Event Participants
Executives
3 Harit Zaveri, Harshit Gandhi, Riya Daria
Analysts
8 Deepesh J. Sancheti, Isha Shah, Rajinder Pasi, Rahul Verma, Sahil Patni, Shikhar Mundra, Subhi Gupta, Yash Modi
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹121 crores | Strong 60% YoY growth, in line with guidance, driven by robust consumer demand and higher jewelry sales |
| EBITDA | ₹18 crores | Healthy 39% YoY growth; EBITDA margin at 14.9%, impacted by negligible inventory gains and new store expenses |
| Profit After Tax | ₹9 crores | 28% YoY growth; PAT margin at 7.5% |
| Retail Revenue | ₹78 crores | Strong 70% YoY growth; key growth driver for the quarter |
| Wholesale Revenue | ₹42 crores | Strong 47% YoY growth |
| Job Work Revenue | ₹1.2 crores | Marginal contribution to overall revenue |
| Job Work Mix | 54% | Stable mix, asset-light segment with faster working capital cycle |
| 18-Karat Sales Mix | ~20% | Introduced since December; expected to reach 20% of mix by end of FY27 |
| Retail Sales Volume | 49 kgs | ~20% from own production, balance from outsourced manufacturing |
| B2B Volume | ~125 kgs | Including sales and labor job work |
| Factory Capacity Utilization | ~50% | Total capacity 1.8-2 tons/year; current production 900-1,000 kgs; peaks to 75-90% in festive season |
| Debt Sanctioned | ₹300 crores | Sufficient for four stores opening in FY27 |
| Inventory Book Value | ₹400 crores | Book value vs market value difference ~18% |
Geographic & Segment Commentary
Retail (Harit Zaveri Jewellers): Revenue grew 70% YoY to ₹78 crores in Q1 FY27, driven by robust consumer demand, strengthening brand recall, and successful marketing campaigns for occasion-wear (Akshay Tritiya, Aangan, Godh Bharai, Polki) and daily-wear (Rose, Vintage, Samayu) collections. Retail expansion planned across Surat (Q2 FY27), Rajkot, Maninagar, and Gandhinagar (Q3 FY27), with long-term focus on transforming into a leading Indian jewelry brand with strong Gujarat presence.
Wholesale (B2B): Revenue grew 47% YoY to ₹42 crores, with strong order bookings from IIJS show and corporate clients including family jewelers. Management highlighted successful design appreciation, particularly lightweight jewelry with strong look-to-weight ratio, leading to high customer penetration and full order kitty for July-August.
Company-Specific & Strategic Commentary
Retail Expansion: Four new stores planned in FY27 - Surat (large format, ~10,000 sq ft, opening late September), Rajkot (large format, early Q3), Gandhinagar and East Ahmedabad/Maninagar (mid-format, ~5,000 sq ft, Q3). Inventory deployment of ₹125-150 crores for large format and ~₹50 crores for mid-format stores; capex breakeven targeted within one year or less.
Gold Metal Loan (GML) Strategy: Management shifting toward hedging entire inventory through GML over next 2-3 years, targeting debt-equity of 1.5-2:1. GML cost at 3-3.5% versus 9% on current borrowings, providing ~5.5% interest saving and increased leveraging capacity. Current inventory of ~350 kgs (book value ₹400 crores) will be progressively hedged.
Brand Building & Franchise Ambition: Pre-opening investments for Surat and Rajkot stores (52-60 employees hired, ₹10 crores capex for Surat) aimed at building brand robustness to enable future franchising. Management emphasized this expenditure supports long-term brand equity, positioning Harit Zaveri Jewellers for franchise expansion once brand recognition is established.
