RBZ Jewellers Limited (RBZJEWEL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to RBZ Jewelers Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. [ Rhea Dharia ] from EY Investor Relations team. Thank you, and over to you, Ms. Dharia.

Thank you, Ranju. Good afternoon to all participants on the call. Welcome to the Q1 FY '27 earnings call of RBZ Jewellers Ltd. Before we proceed with the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our business risks that could cause future results, performance, or achievements to differ significantly from what is expressed or implied in such forward-looking statements. Please note that we have mailed the results and the same is available on the exchange. In case you have not received the same, you can write to us and we will be happy to send the same over to you. To take us through the results today and answer your questions, we have the management of RBZ Jewellers Ltd represented by Mr. Harit Zaveri , Joint Managing Director and CFO, Mr. Harshit Gandhi , Internal Financial Controller, and Mr. Bhavesh Sabhnani, Senior Manager Accounts and Finance. We will start the call with a brief overview of the quarter gone past and then conduct the Q&A session. With that, I hand over the call to the management. Over to you.

Yes, good evening everyone and thank you for joining us today for RBZ Jewellers earnings conference call to discuss our performance for the first quarter of fiscal 2027. On behalf of the management team, I extend a warm welcome to all the investors, analysts, and stakeholders participating in today's call. Before I take you through the financials and operational highlights for the quarter, I would like to briefly introduce our company for those who may be engaging with RBZ for the first time. RBZ Jewellers Ltd is one of India's leading organized gold jewelry manufacturers and is steadily strengthening its presence in retail jewelry segment. Over the years, We have built our business founded on 3 core pillars: trust, craftsmanship, and design excellence. These values have helped us earn enduring relationships with customers, retail partners, and stakeholders and continue to guide our growth journey. I would like to take a moment to share the core principles that define how we conduct our business and create long-term value for all our stakeholders. A key aspect of our philosophy is conducting business with the highest standard of transparency and governance. At our retail business, Harit Zaveri Jewellers, we strictly follow zero cash transaction policy, ensuring complete transparency and traceability in every customer transaction. We believe trust is not built only through the quality and purity of jewelry we offer but also through the integrity of professionalism with which we operate. As a listed entity, we are committed to maintaining robust corporate governance, regulatory compliance, financial discipline, and ethical business practices. We aspire to be recognized not only as a leading jewelry player but also as a company who is known for clean, transparent, and professionally managed operations. As you all know, RBZ operates a unique diversified business model. We cater to leading national jewelry retailers through wholesale and job work relationships while simultaneously serving end consumers through our flagship retail brand, Harit Zaveri Jewellers . This integrated presence across manufacturing and retail provides us with valuable insights into customer preferences while allowing us to capture opportunities across multiple segments of jewelry industry. Our manufacturing operations are supported by state-of-the-art facility equipped with advanced casting, laser, and 3D printing technologies. Backed by a team of more than 200+ professionals and around 250 skilled karigars, we combine cutting-edge technology with fine craftsmanship to create jewelry that resonates with today's consumer. One of our key differentiator is our strong in-house design capabilities. We continuously invest in design innovation and product development, enabling us to offer distinctive collection that blend traditional artistry and contemporary aesthetics. This design-led approach has been instrumental in strengthening our consumer appeal and enhancing our competitive positioning in the market. We offer a diverse portfolio of jewelry across multiple categories, techniques, and price points. While our collection caters to bridal, festive occasion wear, and every day-wear requirements, our strength lies in antique gold bridal jewelry, a segment where we have established a strong reputation for craftsmanship and design excellence. Though Harit Zaveri Jewellers, customers can choose from an extensive range of gold, silver, studded, and other jewelry products including bangles, chains, necklace, rings, earrings, and several other contemporary and traditional offerings. Looking ahead, we remain focused on further strengthening of retail presence and brand recognition across Gujarat. Leveraging our strong brand equity in Ahmedabad, we are focused on expanding our key market in East Ahmedabad, Gandhinagar, Rajkot, Surat, while also continuing to deepen our footprint in Ahmedabad. Our long-term is to transform Harit Zaveri Jewellers into India's leading Indian jewelry brand, recognized by exceptional design, superior craftsmanship, and transparent business practices, and an outstanding customer experience. We believe that our integrated manufacturing capabilities, design expertise, governance-led approach, and growing retail presence provide a strong foundation for sustainable growth. As consumer preference increasingly shifts towards organized and trusted jewelry brands, we are well positioned to capitalize on the opportunity and create a long-term value for all our stakeholders. With that, let me now take you through the financial operations performance for the quarter. We are pleased to report a healthy performance of Q1 fiscal '27, delivering a revenue growth in line with the guidance shared in the previous quarter. For the quarter under review, revenue from operations stood at INR 121 crores, registering a strong growth of 60% Y-o-Y, with the revenue growth in line with the guidance shared in the previous quarter, driven by robust consumer demand, higher jewelry sales, and strengthening brand recall. EBITDA for the quarter is INR 18 crore, reflecting a healthy growth of 39% Y-o-Y, with EBITDA margins coming in at a healthy 14.9%. Profit after tax for the quarter has been 28% at INR 9 crore, translating PAT at 7.5%. In terms of segmental performance for the quarter, retail revenue stood at INR 78 crore, registering a robust 70% Y-o-Y growth. Wholesale revenue stood at 42%, reflecting a strong 47% Y-o-Y growth. Job work revenue stood at approximately INR 1.2 crores. During the quarter, we also strengthened our market presence through activities, participation in 5 major jewellery exhibitions and trade shows across Saurashtra region, North Gujarat, Ahmedabad, and key other key locations. This platform enabled us to showcase our latest collection, deepen engagement with trade partners, and enhance our reach among prospective customers. In parallel, we continue to invest in brand-building initiatives through a series of targeted digital marketing campaigns that highlight both our occasion-led and everyday jewellery offerings. For our occasion-wear portfolio, campaigns such as Akshaya Tritiya, Aangan, Godh Bharai, Mother's Day, and Polki effectively showcased our antique fusion and traditional shringar collection, resonating with consumers during key celebratory moments. At the time, we strengthened our positioning of our lightweight and elegantly crafted daily wear range, including our growing 18-karat rose gold collections, through campaigns such as Homecoming, Samayu, Rose, and Vintage. This initiative helped us improve customer engagement, enhance brand visibility across digital platforms, and reinforce our positioning as a trusted jewelry to both aspirational and everyday jewelry needs. With that being said, I would like to open the floor for question and answer session. Thank you and over to you.

