KALYANKJILNSEQ2 FY23November 15, 2022

Kalyan Jewellers India Limited

7,768words
114turns
9analyst exchanges
6executives
Management on call
Ramesh Kalyanaraman
EXECUTIVE DIRECTOR, KALYAN JEWELLERS INDIA LIMITED
Sanjay Raghuraman
CEO, KALYAN JEWELLERS INDIA LIMITED
Swaminathan Viswanathan
CFO, KALYAN JEWELLERS INDIA LIMITED
Sanjay Mehrottra
HEAD (STRATEGY &
Abraham George
HEAD (INVESTOR
Swaminathan
CFO; Mr.
Key numbers — 40 extracted
20%
expansion of our return ratio post-COVID. We recorded consolidated revenue growth of more than 20% in Q2 as compared to the same period in the previous financial year. Moreover, our revenue as a c
18%
ngfully expanded through COVID with Q2 consolidated revenue having grown at a CAGR of more than 18% over the last three years. If I now sit back and look at our business over the last year and aggr
rs,
. If I now sit back and look at our business over the last year and aggregate the last four quarters, Kalyan has achieved revenue in excess of Rs 13,000 crore and PAT in excess of Rs 420 crore.
Rs 13,000 crore
over the last year and aggregate the last four quarters, Kalyan has achieved revenue in excess of Rs 13,000 crore and PAT in excess of Rs 420 crore. Now let me spend some time on the curren
Rs 420 crore
last four quarters, Kalyan has achieved revenue in excess of Rs 13,000 crore and PAT in excess of Rs 420 crore. Now let me spend some time on the current quarter. We are extremely excite
25%
wali day minus 30 days, and in this period, we have witnessed a revenue growth of approximately 25% versus a prior year. This has been driven by very strong customer walk-ins across all the markets
35%
een really encouraging was a share of new customers during the festive period. It is in excess of 35%. As indicated on the previous call, operating model at the existing five franchise showrooms have
Rs 3,473 crore
terly performance. For this just concluded quarter, our Company reported consolidated revenues of Rs 3,473 crores, a 20% growth compared to the corresponding quarter of the previous year. Consolidated EBITDA ca
Rs 266 crore
growth compared to the corresponding quarter of the previous year. Consolidated EBITDA came in at Rs 266 crores versus Rs 228 crores in the corresponding quarter of the previous year, a 54% growth.
Rs 228 crore
e corresponding quarter of the previous year. Consolidated EBITDA came in at Rs 266 crores versus Rs 228 crores in the corresponding quarter of the previous year, a 54% growth. I s
54%
ame in at Rs 266 crores versus Rs 228 crores in the corresponding quarter of the previous year, a 54% growth. I shall now give you the breakup of the Q2 performance starting
Rs 2,841 crore
u the breakup of the Q2 performance starting with the India numbers. Our India revenue came in at Rs 2,841 crores for this quarter versus Rs 2,503 crores when compared to the corresponding quarter of the previo
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Guidance — 20 items
Ramesh Kalyanaraman
opening
“Moreover, our revenue as a company has meaningfully expanded through COVID with Q2 consolidated revenue having grown at a CAGR of more than 18% over the last three years.”
Ramesh Kalyanaraman
opening
“Our international operations will be predominantly franchisee driven in the next three years.”
Ramesh Kalyanaraman
opening
“Finally, diverse non-core immobile assets which will be released due to the reduction in working capital cash credit and also divesting certain non-core mobile assets, thereby, lightening the balance sheet.”
Ramesh Kalyanaraman
qa
“So, the revenue growth will be higher than the volume growth because, you know, that the gold prices have moved by 5 to 6%.”
Ramesh Kalyanaraman
qa
“So, studded ratio for Q2 will be in the range of what, 26%.”
Shirish Pardeshi
qa
“I mean, I am not asking for guidance, but directionally, do you think we should be achieving that target?”
Ramesh Kalyanaraman
qa
“I think you should look at it that way because very hard for me to give a guidance.”
Manoj Menon
qa
“Diwali was like mad wherein I would also tell you that we should not expect that Q3 ends up with 25%, because Diwali has been like a revenge shopping.”
Manoj Menon
qa
“And a longer-term plan is as I have mentioned in the presentation, our expansion will be majorly driven by franchisee.”
Manoj Menon
qa
“It is a FOCO model, very asset light, capital light, and this will actually bring in lot of cash in the books, and that will be again used for producing our cash credit, which will take out the assets which we have mortgaged the collateral and which can again be liquidated to further improve the return ratios.”
Risks & concerns — 5 flagged
There is one line which spoke about, you know, which basically called out gross margin pressure during the September quarter, essentially to do with the customs duty pass through.
— Manoj Menon
The gold rate meaning the board rate continued to remain under pressure throughout the quarter.
— Manoj Menon
The board rate is decided by the local associations everywhere across the country, and there have been pressure in the board rate itself.
— Manoj Menon
So, to some extent actually, we have negated the impact of the board rate pressure because of the charge of premium in making charge which we had.
