RBZ Jewellers Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Revenue surged 57% YoY, but PAT was flat: Strong retail and wholesale volumes drove the top line, while a sharp drop in high-margin job work (sale of services) compressed the bottom line.
• Demand deferred, not destroyed: A slow Q1 for organized retailers and a mid-quarter customs duty cut pushed job work orders into late Q2, leaving only September to fulfill them.
• The mix shift hurt margins: Margins depend on business model mix; with sale of services volume down significantly, the higher-margin revenue stream shrank, dragging overall profitability.
• H2 bet rests on a strong Q3: Management is "100% optimistic" after hitting October targets, citing strong walk-ins, good wholesale demand, and a full job work order book heading into the wedding season.
• What to watch next quarter: Whether the promised Q3 job work recovery materializes to lift PAT toward the ₹35 crore full-year target, and if retail growth sustains above 35%.

Revenue & Volume Dynamics

• Top-line growth driven by goods, not services: Revenue grew 57% YoY, powered by retail and wholesale (B2B sale of goods), while sale of services (job work) saw emitted levels drop significantly.
• Gold price volatility shaped demand: Gold prices escalated 17% to 25% after the duty rate cut, dipped, then reached ₹80,000 before settling around ₹77,000. Volumes in retail and wholesale shot up, but sale of services volume went down.
• H1 volume decline is a mix story: H1 volume of 542 kg versus ~580+ kg last year reflects the impact of lower job work. Retail and wholesale volumes individually grew a "heavily positive" 25% to 30%.
• Demand timing compressed the quarter: Q1 was slow for organized retailers who had loaded inventory for Akshaya Tritiya that did not sell through. After the duty rate cut, their inventory sales improved, causing deferred demand for RBZ's job work. Load came only in mid-August or September, leaving September as the sole month to complete orders.

Harit Zaveri: "With RBZ it is more to look at the business model, that is retail, wholesale and job work. Or to be more on a broader spectrum, it is sale of goods versus sale of services. More the sale of services, better will be the bottom line."

Profitability & Margin Mechanics

• PAT flatness explained: PAT was flat compared to last Q2 because the scale of services demand was lower; the duty rate cut hampered the bottom line, but the company was saved because of lower book values. It was an opportunity miss: without the duty rate cut, RBZ could have shown better results, though it got subsided by good demand.
• COGS rose on mix, not cost pressure: COGS increased to 78% of top line mainly because job work (which carries lower COGS) was hampered, while retail, which has higher COGS, grew significantly year on year.
• Margins track business model mix: Last year Q2 had higher margins than Q3 because sale of services demand was very strong in Q2. This year Q2 margin is low because sale of services demand is low. Sale of goods also gives good ROI, but more sale of services means a better bottom line.
• Inventory days improved sharply: Inventory days dropped from ~313 days last year (due to IPO proceeds being used in working capital) to 198 days now. Stock realized in Q1 and Q2 brought the company back on track with inventory turnover and better working capital days.
• Inventory change of ₹60.27 crores: 50% from finished goods produced for future sale, 50% from retail buying done this quarter. Purchase of traded goods rose from ₹76 crores to ₹101 crores.

Demand Outlook & Q3 Bet

• Q3 is the quarter management is betting on: October has gone "pretty well," with targets achieved in full. Through November 15th, things are in order and going good. There is good load in job work right now in hand, strong walk-ins in retail stores, and good demand in wholesale.
• Festive season read-through: The festive season went well for all retailers, and demand in the market is good right now.
• B2B optimism tied to industry trends: Management is very optimistic about the B2B front, noting that more retailers getting into IPOs indirectly helps wholesale business.
• Gold price uncertainty remains a risk: Gold prices are lower than a month ago, but the company does not know where bottoms or highs are. Geopolitical environment causes gold price fluctuations that confuse customers. The company buys gold based on demand forecasts; all funds and inventory are majorly in gold.

Harit Zaveri: "I think for RBZ, we look at every quarter, how are we building the company for future? So, I can say that sacrificing any short term opportunities, yes, could be there. But having a long term view would be something more interesting for us."

Retail & Infrastructure Build-Out

• Retail expansion underway: In Q3, RBZ will expand one more floor of 3,000 square feet at its existing flagship store, not a new store.
• Retail growth sustainability targeted at 35-40%+: Management is hopeful to sustain retail growth of 35%-40% or more for another two years.
• Infrastructure ready for scale: Retail infrastructure is ready for at least ₹500-600 crores of top line; the company will work through that capacity before taking further expansion views.
• Systems investment continues: The company has added SAP as accounting software, invested heavily in HR resources and team building, and emphasized that financial integrity is high and robustness is coming into the system.

Harit Zaveri: "We are -- our hunger is more than -- I can put it in words, but the company has to grow more on fundamental basis. I mean, the better questions would be that how growth is sustainable. We have, we are adding SAP to the, we have added SAP, financial integrity is high, our team is expanding. Robustness is coming into the system."

Balance Sheet & Working Capital

• Net cash position: Net cash in the balance sheet is around ₹14 crores, per management's response to a repeated analyst question.
• Cash conversion cycle: Management initially cited a cash conversion cycle of 220 days when asked about net cash, before clarifying the net cash figure.
• Inventory valuation shielded from duty cut: The company maintains books on a weighted average principle; the book value of gold supported prices, so the sudden decrease in customs duty did not impact books to a greater extent.

Guidance & Commitments

Key Metrics