Kalyan Jewellers Eyes Margin Expansion From FY27 With COCO Model

Kalyan Jewellers India Ltd.'s operating margins are expected to expand from fiscal 2027, as the transition to the 'Company-Owned Company-Operated' model will help shore up the topline, according to Executive Director Ramesh Kalyanaraman.

"Ebitda margins for the franchise model stand at 5%, while owned stores operate at an 8% margin. Our current expansion is entirely focused on the FOCO model, which is why we are seeing margin contraction," Kalyanaraman noted.

Kalyan Jewellers reported a 44% growth in profit after tax, adjusting for the impact of customs-duty reduction. The company's Middle East revenue grew 23%, while its digital-first brand Candere recorded an impressive 90% growth.

Its margin narrowed to 6% for the three months ended Dec. 31, 2024, as compared to 7.1% for the same period last year.

"Ebitda margins may further decline until 2027, as we continue with this model. However, once our debt repayment is complete, we will shift to the COCO model, which will drive margin growth again."

The company's third-quarter performance remained strong, supported by festive demand and fewer Shradh days, compared to the previous year.

Kalyan Jewellers plans to repay Rs 150 crore in debt this year, with strong cash flows primarily allocated to debt reduction and dividends. "Once the debt is repaid, we will either open owned stores or consider a buyback," Kalyanaraman added.

Regarding custom duty adjustments, Kalyanaraman clarified, "PAT growth, excluding custom duty impact, stands at 44%. There will be no further impact from custom duty going forward, as all adjustments have been accounted for this quarter."

Approximately 25% of promoter shares are pledged, primarily to acquire more shares of Kalyan Jewellers, he said. "However, promoter pledging will not increase further."

The company remains focused on debt reduction and intends to release land parcels used as collateral. "Our only objective in repaying debt is to retrieve certain land parcels held by banks. We expect more clarity on this in the next three–six months," Kalyanaraman said.

Kalyan Jewellers' stock surged as much as 12.5% to Rs 496.8 per share in early trade on Friday.