RBZ Jewellers Ltd Q1 FY2027 Concall Summary

Key Takeaways

• 60% revenue growth, retail-led: Q1 FY27 revenue of ₹121 crores grew 60% YoY, with retail up 70% to ₹78 crores and wholesale up 47%.
• Margin softness is timing, not structure: Stagnant gold rates meant negligible inventory gains, while Surat pre-opening costs, lease amortization and pre-booked advertising compressed EBITDA.
• Four stores in two quarters: Surat opens late September, Rajkot before October, and Maninagar, East Ahmedabad and Gandhinagar follow in Q3, with the mid-format stores possibly coming in November.
• GML adoption has begun: The company started using Gold Metal Loans this quarter, targeting a 5.5% interest advantage and a path to 100% hedged inventory over three years.
• What to watch next quarter: Whether Surat and Rajkot open on schedule and deliver early traction, whether IIJS order flow converts into Q2 revenue, and whether margins recover as pre-opening costs roll off.

Retail Expansion: Four Stores, One Season

• Surat first: The Surat mega store opens in the last week of September, closer to Navratri, with approximately ₹10 crores of capex and 52 to 60 people already hired.
• Rajkot follows immediately: Management wants Rajkot open before October itself, so both mega stores capture the full festive season.
• Three more in Q3: Maninagar, East Ahmedabad and Gandhinagar are mid-format stores that may open in November, with management unsure whether they land before Diwali or in October.
• Pre-opening drag is visible now: Lease liabilities of ₹1.15 crore, asset amortization of ₹76 lakhs, and around ₹9 crores of pre-opening expenses were booked in Q1, with employee costs elevated because Surat staff are already engaged in BTL activities and training.
• The Ahmedabad proof point: Management cites the Ahmedabad store's growth from ₹24 crores turnover in fiscal '21 to ₹408 crores last fiscal year as evidence that a non-legacy player can deliver very high growth rates, which underpins confidence for Surat and Rajkot.

Harit Zaveri: "In Ahmedabad we are not a legacy player, the store came into the operation in store in fiscal '21 when it was a INR24 crores turnover and last fiscal year we closed at INR408 crores. So, seeing that there is no legacy and the store we are able to deliver a very high growth rate, we hope that in Surat and Rajkot we deliver strong performances because we have done that in Ahmedabad too."

Gold Metal Loans: The Hedging Pivot

• GML usage started this quarter: The company has begun using Gold Metal Loans, with negotiations ongoing with banks regarding sub-limits.
• The economics: GML carries a 3% to 3.5% interest cost versus 9% on conventional borrowing, giving approximately 5.5% interest advantage.
• The trade-off: By arresting gold volatility through GML and keeping dollar and custom duty components separate, the company sacrifices roughly 7% CAGR gold appreciation for 5.5% interest saving, remaining at "minus two" long-term, but it helps scale because debt leveraging capacity increases robustly.
• Why now: The company did not take GML before because of margin requirements; now balance sheet size has increased, ability to absorb margin hits has improved, and GML acts as a natural hedge as the business becomes more retail in nature.
• The glide path: Management plans to progressively move toward GML: some portion by this fiscal year, potentially 50% next year, 75% in the third year, and 100% in the long-term approach, with progression tied to credit rating improvement from BBB+ positive outlook to A band and above.

Harit Zaveri: "What we are trying we say that we are using GML, what we are really trying is we are trying to arrest the volatility of gold and gain benefit from the low cost of loan that we are getting from GML that is let's say 3%, 3.5% versus 9% that we are getting on the interest rate that we are paying."

Demand Environment: IIJS Momentum and B2B Strength

• IIJS was "really warm": Management saw buyer growth, good order backing, and high customer penetration due to a variety mix with strong lightweight look-versus-weight ratio; July and August order kitty are full.
• B2B order book is strong: Wholesale numbers were very strong this quarter, and B2B order book levels are very strong for the coming quarter, with all corporates giving orders because of the upcoming Q3 season.
• Q2 demand looks promising: July has been good, August so far has been right, and IIJS has gone good; management hopes Q2 performance will be "very much in line with whatever we have projected in earlier commentaries."
• Capacity utilization in season: In Q2 and Q3 festive season, capacity utilization is expected at 70–80% minimum, sometimes 75–85%, near 90% on some days; Q2 is very heavy for corporate job workload.
• Occasion wear resilience: Occasion wear purchases are event-linked and compulsory; steady or steep price increases make occasion wear segment resilient to demand weakening, unlike daily wear which is purchased for moments of joy.

Management: "Occasion wears are purchased on the compulsory basis. And we are in a segment wherein the demand is more resilient, and hence I think it's the right proposition to be in this segment and grow in a profitable gold segment that is an antique category."

Revenue Mix: The Retail Transformation

• Current mix: Job work stands at 54% of revenue in Q1, a fast-moving working capital cycle that remained consistent.
• Near-term target: B2B to B2C mix is expected to reach 50-50 in a year or two.
• Long-term target: 75-25 with 75 being retail, with major profits coming from retail even if sales mix lands at 50-50 or 60-40.
• The white space: Management sees 60% of the industry as unorganized, with no such retail players in Gujarat, Rajasthan or Madhya Pradesh, creating clear white space.
• Franchise is downstream: The company is investing in brand building so the brand becomes lucrative for franchisors, wanting brand robustness before approaching franchisees so goods move faster from their shelves; too early to say anything on franchise route today.

Harit Zaveri: "We are going to transform into a retail side... Given that the profit from the side of value of merchandise will come more from retail, we see retail as a scalable business and this is the right moment as 60% of the industry is unorganized and there is not such retail players in Gujarat or Rajasthan, Madhya Pradesh. There is a clear white space available."

Margins: The Q1 Squeeze

• Inventory gains absent: Average gold rate remained stagnant, so there is negligible inventory gain in the system in Q1, which reflected in EBITDA margins.
• Lease costs hit: Amortization of lease assets (₹76 lakhs) and impact of lease liabilities (₹1.15 crore) contributed to margin sluggishness.
• Pre-opening costs front-loaded: Employees were already offered and engaged for BTL activities and training for the Surat store opening in September, so employee expenses were a little higher; stock planning for the new store pushed finance costs up.
• Advertising spread deliberately: Some expenses like advertisements were booked in advance for the new store ramp-up, spreading expenses so they don't hit a single quarter heavily; increased marketing expense will be seen in coming quarters.
• Employee cost trajectory: Employee cost will be on a rising trend because of team development across roles (head merchandisers, head supply chain, head vigilance and security) as multiple stores come up; 60 employees were added in this fiscal year.

Product Strategy: Caratage and Category Positioning

• 18-carat introduction: Introduced since December, corporate sales mix is moving from 100% 22-carat toward at least 20% 18-carat by end of this year.
• 22-carat dominance belief: Management still believes 22 karat is going to be dominant in occasion wear category; not seeing demand across India for 18 karat to rise in occasion wear, though in certain parts there is good demand of 18 karat and designs are being developed for those areas.
• Antique gold positioning: The company operates in the antique domain within the gold category, which is industry-wide known to be a profitable gold segment, unlike plain gold segment without stones or margins.
• Daily wear not a priority: The company is not going to entertain daily wear side as of now; remains an occasion wear player in B2B.
• Exhibitions outside Gujarat: The company has done exhibitions in Bombay this year and has scheduled Indore exhibitions, extending reach beyond its home market.

Harit Zaveri: "We are not seeing demand across India for 18 karat to rise in occasion wear. In certain parts there is good demand of 18 karat that we are witnessing."

Guidance & Commitments

Key Metrics