Kalyan Jewellers , a prominent player in the Indian jewellery market, has announced a strategic shift in its financial management approach. The company has temporarily halted its debt reduction strategy to prioritize the release of non-core land assets currently used as bank collateral.

Strategic Pause in Debt Reduction

Executive Director Ramesh Kalyanaraman emphasized that this move is a strategic pause rather than a permanent stop to the company's debt reduction efforts. Over the past year and a half, Kalyan Jewellers successfully reduced its debt by over Rs 500.00 crore. The company is now working on releasing Rs 200.00 crore worth of collateral through bank paperwork.

Kalyanaraman stated, "We plan to resume debt repayment within a couple of months once the collateral is released." This approach demonstrates the company's flexible financial strategy in managing its assets and liabilities.

Expansion Plans Continue

Despite the temporary pause in debt reduction, Kalyan Jewellers remains committed to its growth trajectory. The company has outlined several expansion initiatives:

1. Introduction of a new jewellery line targeting regional markets
2. Plans to open five new showrooms in the next 12 months
3. Allocation of Rs 300.00 crore for capex, including inventory for new stores

Jewellery Park and Lean Credit Model

In a move to strengthen its supply chain, Kalyan Jewellers is developing a jewellery park in Kerala for contract manufacturers. This initiative is expected to streamline production and potentially reduce costs.

The company has also piloted a lean credit procurement model, which has yielded impressive results. This new approach has reduced the average credit period from 30-32 days to approximately one-third of that duration, potentially improving cash flow management.

Financial Outlook

Management expressed optimism about the company's financial performance:

• Margins are expected to exceed 7.00%
• Return on Capital Employed (ROCE) is projected to grow organically by 1-2% annually

These improvements are anticipated to be driven by asset-light expansion and operating leverage.

Kalyan Jewellers' strategic decisions reflect a balanced approach to financial management and growth. By temporarily pausing debt reduction to free up collateral, the company aims to create more flexibility for its expansion plans while maintaining a focus on improving financial metrics in the long term.

Kalyan Jewellers , one of India's largest jewellery retailers, reported robust financial results for the first quarter, despite a significant drop in its stock price. The company's performance highlights its resilience in a volatile market environment.

Strong Financial Performance

Kalyan Jewellers recorded a consolidated revenue of ₹7,268.00 crore in Q1, marking a substantial 31% growth compared to ₹5,528.00 crore in the same period last year. The company's consolidated Profit After Tax (PAT) saw an impressive 49% increase, reaching ₹264.00 crore, up from ₹178.00 crore in the previous year's Q1.

Indian Market Performance

In the Indian market, Kalyan Jewellers' standalone revenue grew by 31% to ₹6,142.00 crore, with PAT surging by 55% to ₹256.00 crore.

International Operations

The company's international operations, particularly in the Middle East, also showed strong growth:

• Revenue increased by 27% to ₹1,026.00 crore
• PAT rose by 18% to ₹22.00 crore

Stock Performance

Despite the strong financial results, Kalyan Jewellers' stock experienced a significant decline. The share price dropped 9% to ₹551.90, after opening higher at ₹615.65.

Operational Highlights

• 18% same-store sales growth in India
• Addition of 10 new showrooms during Q1
• Total of 406 showrooms across India, the USA, and the Middle East
• Retail area exceeding 10,00,000 sq. ft.

Analyst Perspective

Market sentiment remains largely positive:

• Citi maintained a 'Buy' rating
• Price target raised to ₹700.00
• EBITDA and profit before tax increased by 35% and 49% respectively
• Eight out of nine analysts covering the stock have 'Buy' ratings

Strategic Initiatives and New Ventures

• Implementation of 'lean credit procurement' pilot project
• Potential capital infusion of ₹1,500.00-2,000.00 crore if rolled out company-wide
• Paused debt reduction to monetize real estate collateral
• Plans to open five stores under a regional brands strategy
• Received subsidized land worth ₹5.00 crore from the Kerala government
• No plans for in-house manufacturing
• Reevaluating previous credit period policy

Management Commentary

Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers, expressed optimism about the upcoming festive season, stating, "We have started off the ongoing quarter well despite continuing volatility in gold prices and a higher base. We are upbeat about the upcoming festive season across the country and are gearing up for the launch of fresh collections and campaigns."

Conclusion

Despite stock price volatility, Kalyan Jewellers' strong financial performance, expansion plans, and strategic initiatives suggest a positive outlook. The company's assurance that new ventures won't impact ROCE and the receipt of subsidized land from the Kerala government further strengthen its position. Investors and analysts will be closely watching how the company navigates the upcoming festive season and implements its strategic initiatives in the coming quarters.