Product Innovation: Introduced 18-karat rose gold and lightweight collections since December, shifting from 100% 22-karat to ~20% 18-karat. Focus on occasion-wear antique gold bridal segment, recognized as profitable category with resilient demand; design-led approach with in-house capabilities supported by 3D printing and laser technologies.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | In line with previous guidance (60% YoY) | Q1 performance matched guidance; management expects continued strong performance in Q2-Q3 FY27 |
| Revenue Mix | 50-50 B2B/B2C in 1-2 years; 75-25 (retail) long-term | Transformation from B2B to B2C focus; retail to drive majority of profitability |
| Debt-Equity Ratio | <1:1 by end FY27; 1.5-2:1 over time | Leverage increase primarily through GML at 3-3.5% interest cost |
| Store Launches | 4 stores in FY27 (Surat Q2, Rajkot/Gandhinagar/Maninagar Q3) | Large format stores opening before Navratri (October 11) to capture festive demand |
| Capacity Utilization | 75-90% during festive season (Jul-Sep) | Seasonal peak; off-season runs at ~50% |
| GML Hedging | Progressive adoption; 50% by FY28, 75% by FY29 | Dependent on credit rating improvement (BBB+ to A band) and banking relationships |
| Capex Breakeven | Within 1 year per store | Based on expected revenue generation from new stores |
Risks & Constraints
| Risk | Context |
|---|---|
| Gold Price Volatility | Gold at USD levels has corrected 30% from peak; INR gold stable due to dollar appreciation and custom duty increase (6% to 15%). Management hedging via GML to arrest volatility, accepting ~2% long-term sacrifice (7% CAGR vs 5.5% GML cost) for scalability |
| New Store Execution Risk | Four stores opening in FY27 with ₹125-150 crores inventory per large format store. Pre-opening expenses (52-60 hires, marketing, BTL activities) impacting Q1 margins. Management confident given Ahmedabad store success (₹24 crores to ₹408 crores in 5 years) |
| Margin Pressure | EBITDA at 14.9% impacted by negligible inventory gains (flat gold prices), lease amortization (₹76 lakhs) and lease liabilities (₹115 lakhs), plus employee costs for new store ramp-up |
| Operating Leverage Risk | Inventory book value (₹400 crores) nearly equals market cap; transitioning to GML hedging over 2-3 years leaves current inventory unhedged and exposed to gold price movements |
| Competition & Market Share | Lightweight jewelry segment growing among peers; 18-karat demand rising but management maintaining focus on occasion-wear 22-karat, viewing it as more resilient (compulsory purchases vs discretionary daily wear) |
Q&A Highlights
Store Expansion Details
- Question: What are the timelines, investment, and breakeven for new stores? (Isha Shah)
- Answer: Surat in Q2, Rajkot early Q3, Maninagar and Gandhinagar in Q3. Large format stores ~10,000 sq ft with ₹125-150 crores inventory; mid-format ~5,000 sq ft with ~₹50 crores. Capex breakeven within a year. Ahmedabad store grew from ₹24 crores (FY21) to ₹408 crores (FY26), demonstrating non-legacy growth capability. (Harit Zaveri)
Debt-Equity and Leverage Strategy
- Question: What's the target debt-equity ratio given increased borrowings? (Subhi Gupta)
- Answer: Sanctioned debt of ₹300 crores, sufficient for four stores; debt-equity below 1:1 by fiscal year end (~0.8:1). Targeting 1.5-2:1 over time, primarily through GML at 3-3.5% cost, allowing similar interest expense at higher leverage. (Harit Zaveri)
Q2 and Festive Season Demand
- Question: How is demand shaping up for Q2 with half the quarter gone? (Rajinder Pasi)
- Answer: July has been good, August tracking well; IIJS show had strong buyer growth and order booking. Q2 corporate job work is heavy (July-September). Q3 will be led by retail with all stores operational, expected to be an exciting quarter. (Harit Zaveri)
Margin Decline Explanation
- Question: Why was EBITDA margin lower despite volume growth? (Deepesh Sancheti)
- Answer: Multiple factors: 1) Stagnant average gold rate leading to negligible inventory gains, 2) Lease amortization of ₹76 lakhs and lease liability impact of ₹115 lakhs, 3) Pre-opening expenses for Surat store including employee hiring, BTL activities, training, and stock planning. These costs were deliberately spread to avoid heavy single-quarter impact. (Harit Zaveri)
Capacity Utilization
