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Q1-2026 Earnings Call
AI Summary
Earnings Call on Aug 13, 2025
Revenue Growth: Revenue rose 43% year-over-year to INR 530 crores in Q1 FY '26, driven by strong underlying business momentum.
Profitability: Profit after tax (PAT) grew 21% year-over-year to INR 19 crores, despite absorbing INR 11 crores in tariff impacts.
Cost Savings: Cost optimization measures delivered INR 12 crores in quarterly savings, with an annualized savings target of INR 48–50 crores.
Tariff Impact Managed: Tariff headwinds in the US were fully absorbed in Q1 and are not expected to impact future quarters, as costs are now being passed on to customers.
Debt Reduction: Net debt reduced by INR 95 crores year-over-year, with net debt-to-equity improving to 0.19 from 0.31.
D2C and B2B Strength: Direct-to-consumer revenue grew 37% to INR 69 crores; customer brands revenue surged 67% to INR 394 crores.
Guidance on Working Capital: Receivable days are expected to normalize to 90–95 days and inventory to six months by September.
The company posted a strong Q1 with revenue rising 43% year-over-year to INR 530 crores and profit after tax (after exceptional items) increasing 21% to INR 19 crores. This growth was achieved despite the adverse impact from US tariffs, underlining robust demand and operational execution.
Significant US import tariffs led to an INR 11 crores impact in Q1, which management absorbed in the period. Going forward, tariff costs are being passed on to customers, and management does not expect further tariff impacts. Risk mitigation strategies and a global supply chain are in place to address future tariff changes.
The company completed a major cost optimization program, including closing its Bhavnagar facility. These initiatives delivered INR 12 crores in quarterly savings, with an annualized benefit of INR 48–50 crores expected. Management anticipates these savings will support improved profitability through the year.
Direct-to-consumer (D2C) revenue rose 37% to INR 69 crores, while customer brands revenue jumped 67% to INR 394 crores. The transition to lab-grown diamonds has contributed to growth, especially in customer brands. Some portion of the growth was attributed to pre-booking in anticipation of tariffs, which is not expected to be fully sustainable.
Net debt declined by INR 95 crores to INR 276 crores, and the net debt-to-equity ratio improved to 0.19. The company reported strong liquidity with cash and investments of INR 219 crores. Receivable days rose temporarily but are expected to normalize to 90–95 days, with inventory holding steady at about six months.
The US remains the largest market, accounting for around half of global diamond jewelry consumption. The company is actively working to expand in Continental Europe and the UK to diversify geographic risk, though management acknowledges that the US will remain a key market.
Domestic (India) business remains small, at about INR 25 crores in annual revenue. Management is cautious about expanding domestically, preferring to wait for improvement in unit economics before increasing physical presence.
Ladies and gentlemen, good day, and welcome to the Renaissance Global Q1 FY '26 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Snehkumar Purohit from Renaissance Global. Thank you, and over to you, sir.
Good afternoon, everyone, and thank you for joining us on Renaissance Global's Q1 FY '26 Earnings Conference Call. We have with us today Mr. Sumit Shah, Chairman and Global CEO; and Mr. Darshil Shah, Managing Director of the company. We would like to begin the call with brief opening remarks from the management, following which we will have the forum open for an interactive question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now like to invite Mr. Sumit Shah to make his opening remarks.
Good afternoon, everyone. On behalf of Renaissance Global, I extend a warm welcome, and thank you all for joining us on our earnings conference call for Q1 FY '26. I'll begin with a strategic overview of our operational and business performance for the quarter. Following that, Darshil will take you through the financial highlights in great detail.
We're pleased to report a strong performance in Q1 '26. Revenue from continuing operations grew 43% year-over-year, reaching INR 530 crores in Q1 '26, up from INR 372 crores in Q1 '25. On the profitability front, our profit after tax after adjusting for exceptional items grew by 20%, reaching INR 19 crores for the first quarter, up from INR 15 crores for the same period last year. The performance is particularly noteworthy given the adverse impact of the uncompensated tariffs on our U.S. imports.
