Deepa Jewellers Ltd (DEEPA) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to Deepa Jewellers Ltd Q2 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.
Purvangi Jain (Valorem Advisors): Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Deepa Jewellers Ltd.
Purvangi Jain (Valorem Advisors): on behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and first half of the financial year 2027. Before we begin, let me mention a quick cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief, as well as assumptions made by, and information currently available to the management. Audience are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial performance for the quarter under review. Now, let me introduce you to the management participating with us in today's earnings call. We have with us Mr. Dev Agarwal, Whole-Time Director, and Mr. GK Srinivas, Chief Financial Officer. Without any delay, I request Mr. Dev Agarwal to start with his opening remarks. Thank you, and over to you, sir.
Dev Agarwal (Deepa Jewellers Ltd): A very good evening and warm welcome to all of you to Deepa Jewellers Limited's first ever earnings conference call. We appreciate your time and participation today. This is an important milestone for us as a listed company, and we look forward to engaging with the investment community and sharing our business progress, operating performance, and growth priorities. To begin, I would like to provide a brief overview of our company before taking you through our operational and financial performance for the period under review. Deepa Jewellers Limited is a South India focused B2B jewelry manufacturer with a strong presence in traditional vaddanam, which is a gold waist belts and CNC machine-cut bangles. Our Promoter, Chairman, and Managing Director, Ashish Agarwal, and our Promoter and Non-Executive Non-Independent Director, Seema Agarwal, embarked their journey in the gem and jewelry industry in the year 2001 through a partnership firm, and hold an experience of 25 years in the industry. I joined the company in 2021 and represent the next generation of leadership, contributing modern business perspectives, technology-oriented thinking, and contemporary strategic direction that support our ongoing growth. We primarily operate across Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, and Kerala with a strong presence in the Southern Indian jewelry market. We have established long-standing relationships with leading jewelry retailers, including Joyalukkas, Kalyan Jewellers, Lalithaa Jewellery, Bhima Jewellers, and other regional jewelry chains. While revenue is concentrated in Southern India, our established retail chain relationships enable the company to access and access markets beyond the region and broaden our market reach across India. We believe the shift towards organized jewelry retail chains presents a significant growth opportunity for organized B2B manufacturers like us. Large retail chains increasingly seek reliable manufacturing partners who can ensure consistent product quality, design variety, and timely delivery and strong inventory controls as well. Our established capabilities and customer relationships position us well to meet these evolving requirements and build long-term partnerships with organized retailers. We also benefit from our strong presence in South India, which accounts for approximately 40% of India's gems and jewelry market, making it the largest regional market. The region's deep-rooted cultural affinity for gold, strong wedding and festive demand, and growing penetration of organized retail provide a favorable growth environment. Over the years, we have developed a diversified portfolio spanning 16 product categories and approximately 110 SKUs, and more than 24,000 designs. Our customer base comprises approximately 373 customers, including 47 jewelry retail chains. Our business is primarily focused on jewelry manufacturing, complemented by job work services, which represent a smaller, but strategically important part of our business model. With our expertise in traditional jewelry such as vaddanam, established customer relationships, and expanding manufacturing capabilities, we are very well positioned to capitalize on these opportunities and strengthen our presence in this key market. With that backdrop, now, I come to operational highlights for the period under review. One of the key developments during the period was the commencement of our in-house manufacturing facility in Hyderabad in September 2026. The facility, spread across approximately 6,700 sq ft, marks an important step in strengthening our internal manufacturing capabilities
Dev Agarwal (Deepa Jewellers Ltd): believe, this addition will provide us with greater operational flexibility, support our evolving production requirements and create a stronger foundation to scale our business as we continue to expand our product portfolio and customer relationships. Another important operational highlight is the plan to open our second sales office in Chennai in in third quarter end, which is the month of December. And another important key note which the management wa wishes is to convey to all the investors is that from 1st October onwards the the both the promoters and both the executive directors which is Ashish Agarwal and Dev Agarwal plan to not draw any salaries from the business. So this is in respect of encouraging the this is profitability and long-term growth in the business. So from third quarter onwards both the promoters have been not be drawing any salary from the business. Now coming to the operational KPIs, during the second quarter of the financial year 2027, our total operating volume stood at 809 kgs, representating representating YoY increase of 13%. Processing and manufacturing volumes remained broadly stable at 491 kgs, while job work volumes increased to 318 kgs, registering a significant YoY growth of 44%. This reflects the growing contribution of job work services to our overall operating volumes. For the first half of FY '27, total operating volumes increased to 1,327 kgs, representing representing YoY growth of 12%. Processing and manufacturing volumes stood at 783 kgs, slightly declining by 5% YoY, while job work volumes on the other hand, increased significantly by 51% YoY to 544 kgs. The growth in job work volumes is strategically positive as the segment offers higher margins, lower working capital requirements and no exposure to gold price fluctuations as the gold is provided by the customer. As we continue to develop this segment, our focus remains on building its contribution in a manner that complements our core manufacturing business. Looking ahead, we remain focused on strengthening our core core manufacturing business, expanding our job work operations and improving the utilization of our manufacturing capabilities. At the same time, we recognize the importance of maintaining profitability and financial discipline as the business grows. Our priorities will remain centered on sustainable revenue growth, operational efficiency and prudent management of working capital while building a stronger platform for the next phase of our journey. With that, I would night now like to invite our CFO, Mr. GK Srinivas to share the financial highlights for the period under review.
