Short-term market moves can reflect uncertainty whenever a company announces significant new strategies : Kalyan Jewelers

Kalyan Jewelers reported a strong Q1 performance, beating market expectations on revenue growth and operational metrics.

Kalyan Jewelers reported a strong Q1 performance, beating market expectations on revenue growth and operational metrics. However, the stock’s close to 10 percent fall on Friday reflected investor caution as the company unveiled key strategic shifts — from piloting a lean inventory procurement model to launching a new regional brand designed to take on entrenched local players. In this conversation with Moneycontrol, Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers, explains the thinking behind these moves, details the company’s debt repayment priorities, shares his outlook on jewellery demand, and outlines why he believes the market will soon recognise the long-term value of its strategy.

A: At the operational level, the company has outperformed expectations, and we’re genuinely pleased with the outcome. July has also started strong, although it’s important to note that last year’s July performance benefitted from a one-time bump due to a customs duty cut, so year-on-year comparisons aren’t entirely fair.

In terms of the market’s immediate reaction, I think investors are still digesting the new strategic directions we announced yesterday. These strategies are not short-term plays — they’re designed for long-term margin improvement, stronger regional penetration, and more efficient capital use. Stock price movements in the short run can be volatile and influenced by sentiment, but our focus remains on consistent operational delivery, and that’s what will ultimately drive sustainable valuation.

A: Certainly. We announced two key strategic moves.

The first is the lean inventory procurement model we tested through a pilot at Kalyan Jewellers over the last four-and-a-half months. This was designed to reduce working capital cycles while improving return on capital employed (RoCE). The results have been better than the overall corporate RoCE, which is a strong validation.

We implemented the pilot in Kalyan Jewellers because it’s a large, stable platform where operational changes can be tested without disrupting the broader network. The reason for doing this now is that we are preparing to launch a new regional brand within Kalyan Jewellers. This will be a third format alongside our national Kalyan Jewellers showrooms and our lightweight jewellery brand. The regional brand will stock only region-specific inventory, focus entirely on local consumer tastes, and compete directly with entrenched regional players.

Why is that important? Because in a purely regional model, stock turns are higher — and when inventory moves faster, procurement efficiency has a multiplier effect on returns, often three to four times more impactful than in the national format. This makes getting the procurement model right from day one absolutely critical.

The second strategic move is to fully integrate this lean procurement approach into the regional brand from launch, while continuing to run it as a pilot in Kalyan Jewellers. We don’t have a fixed timeline yet for rolling it out nationally — we want to keep refining it and see how it performs in different demand environments.

A: Yes, but with a completely separate identity. Think of it as a separate showroom concept, similar to Candere in terms of operational independence. Each regional brand will be tailored to a specific state or region, with its own name, marketing, and product mix.

Our initial plan is to launch in one state, open five showrooms within the first 12 months, and require around Rs 200 crore in initial working capital. After that, expansion will primarily be through the FOCO (franchise-owned, company-operated) model, leveraging our strong franchise network.

This step-by-step approach ensures we don’t dilute the brand’s regional authenticity and allows us to fine-tune the model before entering the next state.

A: Not materially. In fact, we see it as complementary rather than competitive. The regional brand will target a customer base that, in many cases, is not served by Kalyan Jewellers at all.

In some states, for example, Kalyan Jewellers might avoid certain smaller cities or towns because the local consumer preference is strongly tilted towards hyper-local players. A regional brand, positioned and merchandised in their style, can go into those markets without diluting the Kalyan Jewellers brand.

Even in locations where both exist, the target audience is different. The regional brand will appeal to consumers who may not aspire to shop at a national chain, but who will trust and prefer a brand that “speaks their language” — literally and culturally.

A: This is a good example of where there might be misconceptions. The jewellery park is not about Kalyan Jewellers entering direct manufacturing. The Kerala government has allocated us land, and we will build high-quality infrastructure there — safe, clean, well-organised facilities that can be used by our contract manufacturers.

These manufacturers are already working exclusively for us, but many operate in environments that could be improved for safety, hygiene, and efficiency. The park will allow them to bring their own machinery and processes, but within a facility that meets higher standards.

From our perspective, this is not a big capital expenditure. The investment is limited to constructing the base infrastructure — the “skeleton” buildings. The benefit to us is indirect: better working conditions can improve productivity and quality control, and having multiple vendors in a centralised location can enhance coordination.

A: No, we are not directly impacted by US tariff changes because Kalyan Jewellers does not export from India — not even to our own showrooms in the Middle East. Our supply chains for international markets are independent.

In the US, we currently have only two stores, both less than a year old, so their contribution to revenue is minimal. Our immediate focus there is building brand awareness and establishing a base before thinking about scale.

A: None at all. Our repayment strategy was never about chasing lower interest costs — our cost of debt is in the 8–10% range, while our RoCE on new business is upwards of 20%. Instead, debt repayment was aimed at releasing non-core land parcels that were mortgaged to banks.

Over the past 18 months, we have reduced debt by Rs 500 crore. We are now completing the paperwork to get the first set of collateral released. Once that happens, we will continue repayments to release the remaining parcels. Freeing these assets gives us flexibility — they can be sold, redeveloped, or used for future projects without being tied up in bank security.

A: Demand is strong. In India, overall revenue grew 31% this quarter, with same-store sales growth at 18%. Footfalls have been steady in July as well.

While the last week of July and first week of August can’t be compared to last year — due to the earlier customs duty cut — we expect the shortfall to even out. This year, Navratri starts earlier, giving us nine extra festive sales days compared to last year. Historically, those days are high-conversion periods, so we’re optimistic about maintaining momentum into the festive season.

A: Yes. We always recommend looking at PBT margins, not just EBITDA margins. Adjusted for the customs duty change, India PBT margins are around 5.6–5.7%, which is stable compared to last year.

Over time, margins should improve further due to operational leverage, higher-margin store performance, and efficiencies from the pilot procurement project. The FOCO model does lower reported margins because franchise stores have different revenue recognition, but it’s asset-light and RoCE-accretive, which benefits shareholders.

A: Each market will have its own name — we want to ensure the brand is fully localised, from name to product to marketing. We won’t enter all states in India; we’ll focus only on those where we see a significant gap for a regional organised player. The roll-out will be slow and deliberate, with one state at a time.

A: That will happen after our current debt repayment cycle and asset release process are complete. Until then, the priority is FOCO expansion and consolidating the pilot project benefits.

A: Very strong. We’ve already signed all planned FOCO stores for this year. There’s also interest in the upcoming regional brand, but we won’t give those out until the first company-owned stores are operational and the format is proven in the market.