Adjusting for the temporary tariffs, our Q1 performance highlights a strong underlying momentum in our core business. The reported profit before tax before exceptional items stood at INR 21 crores. However, while factoring in the tariff impact of about INR 11 crores, the adjusted operational PBT number rises to INR 32 crores, reflecting an impressive 68% year-over-year growth. This significant improvement showcases the robust earnings potential of our business even in the face of external cost pressures.
During Q1 FY '26, we successfully concluded our cost optimization and rationalization program with the closure of our Bhavnagar facility. The bold measures we undertook during FY '25 to position our business for long-term profitable growth have already begun to yield results. These initiatives contributed to operating savings of INR 12 crores in Q1 FY '26 alone compared to the year before. This translates into an annualized saving of around INR 48 crores to INR 50 crores that we had indicated earlier.
Our financial position continues to strengthen with a significant improvement in the net debt-to-equity ratio, reflecting our disciplined approach to deleveraging and a strong commitment to reducing further debt. As we look to the future, our priority is to grow our direct-to-consumer business, both organically and inorganically. High-margin and low-working capital requirements of this business make it an important part of our growth and transformation strategy. We also continue to make efforts to diversify our B2B business by pursuing growth opportunities in key international markets such as U.K., Mainland, Europe and Australia. This will help us mitigate geographic risk while fostering sustainable growth.
With that, I hand over the call to Darshil, who will provide a comprehensive overview of our financial performance.
Thank you, Sumit. Good day, everyone. I am pleased to report a strong start to the fiscal year with consolidated revenue from operations crossing INR 530 crores, marking a robust 43% growth compared to Q1 of FY '25. Our brand under the D2C segment demonstrated remarkable resilience and growth with revenue increasing by 37% year-over-year, reaching INR 69 crores. Customer brands also contributed significantly, posting a 67% increase to INR 394 crores, underlining the growth acceptance and reach of our products in the market.
On the profitability front, I am pleased to share that we delivered a strong performance in Q1 FY '26 despite facing significant headwinds during the quarter. Our EBITDA stood at INR 41 crores, reflecting a healthy year-over-year growth of 13%. Profit before tax before exceptional items increased to INR 21 crores, up by 11% compared to the same period last year. During the quarter, we incurred an exceptional expense of INR 12 crores related to the discontinuation of operations at our Bavnagar facility. This was a strategic decision aimed at optimizing our cost structure and enhancing overall efficiency.
Importantly, the closure is not expected to have any adverse impact on our revenue and is anticipated to deliver meaningful savings in operating expenses going forward. Furthermore, our PAT after adjusting for exceptional items rose by 21% to reach INR 19 crores against INR 15 crores in Q1 FY '25. Lastly, regarding our balance sheet, we remain focused on strengthening our financial position. Our net debt-to-equity ratio improved to 0.19 in June 2025 compared to 0.31 for the same period last year. Our total net debt stands at INR 276 crores at the end of June '25, which is lower by INR 95 crores from INR 370 crores at the end of Q1 of FY '25.
Our cash and bank balances, along with current investments remained strong at INR 219 crores, marking an increase of INR 33 crores from the same period at the end of last year. While we remain cautious of potential headwinds from the U.S. tariff changes and the challenging global macroeconomic environment, -- we are confident that our strength in product design, deep industry insight and strong distribution capabilities uniquely position us to seize long-term growth opportunities. We will continue to focus on scaling our high-growth owned brand business and expanding our portfolio of brands to drive sustainable value for our stakeholders. Thank you.
Sir, should we proceed with the questions?
Yes.
[Operator Instructions] The first question is from the line of Paresh Shah from Global Investments.
Can you hear me?
Yes sir, please go ahead.
Yes. I had just one -- I mean, a few questions, but the first question to start with, when I was looking at the balance sheet and the P&L account, right, from 2018-odd financial year, we have been consistently at around INR 1,800 crores kind of top line with net profit ballpark in the range of INR 75 crores to INR 80 crores and ROEs subpar.
