SKYGOLD - SKY GOLD LIMITED Share Price

Outlook by Management:
Sky Gold Limited anticipates sustained growth, targeting INR3,300 crores revenue for FY25 and revised guidance of INR5,700 crores (FY26) and INR7,200 crores (FY27), driven by new client acquisitions (e.g., Aditya Birla's Indriya, CaratLane), operational efficiencies, and expansion into lab-grown diamonds and 18-carat jewelry. Exports (INR71 crores, +12% QoQ) and domestic demand remain focal areas, supported by industry-wide retail expansion.

Key Highlights:

1. Financial Performance: Q3 FY25 revenue surged 116.7% YoY to INR998 crores; EBITDA grew 217.6% to INR57.3 crores.
2. Diversification: Entered 18-carat natural and lab-grown diamond segments, with first lab-grown shipments underway.
3. Rebranding: Planned shift to "Sky Gold and Diamonds Limited" to reflect broader product focus.
4. Credit Rating: IND A-/Stable (India Ratings) expected to reduce borrowing costs and improve ROCE/ROE.
5. Production: Monthly output rose 66% YoY to 447 kg; targeting 650-700 kg/month by FY26.
6. Margins: Gross/EBITDA/PAT margins improved to 7.3%/5.7%/3.7% in Q3; aim to sustain 3.5-4% PAT through premium product mix.
7. Cash Flow: Targeting cash flow positivity by FY27 via Gold Metal Loans (55-60% conversion by March 2025) and reduced working capital needs.
8. Capacity: Plans for a 4-ton/month facility post-FY27 to support growth.
9. Demand: Wedding/Akshaya Tritiya demand robust; minimal impact from gold price volatility on manufacturing orders.

Management remains confident in organized sector tailwinds and client-funded inventory models to drive margin expansion.

Question 1: What were the volume contributions from Sky Gold's standalone entity and subsidiaries in Q3, and how will new clients like Aditya Birla and CaratLane impact future volumes?
Answer: Sky Gold's standalone volume for 9M FY25 was 975 kg, with subsidiaries contributing 364 kg. Deliveries to Aditya Birla and CaratLane began in Q3, with expectations to add ~100 kg/month by FY26 (50 kg each). These clients provide their own gold, improving capital efficiency by reducing inventory/debtor funding needs.

Question 2: What is the current debt level, and how will it evolve?
Answer: Debt stood at Rs.380"“400 crore as of December 2025. FY26 debt is projected at Rs.550"“600 crore, driven by growth in lab-grown diamonds and 18-carat segments. Gold Metal Loans (GML) will lower borrowing costs, with 50"“55% GML conversion targeted by March 2025 and 75"“80% long-term.

Question 3: Can EBITDA and PAT margins sustain current levels?
Answer: Margins are expected to stabilize at ~5.5% EBITDA and ~3.5% PAT, supported by higher-margin products (18-carat, lab-grown diamonds). Gross margin guidance is 7%, with lab-grown diamonds projected to contribute 5% of revenue in 6 quarters.

Question 4: How will Sky Gold utilize its expanded capacity amid aggressive industry growth?
Answer: Clients like CaratLane and Malabar Gold are rapidly expanding retail footprints, driving demand. Sky Gold plans a 4-ton/month facility by FY27 to serve organized players capturing market share from unorganized segments. Existing capacity is 1 ton/month.

Question 5: When will Sky Gold achieve cash flow positivity?
Answer: Cash flow positivity is targeted by FY27, aided by clients supplying raw materials (30"“40% of volumes by FY27) and reduced working capital cycles. Export growth (targeting 15% of revenue by FY27) and lab-grown segments will further support this.

Question 6: How does Sky Gold mitigate risks from lab-grown diamond price volatility?
Answer: A just-in-time model ensures inventory procurement aligns with confirmed orders, minimizing exposure to price declines. Lab-grown diamonds are sourced post-order, with no speculative stockpiling.

Question 7: What are the export revenue targets, and which regions drive growth?
Answer: Exports contributed 7% (Rs.71 crore) in Q3, with a target of 13"“15% by FY27. UAE, Singapore, and Malaysia are key markets, supported by new distributors. Domestic growth (85% focus) remains priority due to unorganized-to-organized market shifts.

Question 8: How does Sky Gold retain skilled artisans amid competition?
Answer: Incentives tied to design innovation, productivity, and facilities (gyms, salons) are provided. Employee count is 950 (including subsidiaries), with hiring focused on automation-complementary roles (e.g., polishing).

Question 9: How will the credit rating upgrade impact funding costs?
Answer: The IND A- rating (Fitch) lowers borrowing costs and collateral requirements. GML adoption (targeting 75"“80%) will reduce interest costs from ~1.3% to 0.65"“0.7%, improving ROCE/ROE.

Question 10: Why was FY27 revenue guidance raised to Rs.7,200 crore?
Answer: Revised guidance reflects existing clients' store expansions (e.g., Malabar Gold adding 100 stores/year) and higher-margin business from clients supplying bullion. Lab-grown diamonds and 18-carat segments further bolster growth.