PN Gadgil Jewellers, a newly listed jewellery retail chain based in Maharashtra, is setting ambitious targets for the fiscal year 2024-25, aiming for a significant 40% growth in revenue. The company, which has made a mark in the Indian jewellery sector, is leveraging several strategic initiatives, including new store launches and an enhanced product mix, to achieve this robust growth.
Strong Start to the Festive Quarter
PN Gadgil Jewellers has entered the October-December quarter with a strong momentum, largely driven by its recent expansion and the ongoing festive season. According to Saurabh Gadgil, Managing Director of the company, nine new stores were launched post-IPO, many of which became operational just before the high-demand festive period. These new outlets, located in strategic regions, have been instrumental in boosting the company’s sales.
“We added nine stores after our IPO, and these outlets became operational right before the festive season began. The timing has worked in our favor, as festivals like Diwali and Dussehra have already resulted in strong value growth, upward of 25%. This positive trend is continuing as we move forward into the season,” Gadgil remarked.
The festive season, typically a high point for the jewellery industry in India, has been a driving factor for PN Gadgil Jewellers. With the wedding season in full swing, the demand for gold jewellery is expected to surge, with an estimated 40 lakh weddings anticipated in the coming months, according to a report by the Confederation of All India Traders (CAIT). The festive buying coupled with the wedding season provides an ideal backdrop for the company’s revenue target.
Revenue Growth and Operational Performance
For the July-September 2024 quarter (Q2FY25), PN Gadgil Jewellers reported a revenue of ₹2,001 crore, marking a strong performance despite certain headwinds. The company posted an operating margin of 2.7%, with a profit after tax (PAT) of approximately ₹35 crore. However, this figure was impacted by an ₹18 crore loss linked to inventory valuation following a reduction in customs duties.
Gadgil explained, “The PAT of ₹36 crore, after accounting for the ₹18 crore hit, should have ideally been ₹50 crore had we not been affected by the duty reduction. Nonetheless, we remain optimistic about our growth trajectory.”
The impact of the customs duty reduction, which had been implemented by the government, caused a temporary setback in terms of inventory valuation. Despite this, PN Gadgil Jewellers was able to maintain its revenue growth and profitability for the quarter, highlighting the resilience of its business model.
Hedging Activities and Improved Profit Margins
Looking ahead, Gadgil expressed confidence in the company’s ability to improve its profit margins by the end of the financial year. He attributed this optimism to increased hedging activities, which the company has been focusing on to mitigate volatility in gold prices.
“We expect our profit margins to improve to 3-4% by the end of this fiscal year, thanks to our increased hedging activities. The hedging strategy allows us to manage the fluctuations in gold prices better, thereby stabilizing our cost base,” Gadgil stated.
The jeweller has been actively refining its hedging strategy, a move that is expected to cushion the impact of volatile gold prices and improve profitability.
Expansion into Studded and Diamond Jewellery
In addition to its focus on gold jewellery, PN Gadgil Jewellers has been diversifying its product offerings, particularly in the studded and diamond jewellery segments. Over the past year, the company has witnessed growth in this category, with studded and diamond jewellery now accounting for 10-11% of its total sales. This represents a significant shift in the company’s product mix as it seeks to appeal to a broader customer base, catering to both traditional and contemporary tastes.
Gadgil is optimistic about the growth potential of the studded and diamond jewellery segment. He outlined the company’s strategy to expand this category further, stating, “We aim to increase the share of studded and diamond jewellery in our total sales to 15% over the next two to three years. This segment holds great promise, and we are focused on driving growth in it.”
The company’s commitment to expanding its range of studded and diamond jewellery reflects the growing demand for luxury and premium offerings in the Indian jewellery market. With consumer preferences evolving, PN Gadgil Jewellers is positioning itself to tap into this lucrative market segment.
Stock Market Performance and Market Capitalisation
PN Gadgil Jewellers made its debut on the National Stock Exchange (NSE) on September 17, 2024, with an initial public offering (IPO) price of ₹830 per share. While the stock opened strong, it has since seen a decline, trading at around ₹707 per share at the time of reporting. Despite this drop, the company’s market capitalisation remains robust at ₹9,614 crore.
The decline in share price post-listing can be attributed to several market factors, including broader market volatility and sector-specific trends. However, experts remain optimistic about the long-term growth potential of PN Gadgil Jewellers, given its strong brand presence, strategic expansions, and a diversified product portfolio.
Future Prospects and Strategic Plans
Looking ahead, PN Gadgil Jewellers is focused on further strengthening its position in the jewellery retail sector. The company plans to continue expanding its footprint across India by opening new stores in high-potential regions. The strategic store launches are expected to be a key driver of growth in the coming years, especially as the company seeks to build on the success of its recent IPO.
The jewellery retailer is also keen on strengthening its digital presence to reach a larger customer base. In recent years, online jewellery shopping has gained popularity, and PN Gadgil Jewellers plans to enhance its e-commerce capabilities to cater to this growing trend. By offering a seamless shopping experience both in-store and online, the company aims to position itself as a leading jewellery retailer in the country.
Conclusion
PN Gadgil Jewellers is on a strong growth trajectory, with a target of 40% revenue growth for the fiscal year 2024-25. The company’s strategic initiatives, including new store openings, a focus on hedging activities, and expansion into the studded and diamond jewellery segments, are expected to drive its continued success. Despite challenges such as the impact of customs duty reductions, the company’s solid performance in the last quarter demonstrates its resilience and ability to adapt to market dynamics.
With the ongoing festive season, the surge in wedding demand, and the planned expansion of its product range, PN Gadgil Jewellers is well-positioned to achieve its ambitious revenue targets. Its focus on diversification, profitability, and long-term growth bodes well for its future in the competitive Indian jewellery market.
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