Shares of Kalyan Jewellers India have been losing the lustre, shedding more than 22 percent since being at their brightest a week ago.
The decline inn share price defies the company’s strong Q3 show with a 39 percent likely growth in net revenue on the back of a 41 percent surge in India business on festive and wedding season demand. Same-store sales also grew nearly 24 percent during the quarter.
In an exclusive interaction with Moneycontrol, Ramesh Kalyanaraman, executive director of Kalyan Jewellers, maintained that the company is on its way to become India’s largest jewelry brand. And the ongoing correction could be a good opportunity for some inventors to enter the stock market.
Here's an excerpt from the exclusive interaction...
How do you explain the slide in Kalyan’s stock price over the past week?
As a promoter and executive director, I believe, the only thing we can do is focus on the fundamentals of our business. If you look at our operational performance—store-level margins, execution of our expansion plans for this financial year, and our debt reduction efforts—you’ll see that we’ve delivered consistently. We reduced Rs 435 crore of debt last year and lowered borrowing by 170 crore this year. We also paid a dividend of approximately Rs 170 crore.
The cash flow for the past 12–18 months has been strong, performance has been solid, and same-store growth (SSG) figures remained robust. Expansion is progressing as planned, and we are executing well on all fronts.
Also Read: Kalyan Jewellers shares decline for sixth consecutive day
Do you feel the market is reacting to any particular issue?
Market reactions are influenced by several factors, including macroeconomic conditions. These are often beyond our control. What we can do—and have always done—is focus on executing our business strategy effectively and communicating transparently.
We’ve also maintained high standards of corporate governance. Our board is diverse, with the necessary depth to guide us effectively. Our statutory auditors are thorough, and our internal controls and systems are strong. Disclosures to minority shareholders are also detailed and transparent.
For instance, my father stepped down as the chairman, and Vinod Rai took over to enhance the governance. We continuously work to improve, ensuring that our corporate governance standards are among the highest.
Are you worried about the extremely high volatility in stock prices?
Over the past two and a half years, Kalyan Jewellers has delivered consistent performance. Short-term volatility may have occurred due to profit-booking, corrections, or broader macroeconomic factors. It’s essential to look beyond a few days of fluctuations and focus on the longer-term trajectory.
Do you feel jewellery stocks, including that of Kalyan's, are fairly valued at the current PE ratios?
Valuation multiples are a function of several parameters. If you look at Kalyan, we are growing faster than many of our competitors in terms of SSG and total revenue. Over the past 18–24 months, our performance has consistently outpaced our competitors. Despite this, our valuation multiples are not yet on a par with the market leader.
Can you provide more details on your recent Middle East investor meet?
We maintain active relationships with investors through roadshows in markets like Singapore, the US, and the UK. This was our first time engaging with investors in the Middle East, which is an increasingly important market for investment.
Unlike companies that meet investors only for specific transactions, such as acquisitions or block trades, we engage with them regularly to maintain strong relationships. Whether the news is good or bad, we believe in staying connected with our investors.
Kalyan has marquee investors like the Singapore government. Any exits on the cards?
Investment horizons vary among investors. A company needs a mix of long-term investors, hedge funds, and others to ensure liquidity and price discovery. For example, we participated in the last block trade to bring in new investors, even though we could have participated earlier. This strategy ensures that the stock remains attractive to diverse investor categories, including family offices and PMS funds.
Also Read: Decoding Titan and Kalyan's stellar growth in jewellery sales
Do you see the current stock price as an opportunity for investors?
Yes, the current correction is an opportunity for both new and existing investors. New investors who missed the earlier rally can now enter, and the existing investors can add to their holdings. These pauses are essential to attract fresh participation.
How has inclusion in the F&O segment impacted the stock?
While I’m not a capital market expert. I believe F&O inclusion has provided an opportunity for a new set of investors to participate in the stock.
There is speculation about margins despite revenue growth...
Gross margins and EBITDA margins may decline temporarily because franchisee stores, which have lower margins than company-owned stores, form a larger part of our network. Once our debt reduction journey is complete—likely in the next 1–1.5 years—we will focus on opening more company-owned stores.
This will improve gross and EBITDA margins. Additionally, operating leverage from our own stores and reduced interest costs from debt repayment will drive PBT margin expansion.
Can Kalyan become the largest jewellery brand in India?
We have about 50 percent of the industry leader Titan’s showroom count. However, we are expanding at a faster clip. If this continues, we could reach Titan’s scale in the next 3–3.5 years.
Will you maintain your dividend policy?
We allocate about 50 percent of our free cash flow to debt reduction and dividends. With approximately Rs 745 crore of debt remaining, we aim to clear it within the next 1–1.5 years. This year alone, we expect to reduce Rs 150 crore. Once the debt is repaid, we will focus on opening more company-owned stores.
Will Kalyan diversify beyond jewellery?
India’s jewellery market offers immense growth potential. Kalyan holds only 6–7 percent share of this market. There are significant opportunities in Tier 2, 3, and 4 cities. Even within jewellery, there is scope for diversification. For instance, we can explore verticals like lightweight jewellery, lifestyle jewellery, and luxury jewellery. Each of these segments offers growth opportunities for the future.
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