Senco Gold Nov-24

• Senco Gold Limited Q2 and H1 FY25 results conference call took place on November 14, 2024.
• Suvankar Sen, Managing Director and CEO of Senco Gold Limited, and Sanjay Banka, CFO, were present.
• Devanshu Bansal from Emkay Global Financial Services was the moderator.

Q2 Performance

• Retail growth of 27% registered.
• 30% value growth in gold.
• 9% value growth in diamonds.
• 7% growth in gold volumes.
• 3% decline in diamond volumes.

H1 Performance

• 17% overall growth.
• 1% volume growth in gold.
• 8% volume degrowth in diamonds.
• 22% value growth in gold.
• 3% value growth in diamonds.

Financials

• INR 27 crore to INR 30 crore impact due to duty cut.
• A 12% growth in ATV and ASP observed.
• A 12% growth in the number of invoices.
• A 34% increase in the use of old gold by consumers.
• 62% of exchanged old gold was non-Senco old gold.
• Achieved best-ever sales in Senco's history in October, surpassing INR 1,000 crore.

Outlook

• Expecting around 18% growth year-on-year.
• Aiming for a bottom-line growth of 15% to 18%.

Initiatives

• Launched Aparupa collection.
• Kartik Aaryan appointed as brand ambassador for men's jewellery.
• Focusing on men's jewellery as a category, aiming for 15% of overall sales.
• Opened 1 Senco company-owned company-operated store.
• Opened 4 Sennes stores for lab-grown diamond jewellery and leather accessories.
• Launching perfumes range under the Sennes brand.
• Franchisee growth played a significant role in the overall growth of the business, especially in Tier 2, 3, and 4 towns and cities.

Consolidated Results

• Top line grew by 18.5% from INR 2,452 crore to INR 2,904 crore Y-o-Y H1.
• EBITDA grew almost 50% from INR 106.7 crore to INR 160.7 crore.
• PAT grew 60% from INR 39.6 crore to INR 63.4 crore, despite a custom duty impact of around INR 29.83 crore.
• Standalone number for quarter 2 improved significantly from INR 1,156 crore to INR 1,474 crore, a 30% improvement. PAT improved from INR 12.0 crore to INR 16.8 crore, a 40% improvement.
• Borrowing has increased by INR 238 crore, but a major part of this increase is on account of gold price rise as well.
• Gold price last quarter rose at INR 7,158. And this quarter rose at INR 7,486 almost a 4% to 5% increase.
• Inventory has increased by almost INR 301 crore.
• Hedging policy talks about a minimum of 50% hedging, while we have said that we will keep hedging around 80% plus.
• Hedging was almost 85% as we ended the quarter.

Additional Points

• SSG is usually around 60% to 70% of total growth.
• The SSG for the month of October will be in the range of 12% to 15% for Q3.
• Volume growth will lead to asymmetry in understanding because the consumer does not consume by volume. It has to be seen in terms of revenue growth only.

Expansion and Future Plans

• Targets a mix of new, matured and growing stores, with varying growth rates
• Aims for 10%-12% average same-store sales growth and 6%-7% from new stores
• Gross margin target of 15%-16%
• Government of India is considering allowing hallmarking for nine-carat gold

QIP Rationale

• Intends to raise approximately INR 500 crore through a QIP.
• The QIP is aimed at maintaining the business level and is primarily for working capital.

Hedging Practices

• Hedging percentage target is 85% of inventory
• The inventory, inventory means that total inventory less diamond. So, whatever the total inventory that you see in the balance sheet around INR 2,800 crore and out of INR 2,862 crore, you can reduce INR 400 crore of diamond and other gold platinum. So, INR 2,200 crore to INR 2,300 crore of gold is hedged.
• GML is almost unfixed. Balance will do at MCX by future sale.
• Hedging inventory lying in our books which is either the inventory lying at the stores or inventory lying at various warehouses or head office
• Franchisees inventory is on their books.

Competition

• An equal demand from Dhanteras, Diwali, was seen both in smaller towns and larger cities
• Smaller ticket sizes were more common in bigger cities, while high-value wedding products sold better in those bigger cities
• Competition is high with aggressive actions in the market
• Unorganized shift continues to happen with branding efforts

Sennes Brand

• Sennes will focus on upper-middle-class consumers with international designs
• Sennes aims to be a lifestyle and design brand with jewellery, bags, and perfume

Additional Data

• YTD is 15% and H1 is 17%.
• Console revenue if we take the number, Devanshu, it has increased from INR 2452 crore to INR 2904 crore. It is 18.5% console revenue.