Senco Gold Feb-25

• Senco Gold Limited held its Q3 & 9M FY25 Results Conference Call on February 14, 2025.

Key People on the Call:

• Suvankar Sen, Managing Director and CEO
• Sanjay Banka, Chief Financial Officer
• Devanshu Bansal from Emkay Global Financial Services Limited moderated.

Financial Performance Overview:

• Consolidated revenue growth was 27% YoY for Q3 and 22% for 9 months. However, the stud ratio (diamond jewellery sales percentage) did not grow.
• Diamond sales remained similar to the previous year due to consumers being more interested in buying gold jewellery. Higher gold prices impacted the overall cost of diamond jewellery, decreasing the stud ratio.
• Q3 FY25 saw lower EBITDA and PAT compared to Q3 FY24, with an EBITDA of 4.8% versus 7% and a PAT of 2.1%.
• The company reported that Rs.58-60 Cr was the duty cut impact on its overall numbers.
• Diamond sales have started picking up with about 59% growth year-on-year in the last 3 months
• YTD (9 months) invoice count grew by 4.5%, with ATV up by 14.5% and ASP up by 15.5%.
• Old gold ratio of the overall sale has remained at about 38%. Sennes Fashion was formed as a brand that will open stores of lab grown diamonds, leather bags and perfumes.
• Q4 is expected to continue being a robust quarter, with an expected EBITDA of about 7% to 7.5%
• The company has already crossed Rs.5,000 crore in the 9 months, and should be crossing Rs.6,200 crore at the end of the year
• Gross margin in the range of 14% to 15% and EBITDA of 7% to 8% is consistently the general market guidance.
• Adjusted EBITDA for Q1, Q2 and Q3 is 7.8%, 5.9% and 5.3% and YTD is 6.2%.
• About 90% of diamond jewellery is below 0.11 cent. Impact on the lower diamond jewellery of stud ratio is around Rs.15 Cr with export sale impacting by Rs. 4 Cr to Rs.5 Cr.
• Hedge accounting is followed, with almost 80% plus hedging.

Hedging and Gold Loans:

• Hedging is done by keeping the entire GML unfixed and taking the same position on MCX future.
• There was a loss on account of the hedge position.
• The intent of hedging is to keep the whole GML unfixed for MCX future position.
• The adjusted gross margin for 9 months is 6.1%. Diamond jewellery growth is 9%, silver jewellery has 35% with the costume jewellery range increasing by 18%.

Expansion and Outlook:

• The company opened 14 stores and plans to open 5 to 6 more in the coming quarter, totaling 18 to 20 stores for the financial year.
• Plans include opening 20 stores next financial year, with a focus on East India and North India.
• Had a great Dhanteras with Rs.1,000 crore sale in the month of October.
• The company is taking action to reduce the dependency on a single channel and extend to a more diverse customer base in terms of demographics.
• Intends to take about 14% to 15% in lab grown diamond industry.

Q & A Highlights:

• Growth deviation was clarified as retail sales growth (22%) versus consolidated growth (27%).
• The impact of new store openings on margins was addressed, highlighting the strategy of balancing discounts and brand building.
• There should be a focus on the last 3 to 4 quarters, look at the previous years, full 3 quarters, the years before that full 3 quarters and this full 3 quarters. The metal gold loans from the banks that we take in August and September to build up the inventory for the Dhanteras festive season is also important.
• Hedging is a risk mitigator not intended to generate profit.
• The numbers mentioned in the call are to ensure corporate governance and for a conservative and stable business approach. Any fluctuation from Q1 to Q2, and finally to Q3 is normalised due to the effort put towards it.

Additional Points:

• The interest on gold loan will move up to about 6% to 7% for February and March, impacting approximately Rs.7 Cr to Rs.8 Cr
• Stud ratio trend is moving up to 10.7% to 10.8%
• Consumers prefer 14-carat and 18-carat jewellery.