SENSEX NIFTY
Mar 06, 2013, 10.40 PM IST | Source: CNBC-TV18

See growth at 30-35%, 20 more stores in FY14: PC Jeweller

The stock price of PC Jeweller has been up on back of that news that the PC Jeweller will replace Orient Power in the S&P BSE 500 Index with effect from March 7, 2013.

We are in the field of selling wedding jewellery and demand for wedding jewellery is always stable. Overall it is a very steady growth.

Sandeep Bhatia

CFO

PC Jeweller

Sandeep Bhatia, CFO, PC Jeweller says in the fourth quarter the company will have a mix of gold and diamond jewellery. He expects growth to be in the range of 30-35% in FY14.

Also read: Lower gold prices lure buyers; India demand to pick up

Commenting on demand for gold jewellery he says, “We have seen a steady demand and have not seen any major spikes or downtrend in the demand.” So, overall growth has been steady.

From the current 30 stores they would be around 50 stores by the end of FY14, he adds.

The stock price of PC Jeweller has been up on back of that news that it will replace Orient Power in the S&P BSE 500 Index with effect from March 7, 2013.

Below is verbatim transcript of his interview on CNBC-TV18

Q: There will be heightened interest in your stock now that it is part of the BSE 500 index so we are interested in knowing how you progress in terms of sales and profits. Can you give us an idea whether your sales growth of 40 percent which we saw in this quarter is a pro-rata growth that we can forecast for the coming quarter as well?

A: Yes Q4 is also as good as Q3. In Q4, perhaps we will get better gold and diamond jewellery mix. So our sales are on track. The fundamental of the company remains as strong as ever and our expansion plans are also on track. So we are really working on our financials as well as physical parameters.

Q: How many shops are you likely to open? In terms of physical expansion, what will the tally be at the end of FY14?

A: We should be around 50 stores at the end of FY14. Currently we have 30 stores.

Q: Some of your larger peers like Titan Industries are indicating that because gold prices are benign and we have seen some stability there, there is a pickup in jewellery demand and the wedding season gone by has also been very strong. What is the macro experience with PC Jeweller so far?

A: We have seen a steady demand and have not seen any major spikes or downtrend in the demand. Basically, we are in the field of selling wedding jewellery and demand for wedding jewellery is always stable. Overall it is a very steady growth and our experience has been same like Titan.

Q: Have you opened any stores in Q4? What kind of revenue growth can you expect in FY14 because of this 20 more stores that you are talking about?

A: We have been growing for the past few years at an annual growth rate of nearly 30-35 percent. The growth should remain in these parameters because as the stores get matured, the older stores start showing slightly lower growth rate but then the newer stores then take up from them. I cannot tell the exact figures but I feel a growth target of 30-35 percent is a very reasonable.

Q: There are some observations from analysts about your EBIT margins for example your making charges that you charge to your customers are slightly lower as compared to peers. Also on the foreign business the EBIT margins that you earn are slightly lower. In that context will you be able to hold your margins as compared to peers. What is your outlook over there?

A: I really do not think that our EBITDA margins are lower than any of the peers. Our diamond jewellery sales would increase since we are working very hard on that and they have been growing over the years, this would have a direct impact on our EBITDA margins.

With respect to direct comparison with our peers, I won't be able to comment on that but individually, we are working on our margins. We are confident we should be further able to improve those margins.

Q: Titan also is getting aggressively into diamond jewellery. In that will you be able to hold your pricing or because they have a stronger brand you might have to compensate a bit on pricing?

A: Let me assure you that market for diamond jewellery is just opening up and there is huge scope. Diamonds were always aspirational item but they were beyond reach of the general public. But now with increasing gold prices even the middleclass finds that it is as affordable to purchase diamond jewellery set vis-à-vis gold jewellery set. For example, if a family was buying four jewellery sets for wedding, now they are purchasing at least one-two diamond jewellery sets as well.

So we would be happy if Titan aggressively promotes diamond jewellery because it opens up the market even for us.

Q: Are you not seeing any blunting of demand at all?

A: Not in the wedding jewellery space. In wedding jewellery everybody has got a budget and they try to remain in that budget.

Q: But surely you have a market of people who are not getting married as well?

A: With the increasing population of the country, we are hopeful that more and more people will get married.

Q: I am saying that even people who are not getting married would be coming to buy jewellery so a denting of ability to buy would be there if the entire economy is not able to buy so much, are you noticing any fall in demand at all from your customers?

A: Within the overall jewellery demand there are few segments which would show a decline, segments like gifting and investment.

Q: What is the capital expansion cost for one store? How long does it take for you to make it up in terms of being a profit centre and therefore what will you do by way of margins in FY14?

A: We don’t invest in real estate; we take any building on long-term lease and then build it as per our specifications. We generally spend an average of about Rs 4000-4500 per sq ft. So for a 5000 sq ft area our total capex would be around Rs 2.25-2.5 crore. The main cost involves stocking up the store with inventory. We expect our stores to breakeven during the first year of operations itself.

PC Jeweller stock price

On November 27, 2014, PC Jeweller closed at Rs 239.85, down Rs 3.4, or 1.4 percent. The 52-week high of the share was Rs 278.00 and the 52-week low was Rs 71.50.


The company's trailing 12-month (TTM) EPS was at Rs 17.44 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 13.75. The latest book value of the company is Rs 93.93 per share. At current value, the price-to-book value of the company is 2.55.

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