KALYANKJILNSEQ1 FY24August 14, 2023

Kalyan Jewellers India Limited

7,631words
120turns
13analyst exchanges
5executives
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
Key numbers — 40 extracted
31%
East over the last several quarters now. While our consolidated revenue growth was approximately 31%, the consolidated PAT grew by around 33%, up from INR 108 crores to INR 144 crores. Revenue from
33%
While our consolidated revenue growth was approximately 31%, the consolidated PAT grew by around 33%, up from INR 108 crores to INR 144 crores. Revenue from India operations grew by approximately 34
INR 108 crore
nsolidated revenue growth was approximately 31%, the consolidated PAT grew by around 33%, up from INR 108 crores to INR 144 crores. Revenue from India operations grew by approximately 34%. Strong operating mom
INR 144 crore
growth was approximately 31%, the consolidated PAT grew by around 33%, up from INR 108 crores to INR 144 crores. Revenue from India operations grew by approximately 34%. Strong operating momentum has been con
34%
3%, up from INR 108 crores to INR 144 crores. Revenue from India operations grew by approximately 34%. Strong operating momentum has been consistent and sustained throughout the entire quarter, inclu
rs,
ur operating team on ground. We continue to see encouraging trends around the share of new customers, which was in excess of 36%. Also, our share of revenue from the non-South market is now at 44%, up
36%
. We continue to see encouraging trends around the share of new customers, which was in excess of 36%. Also, our share of revenue from the non-South market is now at 44%, up from 35% in the prior yea
44%
omers, which was in excess of 36%. Also, our share of revenue from the non-South market is now at 44%, up from 35% in the prior year. This year so far we have opened 16 new showrooms and we
35%
was in excess of 36%. Also, our share of revenue from the non-South market is now at 44%, up from 35% in the prior year. This year so far we have opened 16 new showrooms and we are on track
22%
momentum driven largely by the strong economic activity in the region. Revenue growth was around 22%. Eid holidays driven sales, which was not part on the base year. In the prior year also contribut
INR 4376 crore
major points now so we can have enough time for questions. We reported a consolidated revenue of INR 4376 crores, a growth of over 31% year-on-year. Consolidated profit after tax was INR 144 crores versus INR
INR 3641 crore
arter of the previous year, a growth of 33%. Talking about the India numbers, when you came in at INR 3641 crores, a growth of 34% over the corresponding quarter in the previous year. And India, profit after ta
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Guidance — 20 items
Rahul Agarwal
opening
“This year so far we have opened 16 new showrooms and we are on track to open 10 more showrooms during the current month.”
Rahul Agarwal
opening
“It’s in line with our already announced plan to launch 52 showrooms across the non-South markets.”
Rahul Agarwal
opening
“We expect to launch the first franchisee showroom in the region before the end of the current quarter.”
Rahul Agarwal
opening
“Talking about our online platform Candere in line with our already announced omnichannel expansion strategy, we plan to launch 20 plus physical showrooms of Candere during the next six months starting from August.”
Rahul Agarwal
opening
“We’ve made meaningful progress towards the divestment of the non-core assets which has been previously announced and we expect to conclude the transaction around the end of the current quarter.”
Sanjay Raghuraman
qa
“On Candere we expect to do about 25 stores by the time we end this financial year, most of which would be on the franchise model.”
Gaurav Jogani
qa
“Ramesh Kalyanaraman: Yes, we are already there in those markets for the past couple of years or more than that and we have a very strong brand and what we call revenue share in the market where we are in Bihar and Jharkhand so we are just expanding again wherein we will be opening more showrooms in that region.”
Gaurav Jogani
qa
“So, how will be the competitive scenario there?”
Gaurav Jogani
qa
“Ramesh Kalyanaraman: Yes, in every market depends upon the brand wherein certain brands are target only staple plain gold jewelry.”
Gaurav Jogani
qa
“For example, in Tamil Nadu, Tamil Nadu, there are large players who target only plain gold.”
Risks & concerns — 5 flagged
As I look at the current quarter, we continue to be encouraged by the underlying momentum in footfalls across all our major markets, even though there has been a slowdown in the wedding demand post 18th of July primarily due to the ongoing Adhik Maas, which is once in a three-year phenomenon.