— Ramesh Kalyanaraman
And regarding the operating leverage which will step in, yes, of course, when your revenue grows, operating leverage will step in, but there has been pressure in the gross margin itself by way of gold rate.
— Ramesh Kalyanaraman
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Q&A — 9 exchanges
Q
I have got couple of questions and need some clarification. We have opened five new franchise stores in India. Correct? Ramesh Kalyanaraman: Yes.
Shirish Pardeshi
At various point of time, it would have done its sales, but maybe if you can highlight what is the contribution in the current quarter we have got of these five franchise? Ramesh Kalyanaraman: Yes. So, it is very minimal. So, hard to share the number because it's a very competitive information. Second on, again, some data points. In that 20% growth what we have reported in the quarter, what is the absolute grammage growth we have experienced? So, the revenue growth will be higher than the volume growth because, you know, that the gold prices have moved by 5 to 6%. So, it should be in that leve
Q
Few questions from my side. Ramesh, one thing about demand, let's say, for the second half, normally, I don't get into too much of quarterly and half term stuff, but it's a very peculiar situation. So, when I look at the gold prices, let's say, exit September 30th, and I think about that, let's say, it stays where it is for the next six months, you know, for your basis it looks like there is no gold inflation. So, just wanted your top down view on consumer behavior that, let's say, in a scenario of no gold inflation, just the volumes can make it, make up, let's say, and get to a good sort of a
Manoj Menon
Fair point. Cost stability driving volumes. Understood. And also you mentioned about, understood, a very heartening to hear. Now second on the franchising bit, you know, just one qualitative comment for the record would be helpful, you know, what's the sort of color of franchisees which you are having? What I mean by what sort of background they come with? What are the selection criteria you use? Are they existing jewelers? You know, are they auto dealers? Do they come from, let's say, apparel retail? I don't know. I am just trying to understand what sort of, you know, let's say criteria you u
Q
Thanks for the opportunity. Just one clarification, sir, this one of the participants asked you about margins where you mentioned couple of one-offs for the quarter, and you mentioned if you exclude all that, we are looking at 8, 8.5% margin. Just to understand them better, are we trying to say that as you get into the second half because upfronting has happened in terms of our spending, we will move towards 8, 8.5% margins? Thanks. Ramesh Kalyanaraman: Yes. So, I don't want to give a forward-looking statement, but yes, if without the adjustment relating to the advertisement and promotion, the
Ratish Varier
So, are we trying to say that we have upfronted these expenditures for the quarter? Because you also mentioned Diwali is ahead, so we would have done some spending. For the ad expenses, yes. Yes. Some of the ad expenses, yes, but relating to promotions, no, because it's onetime. Ad expenses for the full year we should consider between 1.8 to 2% as we have been mentioning earlier, isn't it? Ramesh Kalyanaraman: Yes. That is the target for the brand. Just to add one more clarification, when earlier participant Manoj asked you about, you know, the gold price, you mentioned, right, the unorganized
Q
So, the question that I had essentially is, first of all, you spoke about festive-to-festive 35, 36 days growth being 25%. That is obviously much higher than what we have seen in the past and what you have kind of guided for or alluded to in the past also. This leads to operating leverage obviously. So, you expect this stronger book to drive margins much stronger over the next two quarters? Or will some of it be taken away by higher ad spends?
Ramesh Kalyanaraman
So, first of all, it is just to correct, of course, it is Diwali minus 30 days. It is not 35, 36 days. Okay. So, that is the way we see the festive. And yes, the growth has been in the range of 25% and already starting from a higher base. And Diwali, it was like a revenge shopping. The market was extremely vibrant and growth has been there for all, mostly, all the large players in this festive season. And we as a brand started our campaign well in advance. We managed to do a good job. But this 25% is a very bullish number. We should not keep that as a Q3 or a Q4 target. But of course, the quar
Q
I'm sorry if my questions are repeated because I joined a bit late. Sir, my question is with regards to the performance in the Middle East. While the top line performance there has been into tracking well ahead and largely, as you mentioned in the PPT also, that it's largely SSSG driven. So, what is the outlook in terms of store opening there? One. And second, how should one look at the margins there because margins there has been tracking a bit lower, but equally gold rates would increase. So, how should one look at the EBITDA margin given there will be the operating leverage benefits as well
Ramesh Kalyanaraman
For Middle East if you look at the revenue, there has been a substantial growth in revenue in Q2, and that is not the way we should look at it, because Q2, actually, in the last year, the market was just starting to become vibrant. So, from Q3, the Middle East was back in form in last year. So, as we speak, Diwali has been good in Q in Middle East also. The revenue growth has been very similar to that of India, and even now the market is vibrant. So, regarding expansion for Middle East. It will again be more of the franchisee based which we will look for. We have signed the first LOI for our M
Q
So, sir, my first question is, I want to understand the throughput difference between the South and the non-South stores because if you look at per store basis, the non-south revenue is lower, and we don't have breakup of sales per square feet. But assuming that the studded ratio and all is higher in non-south market, so want to understand, I mean, my reading is correct that non- south should be higher throughput or it's currently low for you and you expect it to improve in the coming quarters?
