Senco Gold Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Strong Q1, gold price tailwind: Revenue grew ~28% on the retail side, PAT crossed INR100 cr (up >100% YoY), and EBITDA margin expanded 230 bps, all aided by a ~30% YoY gold price rise and a consumer shift into diamond jewellery.
• Diamond pivot is the margin story: Studded jewellery volume grew 35%, the stud ratio moved above 11%, and diamond inventory bought at lower prices is now being sold into a rising price environment, a tailwind management expects to persist as mines close.
• Hedging gave a one-time boost: The company deliberately cut its hedging ratio to 55-60% in Q1 to protect liquidity, which contributed 100-120 bps of the gross margin expansion; management says this gain is temporary and the ratio will return to 80% if volatility spikes.
• Full-year guidance held, not raised: Despite the strong Q1, revenue growth guidance stays at 18-20% and EBITDA at 6.8-7.3% (conservatively ~7%), with Q2 expected to slow to 16-18% growth because of a high base and no auspicious season.
• What to watch next quarter: Whether the diamond price tailwind actually materializes, whether hedging returns to 80% and compresses the margin, and whether Q2 growth holds at the guided 16-18% without last year's duty-cut boost.

Q1 Performance: What Drove the Beat

• Revenue surge: Retail revenue rose ~28% driven by Akshaya Tritiya, Pohela Boishakh and New Year demand; consumers kept buying despite a ~5% QoQ and ~30% YoY gold price increase.
• PAT inflection: PAT crossed INR100 cr, up >100% YoY, led by strong diamond jewellery demand (35% volume growth, >50% value growth) and the stud ratio improving from 9-9.5% to >11%.
• Diamond demand shift: After a period of consumer trust issues and price declines, Q4 FY25 and Q1 FY26 saw consumers pivot to diamond jewellery for everyday wear as gold prices rose sharply.
• Making charge lever: The company proactively increased making charges in certain categories to mitigate higher gold metal loan interest rates, which were impacted by US tariff policies; those higher rates have since gradually come down.
• Old gold exchange: Old gold exchange rose from ~25% of transactions 2-3 years ago to 40%, helping consumers with lower liquidity continue purchasing.
• Silver and fashion: Silver and fashion jewellery grew upwards of 50-60%, becoming an important gifting category in a high gold price environment.
• Lightweight dominance: 61% of jewellery by count is in the INR25,000 range, with an ASP of INR55,000 and an average weight of ~6 grams, reflecting dominance in the lighter space.

Suvankar Sen: "if we look at it and see how what we are seeing in quarter 4 of the previous financial year and quarter 1 of this year, that with the gold prices going up so high, there has been a tendency of the consumers to buy diamond Jewellery for their everyday wear basis, or for their special occasions."

Margin Walk: The 230 bps Expansion

• Three drivers, one temporary: The 230 bps margin expansion came from: (1) increased making charges, kept elevated even after GML rates fell; (2) diamond inventory built when prices were lower last year, now being sold as diamond prices move up and mines close; (3) a lower hedging ratio of 60-65% that allowed the company to realize gains on rising gold prices.
• Hedging boost is not sticky: The 100-120 bps contribution from lower hedging is purely a Q1 phenomenon; if volatility increases, the company will go back to 80% hedging immediately and those gains will not recur.
• Management declined to quantify: When asked to break down which lever contributed what percentage of the 230 bps, management called margin "a very complex result of multiple efforts" and gave only qualitative reasons.
• Stud ratio math is fuzzy: When asked for the arithmetic correlation between stud ratio and EBITDA margin, management first said 30-40 bps per 1% increase, then immediately corrected to "not more than 20, 30 basis point increase."
• Quarterly aberrations addressed: Past quarterly aberrations in operating margin (especially Q2 and Q3) were due to accounting and hedge accounting issues; management has reviewed processes and is confident aberrations will not recur, and in any case cannot exceed 100 bps.

Sanjay Banka: "Aberrations cannot be more than 100 basis points. So, because we don't reduce or increase our making charge from 1 quarter to other, there's no substantial change in the product mix."