GK Srinivas (Deepa Jewellers Ltd): Thank you Mr. Dev, and good evening everyone. For the second quarter of the financial year 2027, revenue from operations grew 25% YoY to INR 626 crores. EBITDA stood at INR 45 crores, registering a YoY growth of 17% with EBITDA margins at 7.24%. Profit after tax increased 37% YoY to INR 37 crores, translating into a profit PAT PAT margin of 5.96 crores 5.96%, I'm sorry. Coming to our financial performance for the first half of the financial year 2027, revenue from operations grew 30% year-on-year to 1,057 crores. EBITDA increased by 24% year-on-year to INR 84 crores with EBITDA margin at 7.95%. Profit after tax stood at INR 64 crores, registering a YoY growth of 32% while PAT margins came in at 6.07%. The moderation in growth during the second quarter was primarily attributable to the shift in festive demand. Our business typically follows a seasonal pattern with the first half contributing around 40% of annual revenue and a larger share accruing in the second half. The shift in festive demand into the second half along with the fresh issue proceeds is expected to support our growth trajectory in second half of the financial year 2027. On the profitability front, EBITDA margins were impacted by lower gross gross margins and a marginal increase in employee expenses. Despite this, PAT margins improved YoY, supported by higher other income and a lower tax outgo.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Chintan Sheth from Girik Capital. Please go ahead.
Chintan Sheth (Girik Capital): Thank you for the opportunity and congrats for the good set of numbers. On the, my question is on the gross profit, gross margin both in terms of percentage as well as the grammage basis, we have seen a decline this quarter, right? Even if you look at the job work realization, that has seen a 10% drop on a Y-o-Y basis from, say, Rs. 200 to Rs. 180 per gram. So if you can explain a little bit more on what drove the grammage drop in in terms of, you know, our gross profitability as well as percentage margin? Yeah.
Dev Agarwal (Deepa Jewellers Ltd): I'll be happy to do that. The slightly fall in the gross margin is primarily due to more sales of plain gold jewellery than studded jewellery. There has been a slight change in the sales mix between the studded jewellery and the plain gold jewellery favoring a slightly higher plain gold jewellery sales. And as universally known fact, plain gold jewellery sales offer a slightly lower margin than studded jewellery sales. So in Q2 our company observed more of sales in in plain gold jewellery and hence the company has observed a slight fall in the in the in the gross margin. There is no strategic or any major operational change that has caused this. It's just a change in the SKU mix. It is expected to normalize in the upcoming quarters.
Chintan Sheth (Girik Capital): Got it. And if I look at our receivable days as well as inventory for the for for the first half which we have reported, it has seen a substantial increase versus the year-end number of FY 26. If you can elaborate, so how should one view this going forward basis would be helpful.
Dev Agarwal (Deepa Jewellers Ltd): Yes. Yes, sir. First of all, comparing March numbers to September numbers is not a very the right manner to do it, because as the books close in the year-end, all the corporate clients tend to stop their purchasing in the last week itself. And as there is no festive season in the month of March or April, there is slightly lower sale in the second half of March, whereas September-end is the onset onset of the major festive season. So comparing between the March and the September numbers is not does not always give a true picture. But yes, I accept that there has been a slight increase in the inventory days, as well as the trade receivables days when we compare it to the numbers of September FY '26. The increase in the inventory is is because of the expansion of inventory in our new sales office in Vijayawada, which was not there in the September last year. So with a incremental inventory upscaled only in the month of September with the with the IPO funds that we got on 8th September as the company got listed. We had upscaled our inventory. But the, but the increase in inventory, the effect of the increase in inventory has not yet reflected in the P&L because it was there only for a month. So from the next quarter onwards, we expect our inventory and the trade receivable cycle to get normalized.
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