And -- but in the same time, if you look at the balance sheet, the inventory days have gone up from almost 150-odd days, which also seem to be higher, to almost like 250 days. And more than that, the receivable days has gone up from 70 days, 60 days to almost 124 days. How should we look at that -- I mean, how do you look at that as a promoter when you are looking at the company for last almost 8, 9 years?
Yes. Okay. So to answer your question, the numbers are not comparable because in 2018, we had an INR 800 crore gold jewelry business, which we sold last year in August. So that gold jewelry business was -- had a top line of INR 800 crores, delivering very little to the bottom line. And we changed accounting policies later so that INR 1,800 crores actually is INR 1,000 crores because the gold division at that time accounted for INR 800 crores in revenue. Our profits had grown from INR 70 crores, INR 80 crores up to INR 100 crores in FY '22, INR 105 crores was the peak.
And last 2 years, profits have declined because of which we have undertaken a cost reduction exercise, as we have mentioned, of INR 50 crores annually. In this quarter, there is a INR 12 crore saving compared to last year. So I mean, when one looks at INR 80 crores plus a INR 50 crore cost savings, you will see what the numbers will be at the end of the year. So that's how we are looking at it as a promoter.
Sir, it appears this line has got disconnected. We'll wait for the questions. [Operator Instructions] The next question is from the line of Shrikant Parakh from Prudent Investments.
First of all, very congratulations for your quarterly numbers despite all the tariff pressures. So my first question is on that, shall we conclude now that all the restructuring-related expenses or the activity has been concluded, and there will be no further ongoing or spillover restructuring cost in the next quarter?
Yes, absolutely correct.
Okay. And with this new tariff regime, which has revised and which will be applicable -- partially applicable from 1st of August and then partially applicable from 27 August. So how are we assessing ourselves in terms of competitiveness from other countries or vis-a-vis other players from other countries? Will we be having some kind of an additional pressure due to this revised tariff structure?
Yes. So at the moment, customers have -- a lot of the fine jewelry supply chain is in India. Customers have accepted the current tariffs. And while in April, there was a time delay in terms of passing on the tariffs, we do not anticipate any delay in being able to pass on the tariff impact. And we're evaluating multiple supply chain routes because we do have a global supply chain in terms of ability to manufacture. So we are quite confident in our ability to navigate the tariff situation.
We had indicated last quarter that there will be an impact and which will be absorbed, which was to the tune of about INR 10 crores is what I had indicated in the last call. The final number came at about INR 11 crores. I do not anticipate any impact due to tariff in the coming quarter. We've been able to conclude negotiations and discussions with all customers where tariffs will be passed on.
Okay. So -- but vis-a-vis does that increase the final cost of that -- cost of our product or that is something which we don't mind that we have left to our customers?
Yes. I think the new reality is that costs will go up, because any country in the jewelry supply chain is at around 20%, right? I mean the competitors who manufacture jewelry, Thailand being at 19%, China being at 35% and India being at 25% at the moment, doesn't put us in a significantly disadvantageous situation. So we feel that this is a new reality. How that impacts demand, obviously, is yet to be seen. In this quarter, there has been no impact. In fact, you've seen the numbers have been very strong. Consumer demand in the U.S. continues to be resilient.
I think it will have to be a wait-and-watch approach to see the demand on the product when the -- as the price increases. I think from what I understand, most retailers are taking a cautious approach to increasing price. And since these guys have high gross margins, 65% to 70%, it meaningfully maybe dilutes margins by 2% to 3% if they take a tariff impact. So I think some amount will be passed on to the consumers. Some amount may be absorbed by the retailers. So I think that it's something that we'll have to wait and see the impact on demand with the price increases that are taken by retailers.
Okay. And one last question. Since there are a lot of tariff and this was going on, so was there any kind of an advanced sales booking due to upcoming tariff in the current quarter?