Diamond Strategy: The Margin Engine

• Studded growth surge: Studded growth of ~35% in Q1 versus 5% last year, driven by design development (11,000+ designs), the Everlite collection, competitive pricing, better cost management, and the consumer shift from gold to diamond as gold prices rose.
• Diamond price tailwind: 2-3 mines have closed abroad and diamond prices are likely to increase; management expects this to be a major tailwind for improved realization.
• Inventory timing advantage: The company built diamond inventory when prices were lower last year and is now realizing better prices as diamond prices move up, a benefit that should continue.
• Stud ratio target: The company is targeting a 15% stud ratio, up from the current >11%.
• LGD is a sideshow: Lab-grown diamonds are sold in only 6-7 stores under a separate brand; management does not expect LGD revenue to cross INR50 cr in FY26 and sees natural diamonds still holding the fort, especially for weddings and emotional occasions.

Sanjay Banka: "I also understand that a few mines have closed abroad, 2 to 3 mines have closed, and the prices are likely to increase. So, this is going to be a major tailwind for increasing the prices."

Lower-Carat Strategy: The Affordability Play

• 9-carat introduction: The company has launched 9-carat jewellery priced at INR3,500-3,800 per gram, enabling purchases under INR10,000-15,000 for lightweight everyday wear; consumer response has been positive, especially among young consumers.
• Measured rollout: The company is not converting all inventory to 9-carat; the focus is on studded jewellery and modern western designs, not traditional designs, with selected collections being tested.
• Broader carat strategy: Management sees 18-carat, 14-carat and 9-carat as the future, targeting the younger generation and lower ticket size consumers who might otherwise be priced out.
• Industry tailwind: 9-carat hallmarking opens up an opportunity for the organized sector to provide studded jewellery within consumer budgets; unorganized players are finding it difficult to survive and are either getting organized or exiting.

Suvankar Sen: "We are very much conscious that, with this high gold price, 18-carat, 14-carat, 9-carat, these are the future, and we need to focus, whether be it in diamond Jewellery or plain gold Jewellery, so that we can continue to have the younger generation coming and buying from Senco or people who have a lower ticket size can come and buy from our brand."

Store Expansion & Channel Mix

• FY26 store target held: The company aims to open 20 stores for the year (10 owned, 10 franchisees) and is on track, with 5 franchisee stores already opened in FY26; management declined to raise the target despite opening ~10 stores in Q1, saying it will review only when closer to 20.
• Franchisee push: Internal efforts aim to shift the store mix from 50-50 to 65-70% franchisee and 25-30% owned over time; most expansion will focus on opening more franchisees, with the company working to make it easier for franchisees to open stores.
• COCO vs FOCO performance: COCO stores are performing better in same-store growth than FOCO stores; Delhi NCR COCO stores saw 34% growth, while franchisee stores have 17-18% same-store growth; franchisees in smaller towns manage with lower inventories, while COCO stores in metros need deeper inventory due to higher competition.
• Tier 3/4 traction: Good traction in Tier 3 and Tier 4 towns, with footfalls up and business growing through the franchisee model.
• Geographic focus: The company is focused on Eastern and Northern India, not Southern India, aiming to go deeper into existing markets rather than expand to new regions.
• Franchisee primary vs secondary gap: Primary franchisee growth was 34% versus secondary at 24%; the difference is due to new store openings (5 new franchisees) inflating primary.

Suvankar Sen: "I think the hurdle is about getting the right kind of people. And once that effort that we are putting is going on, we will be able to achieve what we will be able to achieve."

Hedging & Risk Management

• Deliberate Q1 reduction: The hedging ratio was reduced to 55-60% (from 75-80%) to maintain liquidity and avoid margin impact from gold price increases; this worked in favor of profitability in Q1.
• Policy framework: The gold policy mandates a minimum 50% hedging of inventory, with the range being 50-80% depending on risk perception; a detailed hedging policy document was issued in Q3.
• No specific trigger disclosed: When asked what specific metric or threshold triggers an increase in hedging, management described the policy as "robust" and "dynamic" but gave no specific metric, only that the Board policy sets the 50-80% range.
• Liquidity protection, not profit-seeking: Management emphasized that hedging is about protecting liquidity, not gaining profit; over the last 2 years, nearly INR100 cr of liquidity was tied up due to hedging.
• Full-year assumption: The full-year margin guidance of 6.8-7.3% assumes hedging can go to 80%; if volatility increases tremendously, the company will go back to 80% immediately.

Sanjay Banka: "Hedging is a very dynamic thing. It will depend upon the risk scenario, the global geopolitics, how the entire demand supply thing is happening. But we are committed to maintain a very robust and dynamic risk management policy."

Guidance & Commitments

Key Metrics