Sky Gold And Diamonds Ltd (SKYGOLD) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Sky Gold and Diamonds Limited Q2 and H1 FY27 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. Please note that this conference is being recorded. I now hand the conference over to Miss. Vidhi Vasa from MUFG InTime. Thank you, and over to you, ma'am.
Vidhi Vasa (MUFG InTime): Thank you, Huda. On behalf of MUFG InTime, I welcome you all to Sky Gold and Diamonds Limited Q2 and H1 FY27 earnings conference call. On the management side, we have Mr. Mangesh Chauhan, Managing Director, Mr. Darshan Chauhan, whole-time Director, Mr. Mahendra Chauhan, whole-time Director, and Mr. Siddhant Shahani, Chief Financial Officer. I hope everybody had an opportunity to go through our investor deck that we have uploaded on exchange and the company's website. I would like to mention a short disclaimer before we begin the call. This call may contain some of the forward-looking statements which are completely based upon our belief, opinion, and expectations as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With this, now I hand over the call to Mr. Mangesh Chauhan. Over to you, sir.
Mangesh Chauhan (Sky Gold And Diamonds Ltd): Good morning, everybody. I would like to start this concall with Darshan Chauhan, director of, whole-time Director of Sky Gold and Diamond.
Darshan Chauhan (Sky Gold And Diamonds Ltd): Thank you, Mangeshbhai. Good morning, everyone. Let me begin by thanking my team. Today, I want to go beyond the quarter. I want to tell you how Sky Gold was built, where we started, why India's reputed retailers choose to work with us, and how we have used every rupee of capital you have trusted us with. I also want to explain why we believe this is one of the most capital-efficient businesses in our industry. One note before I begin. Under SEBI guidelines, we are not supposed to give forward-looking guidance. That is one of the reasons you have not seen future guidance in our later latest quarter presentation. So, today, I will speak only about what we have built and what we have delivered. Sky Gold started with a simple goal: build a solid product portfolio and earn the trust of our customers. We saw early that jewelry retail was moving from unorganized to organized, and that bet paid off. Today, the same shift is happening in jewelry manufacturing. Our roots are in South Indian designs, where we have built expertise over two decades. When we listed in 2018, we were a small company with a design team of 15 to 20 CAD designers. But even then, we promoters had one ambition: to become India's number one jewelry manufacturer. The ambition has grown since. Our vision is to build a global design-led jewelry manufacturing business that is asset-light. Why retailers come to Sky Gold? Why do the highly reputed retailers choose us? There are four reasons. First, we specialize in lightweight jewelry. As gold prices rise, customer wants lighter pieces. We adopted 3D printing with paper casting as early as 2020, and now run 40 such machines. Together with direct casting, laser cutting, hollow stamping, this makes our jewelry 20% to 30% lighter. We have also cut gold loss from 1.5% to 0.5%. Second, we don't just make jewelry, we co-create it. Our design team of around 180 people studies each retailer's portfolio and its competitors. We study what each state and each community wants. Our team brings sketches, prototypes, and samples before anything goes into production. That approach gives us
Darshan Chauhan (Sky Gold And Diamonds Ltd): for our customers. It is also fine, value-added products now make up over half our revenue, from insignificant percentage 3 years ago. Third, we execute. In our industry, execution means two things: timely delivery and sharper delivery with strict quality control. We deliver in less than 30 days, significantly faster delivery timeline for the complex product that we are selling. When our products arrive on time and sell well in the store, the repeat orders come quickly. Fourth, we are one-stop shop. A retailer who buys gold jewelry from us can now buy diamond jewelry, chains, bangles, diamond-studded jewelry and uncut jewelry from the same partner. Behind that sits a large back-office team that handles customization, custom orders and after-sale service. Our customers can focus on retail. We take care of the rest. We are always one call away. Over the last 8 years, we have invested in three things at once: design, technology, and people. On design, we grew from 15 to 20 CAD designers to a team of around 120-180. We hired talent that understood the gaps in the market and needs of each region. On technology, we have adopted first-hand technology, but a machine is only as good as the person running it. A doctorate in material science with over three decades of experience oversees these operations. On people, we built a marketing team to take us from South Indian business to pan-India one. We hired professionals with 20 years of experience and deep relationships in the trade. In the past, we had highlighted about the expansion in management bandwidth after appointing a professional CEO, business heads and CFO. Also, the presence of Thiru, who has 3 decades of manufacturing experience. In addition, he has spent a close to a decade at one of the most reputed jewelry conglomerate. To keep this talent, we made ESOPs a part of how we reward performance. We recently honored employees who have been with us for more than 5 years as they were the backbone of our growth journey. Now, let me take you through on how we have used your capital. Our capital raising history tells a simple story. Each time we have raised capital, we have deployed it with discipline and converted it into a step change in scale. We listed on BSE SME platform in October 2018, raising INR 25.56 crores at 180 per share. At the time, we had just crossed 500 crores in turnover. The IPO gave us the platform, governance standard and visibility of a listed company, and the capital to strengthen working capital. We used that platform to build our design team and a pan-India marketing team. Over the following years, we compounded steadily, growing turnover from more than threefold to 1,745 crores by FY '24. In 2023, we