Ramesh Kalyanaraman
So, you are asking about, first of all, revenue growth in south and non- south, right, if I heard you right? Yes. Not more about revenue, but it's more about per square feet sales. So, revenue per showroom will be surely higher in south than in non-south. And so that will continue you believe or it will, I mean, the gap is narrow. So, revenue per store in South India will be higher than in non-South. That is because, first of all, in South India, we are there in, the number of showrooms if you see, we are there in almost all the Tier 1 and Metros in South India. In non-South area, we are only
Q
Thanks for the opportunity. I have a few questions. Some clarification if you can provide on the movable and immovable property. So, what is the quantum of that? And if I am not saying you did mention that it will happen in two years, but is this has further charged within the other group companies or it's purely on the balance sheet of Kalyan? Ramesh Kalyanaraman: We have only one company no, meaning Kalyan Jewellers owns the land, and the charge is only for Kalyan Jewellers.
Shirish Pardeshi
So, you mean to say that this Rs 1,200 odd crores will be retired in next say 18 to 24 months. Three years. Three years. Ramesh Kalyanaraman: Yes. My second question on the franchise. I did remember that there was a full page ad for a franchise inquiry which was done in Business Daily in Mumbai. So, obviously, your pipelines look very strong, but if my interaction goes back a quarter before, you did mention that we want to stabilize this for five, six franchise and gets a good learning and then expand. Ramesh Kalyanaraman: Yes. So, do you have, in that journey, you have got enough understandin
Q
Sir, on the balance sheet side, so there is on the current liabilities which is increase of Rs 243 crores on the console, can you explain what exactly is that? Ramesh Kalyanaraman: You mean the creditors, right?
Rajiv
Yes. Ramesh Kalyanaraman: Yes. So, that is supply credit increase because it is a what you call preparing for the festive. So, the inventory would have increased and creditors would have gone up. The normal pre-festival build up inventory. And on the Middle East gross margin, so we have seen close to 200 that's dropped there, and which is slightly different from the Indian piece. What is the difference because of? So, Middle East margins have been in the range of 15% no? It is almost steady. It used to be 17.5. Ramesh Kalyanaraman: Yes. It used to be 16 to 17%, because now, you know, tourists
Q
Thank you very much, and looking forward for a good quarter, and hope to see you again soon. Thank you.
Management
Speaking time
Ramesh Kalyanaraman
32
Shirish Pardeshi
27
Moderator
11
Manoj Menon
9
Rajiv
9
Anurag Dayal
7
Sanjay Raghuraman
6
Gaurav Jogani
5
Ratish Varier
4
Nillai Shah
3
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Opening remarks
Rahul Agarwal
Good evening, everyone. And thank you for joining us on the Kalyan Jewellers India Limited Q2 and H1 FY23 Earnings Conference Call. We have with us Mr. Ramesh Kalyanaraman, Executive Director; Mr. Sanjay Raghuraman, who is the CEO; Mr. Swaminathan – CFO; Mr. Sanjay Mehrottra – Head of Strategy and Corporate Affairs; and Mr. Abraham George, Head of Investor Relations and Treasury. I hope everyone got an opportunity to go through our financial results and investor presentation uploaded on Company's website and stock exchanges. We will begin the call with opening remarks from Management, following, we will have the forum open for questions and answers 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 earnings presentation shared with you earlier. I would now like to invite Mr. Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers India Limited to giv
Ramesh Kalyanaraman
Thank you. Good evening, everyone. The recently concluded quarter has been very good. It was really exciting for Kalyan Jewellers. We achieved robust momentum in footfalls and revenue across all our markets, and we are continuing to see strong profitability trend and meaningful expansion of our return ratio post-COVID. We recorded consolidated revenue growth of more than 20% in Q2 as compared to the same period in the previous financial year. Moreover, our revenue as a company has meaningfully expanded through COVID with Q2 consolidated revenue having grown at a CAGR of more than 18% over the last three years. If I now sit back and look at our business over the last year and aggregate the last four quarters, Kalyan has achieved revenue in excess of Rs 13,000 crore and PAT in excess of Rs 420 crore. Now let me spend some time on the current quarter. We are extremely excited with the way the quarter has started despite a very high base last year. We tracked the festive season as Diwali d
Sanjay Raghuraman
Good evening, everybody, and thank you, Ramesh. I am really happy to be talking to you all after a great quarterly performance. For this just concluded quarter, our Company reported consolidated revenues of Rs 3,473 crores, a 20% growth compared to the corresponding quarter of the previous year. Consolidated EBITDA came in at Rs 266 crores versus Rs 228 crores in the corresponding quarter of the previous year, a 54% growth. I shall now give you the breakup of the Q2 performance starting with the India numbers. Our India revenue came in at Rs 2,841 crores for this quarter versus Rs 2,503 crores when compared to the corresponding quarter of the previous year. And India Q2 EBITDA came in at Rs 222 crores versus Rs 201 crores when compared with the corresponding quarter of the previous year. And India PAT came in at Rs 95 crores compared to Rs 68 crores in the corresponding quarter of the previous year. Moving now to talk about our Middle East business. Revenue in the Middle East came in a
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