks because the base was very high. But we also have the festive days of 8, 9. Last year, it was -- there was no festive days because October 2nd only Shradh got ended. So I think partially the customs duty impact should be negated by that. So we are very upbeat and fully prepared.
My -- understood. My second question is, are you seeing any type of footfall slowdown in Tier 3 and 4 cities?
Nothing, nothing at all.
The next question is from the line of Dhiraj Mistry from ICICI Securities.
Yes. Congrats on very good set of numbers. So one thing I wanted to know this is that when I compare Titan margin versus our margin and when we see the studded ratio, despite having higher studded ratio, our EBITDA margin is quite low compared to the Titan. Sir, what are the reasons for that?
So this has to -- meaning so if you look at Kalyan, split it into 2, own store revenue, approximately 35% revenue only comes from the non-South markets, 65% comes from South. South, you -- all of us know that the margins are only in the range of what, 13%. Non-South, the margins are in the range of 20% plus, which might not be the case for the competitor which you mentioned in terms of South, non-South mix, which I don't know. But what we think is that it might not be that ratio, right, because we were born from the South.
Now come to franchisee revenue. Franchisee comes with almost half the margin because we have only 8% margin in franchisee. So last 3 years, we have been entirely growing through the FOCO model. Now the FOCO model revenue share is around 43% as of June. So these are the major 2 reasons for you to have a lesser gross margin when compared to -- or EBITDA margin when compared to the players whom you mentioned.
Got it. Got it, sir. And sir, last time when you highlighted there was like a peak GML interest rate was there. And where are we right now? Is it back to the normal GML rate? Or again, with the margin improvement trajectory, is there any backward integration apart from what you mentioned in terms of sourcing benefit? Is there any other things what you are trying to achieve to improve your EBITDA margin going ahead? That would be my last question.
Yes. So GML is -- levels are back to what September levels, okay? And interest rates have come down to 4%. So that's also almost back. Now what did you ask about backward integration, I just explained. So backward integration, I would actually do it in 3 steps. If you mean that backward integration is manufacturing, okay? So manufacturing will not be there in the near term. Our primary focus for the near term will be to do a leaner credit for vendors, which will have a huge cost benefit. Already, the pilot is done and successfully over. Two will be the jewelry park, which I mentioned, that will not be a margin driver, but that will be an efficiency driver. Third will be the manufacturing, but that's not there in the near term.
We take the next question from the line of Pallavi Deshpande from Sameeksha.
Yes, sir. So just wanted to understand on this jewelry park and related to that, how -- what percentage of our sourcing right now would be from noncorporate vendors? And yes, that would be my first question.
Yes. So for now, we deal with contract manufacturers, okay? And predominantly about studded, for example, diamond, uncut, precious, Polki, those are all coming from what we call organized manufacturers. Even within gold, we have certain products which come from only organized manufacturers. Now our focus is on bringing the South-based small vendors who are ready to work exclusively with us and grow along with us, we want to move them to the park, the manufacturing park, which we are trying to create in Thrissur, our hometown.
Right. So they would work on even the studded and the non-studded, is that right?
Predominantly plain gold, but yes, some of the studded.
Right. And sir, my second question would be on the advertising marketing spend. What was it for this quarter versus similar last year same quarter?
There have been, what, some leverage there because of the revenue growth.
Right, sir. Right, sir. And sir, lastly, in terms of this vendor strategy for the South, that would not impact any of your current contract -- organized contract manufacturers or we could see an impact on them?
So even within the contract manufacturer, the pilot, what we did was we -- on a particular SKU, we reduced the number of contract manufacturers and gave them more work, okay, and asked them for a better pricing. So that was what we did for our regionalized contract manufacturers. So the pilot project is a mix of all those.
The next question is from the line of Aliasgar Shakir from Motilal Oswal Mutual Fund.
Yes. I just wanted to follow up on this question -- sorry, this point you made regarding the vendor credit lines. Can you just elaborate and what exactly we are doing there? And what kind of margin improvement that can bring?
So as I told you, wherein we did the pilot, okay, we could use the available resources which we have to implement that. The pilot project, the amount invested, if you look at the return on capital, it was more than our corporate EBITDA in India, okay -- corporate ROCE, sorry, yes. So more than that, I think it is too early for me to share.