To a certain extent, yes. But I think that our -- over the last couple of years, the sales in our customer brand segment has been challenged because we were slow to migrate to lab-grown diamonds. I think a lot of -- we were very cautious in the transition to lab-grown diamonds because the prices of lab-grown diamonds were falling significantly. We've kind of transitioned fully now to lab-grown diamonds and a lot of the customer brands growth is on account of what we are seeing, right?
We've mentioned that we first focused on lab-grown diamonds primarily in our D2C area, which has shown resilient growth. And now on the B2B segment as well, we've sort of transitioned to lab-grown diamonds because of which we are seeing this growth. But there is some prebooking. I mean, obviously, 67% growth in customer brands is not sustainable. There is some amount of prebooking. But overall, we do see a healthy demand environment.
[Operator Instructions] The next question is from Paresh Shah, Global Investments.
Sorry, I actually dropped off from the line. So that was the first question. So while I do understand there has been a product mix change, right, which has led to our turnover increasing and profitability remaining same despite [indiscernible].
No, it's the other way -- Paresh, sorry to interrupt you. It's the other way around. At that time, there was a gold jewelry business, which has now been discontinued. So the sales of diamond jewelry, which we are now doing was INR 1,000 crores, which is now INR 2,000 crores. And on the profitability front, I'm not sure if you heard, while our sales were challenged due to us being cautious in entering lab-grown, we are seeing a catch-up of that now.
And as I mentioned, we've undertaken a cost reduction exercise of more than INR 50 crores. Our profit after tax last year was in the INR 70 crores to INR 80 crores range, where the cost reduction exercise was not in the numbers. So you will see that this year, there has been a INR 12 crore reduction in cost compared to the same quarter last year. So this should show up in the numbers going forward because we do not expect our gross margin to decline. And with operating expenses going down by INR 50 crores, this should translate into a healthier bottom line.
And what explains the working capital deterioration then, sir, if you may help understand that?
So the working capital deterioration is also a function of the gold business being 15 days receivable. It was always this on the diamond jewelry business. So there isn't a deterioration. The denominator is different, which is the sales, which is what is sort of masking the numbers.
Sir, if I compare [indiscernible].
Sorry, on diamond jewelry, the working capital, the inventory is always 6 months. Whereas 7 years ago, there was -- diamond jewelry was only INR 1,000 crores out of the INR 1,800 crores. Gold jewelry has a 15-day working capital. So when you isolate from 7 years ago, the numbers into 2 parts, gold jewelry and diamond jewelry, the working capital cycle was always the same.
If I just compare plain vanilla March '24 to '25, where I'm sure you have the same line of business and there is no gold business that [ we did ] there also our inventory days for 84 days [indiscernible].
March '24, the gold business was still there -- the gold business was sold in August of '24, sir. That is 7 months ago.
So should we assume that this new receivable cycle of 124 days will continue the day -- it's a normal [ cycle of ] business?
The receivable days will go down to 90. In March, the number was higher because we do a lot of sales in December and a lot of collections happen in March and April. The receivable number should be between 90 and 95 days. March is an aberration and it will normalize to 90 to 95 days, receivables. Inventory will be 6 months. So the cadence and guidance should be 6 months inventory, 90 days receivables.
Right. So when we see the September balance sheet, we will have debtor days of 90 days. Is that understanding right?
That should be correct.
Right. And how should we look at -- I mean, you did explain this time around we having a tariff impact and therefore, a write-off or an impact of INR 11-odd crores, right? But then are we -- do we see more of these write-offs? Or are we done and now basically, we have a clean slate from here on? How should we do that? Because we have been [Audio Gap]
Sir, it appears his line has been disconnected again. [Operator Instructions] We have the next question from the line of Lohit Saini from Jay Ram Stock Brokers.
Hello. Am I audible?
Yes. Go ahead.
I wanted to know like considering yesterday, there was a news, 1 lakh workers in Gujarat were laid off, diamond workers. So how do we see the diamond market ahead with the tariffs? Like gold prices are rising, silver prices are rising. So how is the market ahead? And the second question, are we considering any other geographies other than EU, U.K. and U.S.?