- Question: What is current factory capacity utilization and seasonal outlook? (Deepesh Sancheti)
- Answer: Total capacity 1.8-2 tons/year; current production 900-1,000 kgs (~50% utilization). Seasonal utilization runs at 70-85% minimum, sometimes 90%, particularly during July-September corporate workload. (Harit Zaveri)
Gold Metal Loan Rationale
- Question: What changed fundamentally to shift toward GML from cash credit? (Yash Modi)
- Answer: Gold INR comprises three factors: USD gold price, dollar appreciation, and custom duty. USD gold corrected 30% from peak, but INR gold stable due to dollar strength and duty increase (6% to 15%). GML arrests gold volatility at cost of 3-3.5% vs 9% current rate, sacrificing ~2% (7% gold CAGR vs 5.5% GML cost) for significantly enhanced debt leveraging capacity and scalability. Transition will be gradual (50% by FY28, 75% by FY29) as credit rating improves from BBB+ to A band. (Harit Zaveri)
Franchise Route
- Question: What are plans for franchise expansion? (Yash Modi)
- Answer: Current brand-building investments (marketing, new stores) are specifically to build brand robustness so future franchises benefit from fast-moving inventory. Today is too early for franchising; focus remains on establishing strong unit economics and brand recognition. Long-term (3-4 years), franchise route could transform to different scale altogether. (Harit Zaveri)
18-Karat and Lightweight Jewelry Strategy
- Question: Are there plans to expand lightweight (18-carat or lower) offerings? (Rajinder Pasi)
- Answer: B2B is treated separately from B2C; B2B has registered strong growth. 18-karat introduced since December, now ~20% of mix. Occasional-wear demand remains dominant in 22-karat (categories like Mangalsutra where purity matters). Management positions in antique occasion-wear, a profitable gold category with resilient demand, remaining agile on caratage shifts based on demographic preferences. (Harit Zaveri)
Job Work Segment
- Question: What initiatives are being taken to increase job work share (highest margin, asset-light)? (Rahul Verma)
- Answer: Company approaches every client (family stores and corporates) to provide gold in advance, reducing working capital blockage. Job work mix stable at 54%. Improvement depends on converting wholesale clients to job work model, which depends on consumer preferences and client willingness. (Harit Zaveri)
Market Positioning and B2B Demand
- Question: How do you view demand trends from large retail partners like Malabar Gold or Titan? (Rahul Verma)
- Answer: Corporates are building orders for Q3 festive season; Q1 corporate demand was good. B2B will continue performing well without growth constraints, but major growth leap will come from retail. Existing Ahmedabad store demonstrates same-store sales growth strength, validating retail expansion strategy. (Harit Zaveri)
Key Takeaway
RBZ Jewellers delivered a strong Q1 FY27 with revenue of ₹121 crores (60% YoY) and PAT of ₹9 crores (28% YoY), in line with guidance, driven by retail growth of 70% YoY (₹78 crores) and wholesale growth of 47% YoY (₹42 crores). The company is executing a strategic transformation from B2B manufacturer to B2C retailer, with four store openings planned in FY27 (Surat, Rajkot, Gandhinagar, Maninagar) requiring ₹125-150 crores inventory per large format store and targeting capex breakeven within one year. EBITDA margin at 14.9% was impacted by flat gold prices (negligible inventory gains), lease-related charges (₹191 lakhs combined), and pre-opening expenses for new stores. Management is progressively shifting to gold metal loans (3-3.5% vs 9% current borrowings) to hedge inventory, improve leverage capacity, and target debt-equity of 1.5-2:1, while positioning for future franchise expansion through brand building. The 18-karat mix is expected to reach 20% by year-end. Stock trading considerations include inventory book value (~₹400 crores) nearing market cap, with management moving toward asset-light model for improved ROE. Key watch points include execution of four store launches ahead of Navratri (October 11), margin recovery in Q2-Q3 festive season with capacity utilization expected at 75-90%, and gradual GML adoption dependent on credit rating improvement. Analysts should monitor B2B/B2C mix evolution (target 50-50 in 1-2 years) and profitability shift toward retail.