[Operator Instructions]. The first question comes from the line of [ Isha Shah ] from Malhotra Family Office.

So the management has indicated plans to expand into Surat, Rajkot, Gandhinagar, and Maninagar. So could you please explain the expected timeline for these store launches and the estimated investment per store and even the anticipated breakeven period?

Okay, so, Surat will be launching in quarter 2, and Rajkot in early quarter 3, and same I think, Maninagar and Gandhinagar both will be launched in quarter 3 itself. So 3 stores in quarter 3 and 1 store in quarter 2, that is Surat. The size, large format stores are typically around 10,000 square feet carpet area and mid- format stores are 5,000 square feet carpet area. The inventory deployment in large format stores are typically around INR 125 crores to INR 150 crores, while in small format stores are around INR 50 crores, plus and minus 10%-15%. The CapEx, you know, when you say about the breakeven point, the CapEx breakeven will be achieved in a year or less.

And sir, what are the initial customer responses and pre-launch indicators for the Surat and Rajkot flagship stores?

So company has done quite enough exhibitions in all these cities before coming to the conclusion of launching stores over there. And as we go near there is a marketing -- there are a lot of marketing initiatives and campaigns that has been planned before the launch of the store. Once it is done and the store is operational, we would get engaged the exact response, but we are expecting a lot of positive response. As in Ahmedabad, we are not a legacy player, the store has -- I came into operation in store in fiscal '21 when it was a INR 24 crore turnover, and last fiscal year we closed at INR 408 crores. So seeing that there is no legacy and the store, we are able to deliver a very high percentage of a very high growth rate. We hope that in Surat and Rajkot we deliver strong performances without having any, you know, because we have done that in Ahmedabad too.

Yes, and over the next 3 years to 5 years, how does the management see the revenue mix between the wholesale and the retail segments? And additionally, what is the level of contribution you expect retail operations to make?

For revenue mix, we see that job work percentage right now in quarter one stands at 54%, and you know, the mix, I think the B2B to B2C mix has to be 50-50 or so in a year or two, and in long term it will be 75-25, 75 being retail.

The next question comes from the line of [ Subi ] Gupta with Trinetra Asset Managers.

Sir my first question is that I think our long-term plan is to open about seven stores, if I'm not wrong. So, and in general, also long term, do we plan to sort of open everything in cluster around Gujarat, or do we plan to open pan-India? First, second of all, also if you could just give some color on our debt-to-equity ratio. What is the target for that since our borrowings have sort of increased? Also I think that's due to short-term inventory, right? Short-term borrowings for inventory. So if you could just give some color on that also.