Yes. So currently, I think we are not seeing any impact on demand, obviously, between our B2B business as well as direct-to-consumer businesses, both in Europe, Canada and in the U.S. Demand continues to remain healthy and resilient, which is reflecting in our numbers. I think, obviously, some of the tariff impacts have not been passed on to the consumers. However, if you were to take a historical context compared to 1 year ago, gold prices have increased by more than 50% in the last 18 months, which have been passed on to consumers without any impact on price.
So, I mean, while 20% is -- 25% is a big number, it's something that will have to be passed on to consumers because clearly, neither the retailer nor the manufacturer has the margins to absorb this. How this impacts demand, obviously, is an unknown. Just some historical context that gold has increased and obviously, retailers have taken price increases to this effect, whether it's in India or any other geography without any tangible impact on demand.
Okay. And sir, what about the other geographies? Are we considering any other countries?
Yes. Currently, our mix is 65-35. We have a very small India business, and we are looking at opportunities to grow in Continental Europe as well as the U.K., and we see those as growth markets. Those efforts are ongoing. Having said that, U.S. is 50% of the world's consumption of diamond jewelry, and we will remain dependent on that market. I mean there is no way to diversify this overnight.
Okay. All right. Sir, can I ask one more question?
Please go ahead.
Sir, last few years, there was a good rally in Indian stock market. So consumer did not mind spending on the gold price. But this year hasn't been like that. The stock market isn't that good. So maybe this wedding season, there will be an impact on the sales, I feel so.
Yes. So I think that may be the case in India. I mean our sales in India are about 1.2% of our sales. So it's not material for us. I mean, obviously, consumer demand in U.S., Canada and U.K. is more important for us. And again, as I said, what impact the tariffs have on consumer demand is unknown. So far, with the 10% being passed on, there isn't any noticeable impact. If that does have an impact for the other 10% to 15% that needs to be passed on, it's to be seen.
The next question is from the line of Shrikant Parakh from Prudent Investments.
My question is on domestic business. What's the ongoing strategy with -- how we are looking at it? Because last time we said that we will be going with how the demand is getting shaped up into the Indian markets and that's how you [indiscernible] so can you give us an update on that, what's the real progress going out there?
Yes. We haven't seen much improvement in the demand in our domestic business. And we're obviously going to be very cautious about increasing our physical footprint before the business model is figured out. So it's a small business. It's around INR 25 crores in annual revenue. And unless we don't see the unit economics pan out, we are going to be very cautious about expanding Irasva. So we're in wait-and-watch mode as of right now.
[Operator Instructions] We have a question from Shrikant Parakh from Prudent Investments.
So, Sumit, while you were giving the details about the [indiscernible] as a company, we are also weighing an option since we have a global footprint of the supply chain, we could transfer some of the businesses to some other supply countries also. So how quickly this turnaround time is there [indiscernible] there any possibility we have to move our businesses to a different source of origin?
Yes. So I think that as of right now, I think we've got plans in place for risk mitigation, which gives me confidence that there will not be any tariff impact. I think that the specifics of the strategy, we'd like to keep confidential for competitive reasons. But as I mentioned last quarter, there will be an impact. This quarter, we feel that we are much better prepared, knowing the context of what's happening. And we feel fully confident that we will be able to mitigate the impact of any tariffs going forward. The specifics of the supply chain, we'd like to keep confidential for competitive reasons.
Yes. Totally understandable. But just to get a context for our analysis, any ballpark figure or in a percentage of sales, which can come as a cost for shifting the 2 different supply chain routes?
It will be insignificant.
[Operator Instructions] As there are no further questions from participants, I now hand the conference over to Mr. Sumit Shah for closing comments.
Thank you, everyone, for joining us on the Q1 '26 conference call. If you have any more questions, please feel free to contact our Investor Relations team.
Thank you. On behalf of Renaissance Global, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.