— Rahul Agarwal
And then again there is some impact of Adhik Maas in India as well.
— Ashish Kanodia
And the second question is that there was some comment, the demand slowdown you also mentioned that.
— Anurag Dayal
In your market intelligence or from the procurement level, do you think during Diwali the gold prices will remain stable or will also see the volatility because if you look at the macroeconomic conditions are still very, very volatile?
— Shirish Pardeshi
Ramesh Kalyanaraman: But we would not get any because we don’t take any risk or gain in metal.
— Shirish Pardeshi
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Q&A — 13 exchanges
Q
Thank you for the opportunity and congratulations on a good set of results. Sir, my first question is with regards to Candere in the Middle East the franchisee store openings. So, I missed the earlier part. How many physical stores are we expecting to open in Candere in this particular year and how much would there be on the franchise basis in the Middle East?
Sanjay Raghuraman
On Candere we expect to do about 25 stores by the time we end this financial year, most of which would be on the franchise model. On the Middle East, the first of the franchise outlets will open this quarter by the end of September. And then we will see how many more we can do this year. We have a few in the pipe. But apart from this one store in the Middle East on the franchisee, are you also looking to open more stores around in the Middle East part? Ramesh Kalyanaraman: Yes, Ramesh here. So, here, yes, Middle East as a market, the first franchise showroom we will open before the end of this
Q
Congratulations on the good set of number. So, the first question was on the growth trend, right, because I mean, if I go through your PPT and maybe even your opening commentary, so I think in the Middle East there will be some impact in the current quarter because of Eid. And then again there is some impact of Adhik Maas in India as well. So, just trying to get some sense, if you look at the last 40 days, how has been the growth both for India and Middle East separately?
Ramesh Kalyanaraman
So, as I told you in the opening remark wherein July the first two weeks, the revenue was very good, okay? It was almost as good as Q1. And post Adhik Maas, the wedding part of the revenue has been muted especially in the non-South markets but weekends are very strong. Momentum was very strong. So, yes, there might be some -- it’s not a lost sale, you know that, okay? It can move partially, it can come in Q2 itself, partially it can go to Q3. It might have absorbed in Q1 itself, which we don’t know. So, that is the present scenario but we are extremely bullish on Q2 as well because momentum is
Q
I think I’m reading little deeper from the P&L numbers. Our revenue has increased close to about 34%. But when I look at other expenses, which has grown in tandem at 33.6% while employee expenses have gone a little higher at 45%. So, is there any one-off or how we should look at it and is this the base? I mean, one part is that yes, we have opened more number of franchise stores and we are since actively controlling that. But is there any one-off or how we should look at it for the rest of quarters this number? Ramesh Kalyanaraman: Yes, so two things. One, of course, all of us know that there
Shirish Pardeshi
Just a little more clarity. You said that you have added 600 people in the month of June. Ramesh Kalyanaraman: Quarter. In the quarter. Ramesh Kalyanaraman: Yes. And this ESOPs what you have said is given to how many people? So, ESOP, there are two versions. One is ESOP to only the senior management, which was issued pre-IPO just after IPO, okay? And now we have issued ESOP to more than 400 employees. 400 employees. So, till what level? I mean, you’ve gone up to the store manager level? Till store manager level. Okay. And this obviously, I would believe that will be recurring or this is going
Q
Sir, I had two questions. First was you did give a sense of the gross margins for the store business except franchising. Just if I compare versus last year and I’m talking about the India business ballpark or gross margins are similar whereas the non-South share even if I exclude the transfer that may have happened to the franchisees and the studded there has significantly increased. So, is it the case as you’d highlighted a few quarters back that maybe the incremental margins on the studded are not as high as what is generally understood to be because these are low value studded items.
Ramesh Kalyanaraman
So, non-South share has been largely from franchisees, okay, that comes with more studded. So, that’s why you see that’s the studded ratio or the studded share has increased too much because that studded also come with a lesser margin because it’s a franchise revenue. Understood. Okay. So, it is primarily because of all the incremental growth in non-South and even the studded share is coming in from the franchisee so that then won’t reflect on the gross margin side is what has happened? Ramesh Kalyanaraman: Yes. Of course, there is growth in our own store also, okay? But mostly, it is coming f
Q
Sorry, I missed the comment of same store sales growth for India. Could you please repeat that once? Ramesh Kalyanaraman: Yes. So, the same store has been in the range of 15% in South as well as non-South.