So because we had a store in Ahmedabad and there was a clear success. We had same demographics in Surat, Rajkot, and Gujarat market. So we are first primarily wanting to tap that. The eye is set for expansion across India, but we would want to understand how and when, the timelines. Given that the debt-equity ratio right now is we have a sanctioned debt of around INR 300 crores. So that equity ratio, and we are yet to utilize it, which is sufficient for the 4 stores that is coming in this financial year. By the end of this financial year, we will be still below 1:1 ratio. I guess 0.8 will be debt and 1 will be equity. Over the period of time, we should -- we are wanting to get up this to 1.5 or 2:1 debt equity ratio, wherein major leverage will be through gold metal loan because the interest cost -- then even if the debt equity ratio are 2:1, the cost of GML is around 3% -- 3.5%, which allows us to leverage more and pay the similar kind of interest that we are paying right now in the debt equity of 1:1. So this is about the leverage that we are wanting to take. Not that we are not doing any exhibitions outside Gujarat. We have done exhibitions in Bombay this year. We are planning for exhibition -- we are scheduled for Indore doing exhibitions. So we are exploring cities, we are understanding demographics. We have got a strong learning curve from B2B about the merchandise, but we are taking our steps in the right manner and focusing on retail transformation on an overall basis.

Thank you. Next question comes from the line of Deepesh Sancheti with Maanya Finance.

First of all, how was -- I just wanted to ask, how was the IIJS show and how many orders -- and how was the orders from the customers and how is the consumer confidence before the festive season?

So IIJS has been really warm this time. Like, it was really good this time. It was encouraging, and we have seen a buyer growth. We have seen a good order backing. I think quarter two, we are -- we think that because of the orders and all, we, we are hoping that the performance will be very much in line with whatever we have projected in earlier commentaries.

And was there any new customer additions in this IIJS?

So a good amount of family jewellers were added. Customer penetration was there. So because of the variety mix wherein the lightweight and the look versus the weight ratio was achieved in a very strong way. We have seen that the orders are better from a particular customer. So penetration has been high. There has been a good successful you know, appreciation of designs even from corporate end, because of which the July, August, the order kitty are in full. So right now company is very much in line with the orders that we are receiving, and I hope that the response continues further.

Right. And, so have we introduced anything, below caratage also, as in like below 22 karat, 18 karat, or 14 karat, or 9 karat?

So we have entered -- we have, we have introduced this since December. Our sales mix incorporate -- before it was 100% 22-karat. I see by the end of this year it will be at least 20% will be of 18- caratage.

20%,18-caratage. Now just wanted to understand, our B2B business was for this quarter it was approximately 125 kgs including the sale as well as the labor job of what we did. And we did about 49 kgs in our retail. How much was out of this 49 kgs was our own production?

Approximately around 20%.

20% was our own production.

I really don't have numbers in hand, but yes, that is what the ratio generally remains.

Okay. And so what is the capacity utilization of our factory? I just wanted to understand that.

The total capacity still remains at around 1.8 tons to 2 tons a year, and the production that we are doing, or the consumption that we are able to do, is somewhere around 900 kilos to 1,000 kilos. So we are utilizing factory around 50% of the capacity.

Okay, so you expect that going ahead in Q2 and Q3, where the festive season would actually start, do we have a higher number on the -- I mean, almost 70% -- 80% of our capacity utilization?

In the season times currently, as of now, our capacity utilization generally goes at 70% -- 80% minimum, 75% to 85% sometimes depending on, you know, which days are all. Sometimes it is near to you know, 90% or so, but not on the off-season times. These are the core season times-- July, August, September. Quarter two is very heavy for corporate job workload.

Right, right. And just wanted to understand also that why was the margin lower in spite of our sales growth in volume and numbers were there? I mean, I'm talking about year- on- year.

Yes, so, can you, can you tell me which margins -- net profit margins or EBITDA?

No, no, EBITDA.

EBITDA level is approximately 40%, and generally there are, there are 2 components that we have understood. One is that the average gold rate has remained stagnant, you know, and thus there is negligible inventory gain into the system as of now. So, you know, on the quarter one side, the EBITDA margins have reflected that. But there are other 2 impacts that are there. The amortization of lease assets is INR 76 lakhs, and the impact of lease liabilities is at INR 115 lakhs. So because of this two also, there has been a, you know, sluggishness and margins. So, and because of Surat store opening, you know, in the month of September, we have already, you know, booked -- we have already offered and engaged the employees for the BTL activities and training and stuff. So even for that, the employee expenses has been a little higher., and the stock engagement and things, the stock planning was done. So you can see that finance cost is also a little up in that case. So just because of this new store ramping up, we are wanting to have everything in more advanced as a plan goes. And thus some of the booking of expenses like advertisements and all does also happen. So not one, there are several reasons put together, but I think we overall have done around INR 9 crores or so, and which, you know, I think when the stores are open and things are more in- line, I think it will reflect onto better revenue growth also, and maybe on the PAT levels also.