Got it. But basically, what you're saying is that this pilot will now be expanded to a larger vendor base basically, even though you have been successful in…
Yes, so now we can -- now it is ready to surely start in the regional brand from day 1 because the pilot is done, and we know exactly the working -- how it works, et cetera. To do it across Kalyan Jewellers, it needs a lot of planning because it needs INR 1,500 crores, INR 2,000 crores. So we have to make the funds ready partial or full or how, et cetera. Whether it is debt, whether it is funding, whether it is equity, whether it is partial, whether it is full, there's no clarity as we speak now. That we will decide over the maybe next quarter or next couple of quarters, and we will come back with a clear plan as to what we intend to do. But the only takeaway is that the additional capital which we invested for this pilot fetched good ROCE.
Understood. So basically, you are reducing the credit lines that the vendors are providing, which is kind of margin as well as ROCE accretive. Basically, that's the point you're saying, that's [indiscernible] are working.
Yes. Yes. So ROCE accretive for sure. If ROCE is accretive, then margin is going to surely go up because meaning that's going to come to the bottom line.
Understood. Got it. And can you just tell me right now what is the credit we take from vendors? Sorry, sorry…
Maybe it depends upon -- it's not a very vanilla easy question wherein gold comes with separate terms within gold, certain products in gold comes with separate terms, precious come with separate terms, diamond again comes with separate terms. But average, the period of credit is around, what, [ 30 to ] 33 days.
30 to 33 days. Got it. Got it. Understood. And I mean, from 30, 33 days, whatever we are taking credit lines, generally what is the markup increase that happens because of that? Any broad idea?
Again, it depends upon product to product. So studded comes with a higher markup, gold comes with a lesser markup. So tough to explain on a call. But the only limited point I want to again reassure is that if capital is invested in that region, what we did in the pilot, the returns, the ROCEs are higher than our company ROCE India.
The next question is from the line of [ Darshil Jhaveri ] from Crown Capital.
Firstly, congratulations on a great set of results, sir. A lot of my questions have been already answered. So just wanted to know like we had a fantastic Q1. So will we be able to continue this momentum in terms of growth of over 30% and a PBT of around 5% in the coming quarters as well? And like what's our overall guidance for PBT this year, sir?
Yes, so South demand looks robust. I told you the last couple of weeks cannot be compared because it had a larger base, meaning heavier base in the last financial year. We don't see anything which can change when compared to Q1. We are actually very positive on this quarter as well. And PBT should be upper side of 5%, India.
Okay, okay. Yes. Fair. Yes, India, India, India only. And sir, just wanted to know in terms of Middle East, how is the market moving out there, sir? And like is there like a possibility of exporting more from the Middle East? Or how does it work out there, sir?
So if you look at the demand side, very strong. You look at Q1, the growth was around 27%, predominantly SSG and the July is also very strong. And we had actually achieved this 27% predominantly because of we renovating certain stores, relocating certain stores around 7, 8 showrooms in the last 6, 12 months. And even in July, the demand is very strong. Now coming to export, no, we don't export. As we speak, we don't have exports at all. We don't even export to our own stores, as we speak, even from India or from Middle East.
Okay. Okay. Okay. Okay. Fair enough, sir. And sir, just wanted to know like our third format launch. So any kind of like what kind of investment are we going to be making in that, sir, in this current year? And like how would that scale up, sir?
No, the initial investment for that regional brand will be in the range of INR 300 crores. We will open around 5 showrooms in the next 12 months for that regional brand. But post that, it will be a FOCO model. It will be completely -- because we now sit with a lot of franchisees who wants to come on board with Kalyan. And if they -- that model should really work because stock turns are higher, even though the margins are lesser. The ROCEs are good, 18%, 20% in our model. So I think the franchisee expansion will be the way forward for that regional brand. But we wanted to do our own store, at least 4 or 5 with that regional brand before we give it to franchisees. We already have indicated to some of our existing franchise, and we are getting positive feedback, but we don't want to test out with them because it's a new brand. So we will launch the first 5 and then maybe even convert so that with that money, we can open the next regional brand.
Okay. So for 5 stores, INR 300 crores CapEx will be on par or is it a bit higher side? Like just wanted to get an idea like what does the INR 300 crores CapEx also include? Yes, sorry.
Predominantly, it is inventory only. So you know that jewelry showroom, the initial one, first of all, will be flagship for the brand, we cannot go for a small format and investments are predominantly in inventory.