Anurag Dayal
Okay, thanks. And the second question is that there was some comment, the demand slowdown you also mentioned that. So, I mean, what steps averting some specular steps to improve that? For example, is there any more focus on exchange gold or something like that? So, demand, as I told you usually for the first two, two and a half weeks, it’s not that we have a panic on demand, okay? Demand on the wedding segment has taken a pause. That is because of this Adhik Maas. And whatever you do, those customers will not come before the Adhik Maas gets over. So, we are sure that they are going to come bac
Q
Hi, team. Congratulations on a very good performance and wishing a good luck into the medium term. Ramesh, the first is on some qualitative region you know, color on the same store growth trends region wise broadly because while I heard you commenting couple of times about South 15 and non-South 15, are there any further color you’ll be able to provide on non-South? Ramesh Kalyanaraman: Yes. So, South 15 is there and non-South also it is almost in that range. So, it’s not exactly 15 non-South and it’s in that range of slightly higher than what we call South, maybe in the range of 16 in non-Sou
Manoj Menon
So, what I’m trying to understand is there is no standard deviation -- high standard deviation on the rest of non-South right? West, North, and East? Ramesh Kalyanaraman: No. It’s almost, yes. The reason wise, it’s almost the same. Interesting. Secondly, the comment on Adhik Maas, just help me understand this please. I mean, so this happens every year, right? It’s not this year’s phenomena. So, this must be there in the brief also, right? Ramesh Kalyanaraman: No. Adhik Maas is once in three years. So, you are confused with Aadi Maas or what Kadagam and all know that’s not this. Adhik Maas is c
Q
Firstly, congratulations on a very good set of numbers. The first question on the other expenses. So, it has remained around 4.5% of your revenue. Now as this FOCO stores scale up, while you explain that gross and EBITDA margin will go down slightly, these other expenses should also as a percentage coming down, right because these expenses will be borne by the partners. So, if you can throw some color on that. And going ahead, what should be the range which we should expect? Ramesh Kalyanaraman: Yes. So, you’re right as a percentage. The OPEX percentage on our revenue will surely come down. Bu
Naresh Vaswani
Right. No, I’m asking as a percentage only. So, this quarter while we have seen some compression in margins due to this higher revenue from FOCO stores, but in OPEX, we have not seen that. So, I just wanted to understand that better. Ramesh Kalyanaraman: Yes. So, that impact is fully taken by the salary cost. So, can you guide that this 4.5% should go down to what percentage of sales in next two, three, four quarters? So, here the same store sales growth is coming more majorly in our own store only. And I always conservatively tell everyone that even though there was a 15% same store sales gro
Q
Thanks for giving me the opportunity. So, just if you can call out how many stores did you open from last quarter and how many of them were franchisee?
Ramesh Kalyanaraman
So, last quarter we opened 12, out of which 11 were franchisee. 11were franchisee. And if you can help me with the number, how much was the cash flow from operations during this quarter? So, the total cash flow from operation is INR 426 crores. INR 426 crores. And how much is the CAPEX done in this quarter? INR 78 crores. So, then you would have got let’s say it is INR 350 odd crores release, right? So, where is this - - so this is just casual books right now because earlier you mentioned there has been no change in debt or let’s say in terms of gold on lease limits. So, I’m just trying to und
Q
Sir. Congratulations on a good set of numbers. I had two questions. One of them being regarding the ROE. In the PPT, we had given that we have done around 13.5for FY23. So, say by FY’25, what would be our ROE percentage? And the second question would be so I missed out on the ESOP, so how many ESOPs are we planning to give out on a yearly basis? Ramesh Kalyanaraman: Yes. So, regarding return on equity, it will surely go up because all the franchisee stores which we are opening their office are in the range of 75%, okay? And that’s how we are also meaning the expansion is completely taken care
Abraham
But yes, I agree with Ramesh. Return on equity will definitely go up because but we would not want to give a target for FY’25. Okay, Sir. And regarding the ESOPs, how many ESOPs do we plan on giving? We have already created a pool of about 30 lakh shares. Right now, we’re giving out of that pool to the employees.
