SENCO - Senco Gold Limited Share Price

Management Outlook:
Senco Gold anticipates robust revenue growth of 18-20% for FY25 and beyond, driven by strong consumer demand despite high gold prices. Q4 is expected to see improved margins (7-7.5% EBITDA) due to a rebound in diamond jewellery sales (59% growth in recent months) and the ongoing wedding/Akshaya Tritiya season. The company aims to open 18-20 stores in FY25 (14 already operational) and plans similar expansion in FY26.

Key Points:

1. Performance: Q3 revenue grew 27% YoY (consolidated), but EBITDA/PAT margins declined due to lower stud ratio (10.5% in 9M FY25 vs. 11.6% YoY) and a Rs.57 Cr customs duty impact.
2. Diamond Recovery: Diamond sales are recovering post-December, with volume growth turning positive (2-3%) after initial FY25 weakness.
3. Expansion: Focus on East/North India; 8-10 company-owned and franchise stores annually. Lifestyle diversification via subsidiary Sennes Fashion (lab-grown diamonds, accessories).
4. Margins: Hedging losses (Rs.89 Cr over 9M) and gold price volatility pressured margins, but stable making charges (10-11%) and diamond recovery are expected to normalize EBITDA.
5. Risks: Rising gold loan interest rates (6-7% vs. 3% earlier) may impact costs, offset by operational leverage and mix improvement.

Outlook: Management remains confident in long-term growth, targeting 7-8% EBITDA margins as diamond sales stabilize and store expansion accelerates.

Question 1:
"Sir, my question is on your Q3 update versus the current results. In the Q3 update, you mentioned a 22% growth and now you're saying 27% growth. Why is this confusion and deviation? Can you help me understand, please? And my second question is on your press release, and you said you have new start-ups and subsidiaries. But when I dig it deeper, you have only Sennes Fashion as the only subsidiary. What are those extra subsidiaries? Please help me understand."

Answer Summary:
The 22% growth referred to standalone retail sales, while 27% reflects consolidated growth (including subsidiaries like Sennes Fashion, Senco Artisan, and Dubai operations). Sennes Fashion is the only new subsidiary, housing lifestyle ventures like lab-grown diamonds and leather goods.

Question 2:
"My question was on the competitive aspect of the business. What we have observed is that a lot of branded jewellery players have done QIPs, and IPOs and they are using that money to open fresh stores. And when you open a new store, what you have to do is you have to offer discounts. And is that something which is affecting margins as an industry-wise? And this is a temporary phenomenon, and it will subside in the future."

Answer Summary:
Discounts vary by market maturity: minimal in strongholds (e.g., East India) but higher in new markets. Senco focuses 60-70% expansion in East India, balancing aggressive pricing in new regions with brand loyalty in established areas. Competitive discounting is temporary in entry markets.

Question 3:
"My next question was on the pricing scenario for natural diamonds and lab-grown diamonds. And also, like, we plan to be present in both natural as well as lab-grown. So, don't we think it would cannibalize in a way? And, due to falling diamond prices, could you help me understand the impact on consumer behavior because essentially a consumer is buying a natural diamond for the stores of value?"

Answer Summary:
Natural diamonds (especially solitaires) faced value concerns due to price drops (-25-30%), shifting demand to gold. Lab-grown diamonds are positioned as fashion products (non-investment), targeting distinct segments. Cannibalization is minimal; Senco aims to grow lab-grown share to 2-3% while recovering natural diamond sales.

Question 4:
"Could you please explain a bit more on the gross margin side? [...] While our stud ratio sequentially was similar in Y-o-Y, it still has seen expansion. So, studded mix actually has become more favourable Y-o-Y. If you can just explain the same?"

Answer Summary:
Gross margin pressure stemmed from hedging losses (-Rs.89 Cr in 9M FY25), customs duty impact (-Rs.57 Cr), and lower diamond share in revenue. Adjusted EBITDA (6.2% YTD vs. 7.1% YoY) reflects these headwinds. Stud ratio decline (10.5% vs. 11.6% YoY) and gold-price-driven mix shifts diluted margins.

Question 5:
"While there has been a lot of discussion on margins, I just have a question on the growth. [...] Why are we looking for this very low growth in this scenario, in this environment?"

Answer Summary:
Full-year revenue guidance of Rs.6,200 Cr implies 18-20% YoY growth. Q4 appears slower due to high gold prices (Rs.8,800/gm) impacting volume, but absolute growth remains robust. January saw 19-20% YoY growth; wedding/Akshaya Tritiya demand and diamond recovery (+59% recently) support confidence.

Question 6:
"[...] Your hedging strategy should have helped you in a volatile gold price environment. Instead, on the other hand, it is actually hurting you more. [...] Why the gross margin impact should be so high, where others are able to manage it?"

Answer Summary:
Hedging (80+% coverage) neutralizes gold price risks but creates accounting mismatches (e.g., MCX futures vs. inventory). Losses (Rs.89 Cr YTD) offset inventory gains, causing margin volatility. Unlike peers, Senco avoids speculative trading, prioritizing stability over short-term gains.

Question 7:
"Is it possible to share the cash flow number for 9 months FY '25 versus 9 months versus the base period?"

Answer Summary:
Cash flow details are not disclosed quarterly. Custom duty impact (-Rs.57 Cr) is a direct cash outflow. Adjusted EBITDA (6.2%) reflects operational cash health, with inventory hedging and gold loans managed conservatively.

Question 8:
"What was the studded mix in Q3 of this year versus the same period last year?"

Answer Summary:
Stud ratio was 10.5% for 9M FY25 (11% in Q3), down from 11.6% YoY. Lower diamond sales in H1 offset recent recovery (59% growth in Jan-Feb). Gold's rising share in diamond jewelry (due to price hikes) further diluted margins.