Senco Gold Limited
Q1 FY26
Call date · August 13, 2025
1 · Management Commentary
Key Positives
- Robust revenue growth: Retail revenue up >28% YoY; overall top-line up 30% YoY.
- Same-store sales growth (SSSG) of 19% (owned stores 21%, franchisee 16%).
- PAT crossed INR100 crore for the quarter, up 104% YoY.
- Diamond jewellery volume up 35% YoY, value up >50% YoY; stud ratio increased to >11%.
- EBITDA margin expanded to 10.1% (from 7.7% YoY).
- Opened 10 new stores (including 1 Sennes); on track for 20+ store openings in FY26.
- Old gold exchange now 40% of transactions (vs. 25% 2-3 years ago).
- Inventory and working capital position strong; ICRA A2+ rating reaffirmed.
Key Negatives
- Gold price volatility (up 5% QoQ, 30% YoY) impacting consumer ticket sizes and liquidity.
- Hedging ratio reduced to 55–60% (vs. 75–80% earlier) to manage liquidity.
- Q2 growth expected to moderate (16–18%) due to lack of duty cut and fewer auspicious dates.
- LGD (lab-grown diamond) revenue remains negligible.
Forward Guidance
- Capex/store expansion: Targeting 20+ new stores in FY26, with increasing franchisee mix (potentially >50%).
- New products/segments: Focus on 9/14/18-carat lightweight and studded jewellery; new bridal, men’s, Everlite, and silver/fashion collections.
- Expected client wins/losses: Expanding franchisee network, especially outside West Bengal.
- Revenue/margin outlook: FY26 revenue growth guidance maintained at 18–20%; sustainable EBITDA margin guided at 6.8–7.3% (Q1 margin not expected to sustain).
- Strategic initiatives: Efficiency drive via new software/tools, increased making charges, dynamic hedging policy, continued focus on design and brand building, potential Melorra collaboration for younger customers.
2 · Q&A Highlights
Q 1 (Composite): How will the shift to lightweight/9–14–18 carat jewellery affect revenue and margins?
A (Management):
• Lightweight and lower-carat jewellery addresses consumer budgets without materially impacting average ticket size or margins; studded and lower-carat pieces often carry higher margins than plain gold.
• 61% of jewellery (by count) is below INR25,000; average ticket size has increased despite gold price rise.
Q 2 (Composite): What is the outlook and strategy for franchisee expansion, especially outside West Bengal?
A (Management):
• Plan remains 20 stores (10 owned, 10 franchisee) for FY26, with efforts to increase franchisee share (possibly 11–12 franchisees).
• Brand awareness, national ambassadors, and dedicated franchisee team are driving expansion in new regions.
Q 3 (Composite): What drove the margin expansion in Q1, and is it sustainable?
A (Management):
• Margin expansion due to increased making charges, better diamond pricing (inventory built at lower prices), and lower hedging ratio (55–60%).
• Sustainable EBITDA margin guided at 6.8–7.3%; Q1 margin uplift is partly temporary.
Q 4 (Composite): How is the company managing hedging and liquidity amid gold price volatility?
A (Management):
• Hedging ratio is dynamic (50–80% per Board policy); reduced in Q1 to manage liquidity.
• Liquidity constraints and working capital needs drive hedging decisions; not speculating on commodity prices.
Q 5 (Composite): What is the company’s competitive positioning and long-term strategy versus larger peers?
A (Management):
• Focused on deepening presence in East and North India, leveraging design and manufacturing strengths.
• Conservative, profitable expansion with higher franchisee mix; unorganized-to-organized shift benefits all branded players.
Q 6 (Composite): What is the status and outlook for lab-grown diamonds (LGD) and Melorra collaboration?
A (Management):
• LGD revenue remains in single/low double digits; not expected to cross INR50 crore in FY26.
• Melorra collaboration aimed at younger customers; inventory not a challenge, negotiations ongoing.
Q 7 (Composite): How is demand in Tier 3/4 towns and what is the performance of COCO vs. FOCO stores?
A (Management):
• Good traction and footfall in Tier 3/4 towns, especially via franchisee model.
• COCO stores showing strong SSSG; franchisee stores benefit from lower inventory requirements.
Q 8 (Composite): What are the company’s corporate governance practices?
A (Management):
• Strong focus on governance: independent directors, top-tier auditors (KPMG, Grant Thornton), robust risk management, ERP-driven controls, and transparency.
3 · Other Key Numbers
- Q1 FY26 revenue growth: 30% YoY
- Q1 FY26 EBITDA margin: 10.1% (vs. 7.7% YoY; 9.2% QoQ)
- Q1 FY26 EBIT margin: 10.1% (vs. 7.3% YoY; 8.9% QoQ)
- Q1 FY26 PAT growth: 104% YoY; PAT >INR100 crore
- Diamond jewellery: 35% YoY volume growth, 54% value growth
- Stud ratio: >11% (vs. 9–9.5% FY25)
- Old gold exchange: 40% of transactions (vs. 25% 2–3 years ago)
- Inventory as of June 30, 2025: INR3,558 crore (March 2025: INR3,299 crore; March 2024: INR2,457 crore)
- Average ticket size: INR70,000–72,000; ASP up from INR48,000 to INR52,000
- 61% of jewellery (by count) below INR25,000
- Franchisee store growth: primary 34%, secondary 24%
- SSSG: blended 19% (owned 21%, franchisee 16%)
- April 2025 top-line: ~INR1,000 crore
- Hedging ratio: 55–60% in Q1 FY26 (vs. 75–80% earlier; Board policy minimum 50%)
- ICRA A2+ short-term rating reaffirmed
- LGD revenue: Not disclosed (stated as single/low double digits)
- Planned store additions FY26: 20+ (10 owned, 10+ franchisee)
- Guidance: FY26 revenue growth 18–20%; sustainable EBITDA margin 6.8–7.3%