Q
Thank you for the opportunity and congrats on the great set of numbers. First, the question is on the franchisee model itself. Obviously, this is a first full quarter of the impact. Just if you could give some comments as to how has the experience been, whether the assumptions that you made initially are playing out? Is it working out better or some areas you might have to go back that would be a great start for that?
Sanjay Raghuraman
So, I think after we started, we did the pilot and we got some learnings from then and did some calibration to kind of make sure us as well as the franchisees got what you wanted out of this rollout. So, broadly speaking, our expectations have been met, franchisee expectations have been met and I think we are in a good place as far as being confident about being able to roll this out on schedule. Understood. And you believe that this can be much more scalable now or would you take -- think it would take some time to reach that conclusion? No. Absolutely not. We are very confident of the scalab
Q
Yes. Thank you for the opportunity. So, first is on the wedding share, what would be the rough mix of wedding in the overall India revenue and if you can split that between South and North?
Ramesh Kalyanaraman
So, usually the wedding share for the brand is around 55% to 60% and it’s very similar South and non-South, meaning South can be 60 and non-South can be in the range of what, 55? Sure. And secondly, in terms of employee cost and the number of employees, right, so when I look at 1Q23 versus 1Q24, we have added around 2500 employees and even the employee cost has gone up by almost say from INR 100 crores to almost INR 140 crores. So, when you’re talking about maybe similar or higher store expansion in FY’25 as well. So, is it fair to say that the momentum in terms of new employee addition as wel
Q
Hi. Thanks for the follow-up opportunity. Sir, just wanted to check, you said the aircraft sale will happen. So, just wanted to understand what is the ballpark number which we are getting? And you said there is a tax also. So, that’s the first part. And second, you said that there is also non-core asset. So, is those non-core asset will get divested in the financial year FY’24 or it will get next year? Ramesh Kalyanaraman: Yes. So, the aircraft amount is around INR 134 crore. Net of tax will be in the range of INR 100 crores. Again, real estate, we will not be able to commit anything for the f
Shirish Pardeshi
Okay. My second question on how much spot buying we have done for gold in Q1? You said the exchange is 30%. Yes. Shirish exchange is about 30% and gold metal loan levels have remained at similar levels at about the late 40s. The remaining we’ve bought from spot. So, say about 30%. Correct. Okay. My last question while hearing from the market leader, we have heard that there is a local competition, there is a regional competition and especially the competition took a route for dropping the price, not dropping the prices, I mean giving the similar value to the gold exchange and even the market l
Q
I thank you very much for attending the call. Hope to see you again in the next quarter. Thank you very much.
Management
Speaking time
Shirish Pardeshi
23
Ramesh Kalyanaraman
18
Moderator
15
Manish Poddar
8
Ashish Kanodia
7
Naresh Vaswani
7
Gaurav Jogani
6
Abraham George
6
Sanjay Raghuraman
5
Manoj Menon
5
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Opening remarks
Rahul Agarwal
Good evening everyone and thank you for joining us on the Kalyan Jewellers India Limited Q1 FY’24 Earnings Conference Call. Today on the call, we have with us Mr. Ramesh Kalyanaraman – Executive Director; Mr. Sanjay Raghuraman – 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 the results and investor presentation uploaded on the company’s website and stock exchanges. We will begin the call with opening remarks from Management, following which we will have the forum open for a 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 earnings presentation shared with you earlier. I now like to invite Mr. Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers India Limited to give his
Sanjay Raghuraman
Thank you Ramesh. Good afternoon everybody. I’m really happy to be talking to you all after a very satisfying quarter. I will just highlight the major points now so we can have enough time for questions. We reported a consolidated revenue of INR 4376 crores, a growth of over 31% year-on-year. Consolidated profit after tax was INR 144 crores versus INR 108 crores during the corresponding quarter of the previous year, a growth of 33%. Talking about the India numbers, when you came in at INR 3641 crores, a growth of 34% over the corresponding quarter in the previous year. And India, profit after tax came in at INR 129 crores, a growth of 35%. Our Middle East revenue for the quarter was approximately INR 700 crores, a growth in excess of 21%. The Middle East business posted a profit of INR 17 crores, a growth also in excess of 21%. Our e-commerce initiative, Candere posted a revenue of INR 34 crores, a degrowth of 23%. Understandably so as we are transitioning into the next phase of growth
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