Jewellery business margins to improve from current 6%: SRS

Diversified group SRS is looking to expand in all four verticals (cinema, food courts, retail stores and jewellery stores) of its business with the IPO proceeds.

SRS posted a total revenue of Rs 2,040 crore in last fiscal with bulk of sales coming from its jewellery business. Despite, huge sales coming from the jewellery business, margins in this business stand at around 6% only. Anil Jindal, chairman, SRS in an interview to CNBC-TV18 said, "Last year, 95% of our jewellery sale was wholesale and 5% was retail sale. Going ahead, the jewellery sale will be divided - 15% retail and 85% wholesale then, margins will improve." SRS has come out with a public issue today. It has issued 3.5 crore shares. It opened in a price band of Rs 58- 65 and plans to raise around Rs 200-220 crore. Below is the edited transcript of Jindal's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video. Q: Will the mix of your business remain the same going forward? Will three fourth of your revenues still come from jewellery and about a quarter from retail? A: We are going to expand our business in all four verticals, namely cinema, food courts, retail stores and jewellery stores. The IPO process will be used for expansion. The amount of Rs 101 crore will be invested for expansion of 51 screens. We will invest Rs 40 crore in three food courts and Rs 53 crore in 29 retail stores. In jewellery segment, we will add 17 stores in which Rs 16 crore will be invested. Q: What are the comparable margins that you get in the jewellery segment and also in the retail business? A: Margins are good. At present, our margins are comparable with our peers. We have 18% EBITDA in our cinema business, 5% in wholesale jewellery stores and approximately 16% in retail jewellery. Q: Why is it that you generated sales of more than Rs 2,000 crore but that translated into a profit of just about Rs 40 crore on your bottom line? A: From the amount of Rs 2,042 crore, 70% is our from jewellery sale in which margins are around 6%. Last year, 95% of our jewellery sale was wholesale and 5% was retail sale. Going ahead, the jewellery sale will be divided in 15% retail and 85% wholesale then, margins will improve.