Thanks. Coming to the stock level as well as what you mentioned in the, for the previous participant about, you know, you're planning to go for GML. I wanted to understand that will this GML will be for a new retail stores, or will we apply entire inventory of our 350 kgs for the retail, and for the business, for the factory and B2B business, we will have the GML? Just want to understand that where are we going in the next 2 years to 3 years? Are we looking at being a prominent retail company, or are we looking at B2B as an equal participant?

So, retail , we are going to transform into the retail side. So if I say in a medium-long term, we will -- I said that the ratios will be 50-50 in terms of the retail versus the B2B, given that the profits -- 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. Also, there is a gap between what the product offerings of corporates are and what the family jewelers have an approach. So we see that the scale will happen in retail, not anywhere that wholesale business is going. You know, now we are going good in wholesale business, if you see, even in this quarter and in coming quarter also. But the focus is remaining in retail. In the long term, you will see that major amount of profits will come from retail. The sales mix might be different. It might be, you know, 50-50 or 60-40 or whatsoever, but profitability will come from retail side.

And if you can also mention the stock allocation and where do you use the GML?

GML, we are planning that during the course of the journey we should actually have an inventory which is hedged. We should -- we have already started using GML in this quarter a little bit, but as and when the quarter passes, we are wanting to completely churn out the whole inventory has to go hedged, but that will take three years of time, that is, as we have said. So slowly and steadily, yes, we are moving towards hedging. And basically hedging means the use of GML.

Okay, so the current inventory of ours will not be hedged, right? As in, we are not doing anything to our current inventory?

No, current inventory -- I mean, the current inventory will also be hedged. On the long run, we assume that why not really go for maybe 90%, 100% hedge whatsoever. These are just percentages. The whole idea is we need to hedge gold as a commodity on USD levels.

If I can just ask that how are you going to currently hedge? Like if you have, suppose let's say you have around 350 kgs of gold, are you going to sell it and then convert the entire loan into a GML? I mean, just want to understand how you're going to hedge your current inventory?

Yes. So what you're telling is the methodology of hedging, like methodology of how are you going to do it. So whatever the sales happens in retail, okay, it will be there will be a cash flow, and that's cash whenever we want to utilize the bank from that cash flow, it will be done by a GML. So currently we are in negotiation with bank regarding the sub-limit as GML, and we will be using all our bank limits plus the equity, everything, you know. there will be rotating things slowly and steadily as the sales happen. Things will be more in on the GML level.

Mr. Sancheti, please rejoin the queue for more questions. Next question comes from the line of [ Sahil Patni ] with Strokes Capital.

Most of my questions have been answered, but just some clarification. So, the remaining three stores that you're planning for next year, are they also going to be based out of Gujarat?

So, when you say remaining three stores, do you mean apart from the four stores that are coming right now?

Yes, correct.

So, yes, couple of them what we have -- for which the lease has been signed is in --- is from Gujarat itself.

Okay, all right. And just to piggyback on the previous participant's question on EBITDA margin, because obviously we have the 3 stores, 4 stores coming up this year. So do we kind of see the similar range of margin for like the rest of the quarters as because you'll obviously be spending on the stores, marketing and stuff like that?

So you will be seeing an increased amount of marketing expense in this quarter also. A good amount of expenses have been, you know, we have, we have, we have accounted or recorded for the expenses so that, you know, it does not come heavily on a single quarter. There is a spread of expenses but seeing that we are invested in brand building, upcoming stores are very crucial. It will actually say us how we are performing in retail, in chain store level. Given that the longer-term outlook is more on the transformation of retail, we are positive that the brand building exercises will lead us into more scalable approach.

Okay, got it. And since obviously your Surat store is slated for Q2, so we are already in the middle of August, so should we expect something in the next 3 to 4 weeks, like some sort of an announcement?

So Surat store date is coming approximately, coming on the last week of September.

Okay, got it, got it. All right.

It's coming closer to Navratri, the whole thing is that can it be closer to Navratri things if Surat and Rajkot, both the mega stores are opening closer to Navratri, it's best. So Navratri is at 11th of October, so Surat might be in quarter 2 and Rajkot might be in quarter 3.

Next question comes from the line of Rahul Verma with [ Alpha ].

Apologies, I joined in a bit late, but I have a few questions. So basically, so I wanted to understand on the volumes. Our wholesale volumes grew modestly you know, while retail remained the key growth driver for us, right? So how do you view the demand trends from large retail partners such as maybe Malabar Gold or let's say Titan?