Okay. Okay. Okay. Fair enough, sir. And in terms of payback, like whatever kind of something that we are modeling like the first -- I'm assuming the first year would be similar to Candere and will take time to grow its profitability. But what is our expectations from this brand, sir?
So here, it is unlike Candere because Candere, you should understand that we were, meaning it was a, what we call, evolving segment. It was not an evolved segment where Candere was entering, okay? This segment, we are entering, which has already evolved over years. And again, Kalyan as a brand was also same 15 years before. We actually came out from that positioning to a pan-India to more studded, higher margin, et cetera. So this is not going to take time like Candere because Candere was an online platform where we had to pump in a lot of money on technology, manpower, et cetera, which was not our usual cup of cake. But here, the first year itself, it will be PAT positive.
Okay. Okay. That's really helpful to know, sir.
We take the next question from the line of Naveen Trivedi from Motilal Oswal.
Just one question from my side. How should we look at the India business ad spend considering first quarter, we have seen more flattish kind of spend, how should we look at for the full year?
The ad you are asking?
Yes.
India, know?
Correct, sir.
Yes, it should be in the range of Q1, yes, [ 1.5% ], meaning [ 1.5% ] range.
Okay. So last year, we spent close to 1.8%. So you're saying this year, we should take it more than [ 1.4% ].
Yes. Yes. Yes. Operating leverage will also step in for ad also. So it will be in the range of about [ 1.5% ].
Okay. Does it mean that as an absolute number, which last year we spent close to INR 400 crores, it looks to us that given the size of the business, absolute number is already -- has reached to a level where we can keep capitalizing on the business growth and...
I think, absolute number, there can be a bit of a growth, but it will not grow with the revenue.
Sure, sir. Sure. Yes.
So the inflation is there. We will have to add some amount because inflation is there in all the sectors.
Perfect, sir.
We take the next question from the line of Aditya Sharma from Shikhara Investments.
Two questions from my end. One, how is the pickup in the non-South geography? The question is stemming from the SSG. So the non-South geography is doing 16%, while SSG for South is 20%. So I'm kind of surprised how matured region is doing better SSG than nonmatured stores as the large part of the store expansion was happening in non-South. So could you just highlight on that?
Yes. So again, if you look at the last 3, 4 quarters, it has been like that some quarters, South will grow more than non-South. Certain quarters, non-South will grow more than South. And even in matured stores, SSGs are strong because you know that the shift from unorganized to organized is increasing every year. And once we -- once a customer comes into Kalyan, then it's like a lifetime. So they keep on coming to Kalyan. And the brand is also getting popular day by day because we are expanding. So these are all the reasons.
Okay. Okay. Second question would be, can you throw some light on Candere, how the brand acceptance is taking place, how the unit economics for the stores shaping up? What are the plans for the brand, if you throw some light on it?
So Candere, the only -- because we had increased our footprint and then we started our campaign. Campaign acceptance is good. We see huge traction at the store level. The revenue uptick for June, July has been in the range of 75% plus at the store level. Of course, the base was low because Candere was a low revenue arm for us, but we see high positivity at the store level.
Got it.
And Candere will end PAT positive neutral by the end of the financial year.
We take the next question from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking.
Yes. Congratulations on a very good set of numbers. Sir, first question is regarding the leaner payable days. So what would be the payable days because you mentioned it's currently around 30 to 33 days. So with the leaner structure, what would be the number like?
1/3 of it, maybe 10 days, 10, 12 days. That's what -- that's what we did for a pilot project.
Right. Sir, for incremental 10 days with the size that we operate, do we really require incremental 20 days also?
Yes, [ 23 ] days.
Is it not possible to -- sorry to use this word, but squeeze our vendors because with the size that we operate, we can even do that, right? I mean we can extend the payable days.
So that we believe or even without we doing all that, every vendor wants to work with us, right?
Right.
Everyone has a capital, what you call the cost of capital is there for everybody, right? So everyone has to make money, and we are here for the long run. So more than all that, we have to go and talk about the reality. We did the pilot. The credit period we brought it down to 1/3. We got a huge cost efficiency there. And it's a win-win solution, and why go to that direction.
Okay. Okay. And sir, this pilot project and the regional brand strategy, are these 2 different strategies or they are a part of one strategy? Slightly got confused on that front. If you can throw some light?
There are -- it is actually 2 strategies. But for the regional brand, we have to have this linear because regional brands usually go with more price-oriented, what you call customer base, wherein we will have to get the inventory at the maximum cost efficiency possible. So we wanted to do that for the regional brand from day 1, for which we wanted to do a pilot because we want to start it at the new brand. When we did the pilot, we could again reassure that the cost efficiency is very high that we have to adapt it in Kalyan, and we see higher returns because if we do it in Kalyan fully. So then we thought we should work it better in Kalyan.
Fair enough. And what would be the in-house versus third-party procurement at this point in time or everything is third-party procurement?
Yes, mostly, because we work with contract manufacturers, know. We don't have own manufacturing at all in India.
At all in India, right. And what would be the total debt figure that one should work out with for '26, '27 and '28?
So now because I will give you clarity because now I told you we are taking a pause on the debt, okay, and we are waiting for the collateral to come out. So if the collateral comes out, say, in next month, we might again start the next set of prepayments, okay? So give us some more time because there are multiple projects going on. We might need some capital for our new project, wherein we are trying to get exposure in the new project itself, okay? Worst-case scenario, if the new project, we are not able to get exposure, we might have used the buffer, which is there in Kalyan to open the regional brand there. So when we meet again, I will have a better answer is what I believe.
Fair enough, sir. And one last question, if I can squeeze in. Sir, a very broad level question. Sir, organized has already reached 40% of the market share. How -- even in the mature markets, I mean, penetrating beyond 50%, 60% is difficult for even for organized players. There will always be a certain component of unorganized. So on a maybe 5-year view, I mean, do you still believe that there is a shift that will continue or largely the shift has already been taken place?
We believe that it will be a 100% organized segment in the next 5 years.
Okay. Okay. Fair enough.
And it does not mean that today's all unorganized people will close their stores and everyone will come to -- customers will come to people like Kalyan. When I say 100% is because we still believe that the unorganized segment will convert to organized themselves because there are shopkeepers who were very unorganized maybe 5, 7 years before. Now they are a semi-organized business today. And people in India, they will do business, know. They cannot go out of their business. But even if it becomes fully organized that way, unfair practices will not be there. Unfair advantages will not be there, which is good for brands like Kalyan.
We take the next question from the line of Pallavi Deshpande from Sameeksha.
You just mentioned about the platinum and silver. So I wanted to know what would be the share of non-22-carat gold in the revenue mix? And what was it last year?
So non-22-carat is a bit of a -- meaning because the diamond completely almost comes non-22-carat. But yes, so uncut, precious, et cetera, comes with 22-carat now. Some states in India, especially Bihar, UP, et cetera, the 18-carat revenue is almost maybe 40% of the total gold revenue. But we as a brand are also trying to push 18-carat in other states because it will be easier for us to play in the ticket size, et cetera, because of the high gold price inflation over the last 1 or 2 years. So very tough to tell you exactly about 18-carat revenue share.
Right. Sir, my second question would be just on the previous one when you mentioned about organized share, right, going to 100%. So if I want to look at organized as players who have a chain in more than one state, if I do that kind of a classification, then how -- what would be the share of organized in the next 5 years?
Yes. So -- but that calculation is a bit weird, know. You can -- even as a single shopkeeper can be an organized player, know. That should be the reality, right? You cannot expect everybody to have multiple showrooms and bucket that as organized. Organized means…
No, so I'm bucketing it is because the organized guys get an advantage of shifting inventory from one place to one state if it doesn't work here to that state. And that's how -- that's an advantage, right? So that's not an advantage a single shopkeeper has.
It's not an advantage. It's not, meaning you cannot simply shift product from showroom to showroom because then that means that there is some issue with the planning because that is not going to be the major driving factor for a jewelry showroom success. So even now as we speak, we have seen single jewelry showrooms. I don't want to name the brand who compete us more than other regional players in particular towns because if they do things right in their particular town, it is very tough to compete them.
Right, right. And sir, what would be the share of old gold in exchange in your total revenue?
So we will -- yes, so you should look at B2C, it's [ 25 ].
Ladies and gentlemen, due to time constraints, we take that as the last question. And I would now like to hand the conference over to Mr. Ramesh Kalyanaraman, sir, for closing comments. Over to you, sir.
Thank you very much, and hope to see you soon again. Thank you very much.
On behalf of Kalyan Jewellers India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.