moved to the mainboard of NSE and BSE. In late 2023, we raised 128 crores through a preferential issue of shares and warrants. Notably, promoters participated through warrants alongside notable investors, a clear signal of conviction from within. The capital allowed us to bring in senior professionals, launch our ESOP program, scale our diamond division and build exports. Its impact was immediate. Revenue doubled in a single year, from 1,745 crores in FY '24 to 3,548 crores in FY '25. In October 2024, we completed a QIP of 270 crores when our revenue stood at 3,548 crores for FY '25. During Q2 FY '26, we opened our international office in Dubai. We have also added new categories through acquisitions. Today, we are running at an annualized revenue of 9,000 crores-plus. Put simply, across these two fund raises post our IPO, we have taken in about 398 crores of equity. Over the same period, revenue has grown from 500 crores to 9,000 crores-plus, roughly 18x. For most of our early history,
Darshan Chauhan (Sky Gold And Diamonds Ltd): a South India business. Our vision to be India's number one manufacturer meant we had to serve every region. So we built dedicated teams for North, East, and West and studied what each market and culture wants to wear. We also chose our partners well. Our customers include several of India's large listed and unlisted jewelry retailers. All of our customers, Kalyan, Senco, and PNG, listed on stock exchanges in recent years and opened showrooms rapidly. Because we were already trusted in their existing stores, we grew with them as well. That is the organized retail bet paying off. As the leading retailers grew, the manufacturer who executes best for them grows with them. Now let me take you through our export story. In FY23, our annual exports were only about 35 crores. In Q2 FY27, we have reached exports of Rs. 435 crores. I repeat, FY23 as a whole, we did 35 crores of exports, while in current quarter alone, we have achieved 435 crores. Today, exports are roughly 18% of our business, around 1,600 crore plus on annualized basis. This growth of 45x came in three steps. Step number one, our Indian customers took us abroad. After COVID, the same corporates we served in India asked us to supply their international stores. Our products had already proven themselves in India, so they performed well abroad, too. Step number two, we went there where the Indian diaspora lives. In Singapore and Malaysia have large South Indian communities and South Indian design is our core strength. We began supplying reputed retailers in Singapore and in Malaysia. Within about a year, we were working with majority of reputed corporates across GCC. Step number three, we planted a flag in Dubai. In September 2025, we started operations of our international office in Dubai, led by Mr. Hiralal, who brings 30-plus years of experience in Dubai and GCC. Almost every major retailer we worked with came in the opening of our Dubai office. From Dubai, we now serve wholesalers and corporates across GCC region. Onboarding into Middle East most respected jewelry retailer shows how we win. We are amongst jewelry manufacturers who designs for Arab clientele as well. Our merchandising team studied the look and feel that market wants, and we co-created a gold line with our customer. It was accepted first time right, and the orders followed. We then did the same with other regional international players as well. Hence, reputed regional jewelry chains of UAE, each with 15 to 20 showrooms in Dubai are now our customers. What keeps our customers are our services. Our Dubai office acts as a one-stop shop, available around the clock. Behind it sits a dedicated back-office team in India, supporting each customer from design to dispatch. And this relationships are personal. I traveled to Dubai regularly in the early days, and I still sit with the owners to understand their customer and their timelines. Trade shows have helped widen our reach. Dubai, held around our office inauguration, introduced us to buyers from Bahrain, Sri Lanka, Malaysia, and Singapore. Saudi Arabia, where we built a 21-karat line specially for that market before the show. United Kingdom, our first show there gave us a good response. One new client started with an initial order of 30 kg.
Darshan Chauhan (Sky Gold And Diamonds Ltd): We started our diamond business 2 years ago, small and still learning. We then build a platform around experienced merchandisers led by Akash, who has more than 22 years in diamond jewelry for India and export market. Our edge in diamond comes from being a gold company first. Gold manufacturers lead on technology such as laser cutting, electroforming. We brought that technology into diamond jewelry to make lightweight pieces with right balance of gold and diamond, which matters more as gold prices rise. We began with lightweight everyday wear and then moved into bridal because temple jewelry is our strength of ours. We now make it in diamond in open, closed and combined settings. Closed setting is in high demand in south, yet only limited manufacturers have the skill. We built our capabilities by hiring setting experts from the south. We also use unique materials, such as ceramic and Italian findings, and launch 30 to 40 theme-based diamond collections every quarter. Diamond carries a higher margin than the company average, and sequentially, we have doubled its contribution. Mangalsutra and uncut diamond, we have added this through acquisitions, which I will come to next. The result is a blend we set out to build, an advance metal business where ROIC is effectively infinite, a diamond business with high margins and a value-added gold business that now makes up significant part of our revenues. Acquisitions. Our acquisitions follow one rule: We do not buy a company alone, we buy its management, its expertise, its designs and its customer relationship. In every case, the founders have joined our top management because their long-standing jewelry experience is what we are really acquiring. Each acquisition does two jobs: it adds a category we can sell to our existing top customers, and it gives the acquired business access to our design library, our technology and our customer base. Star Mangalsutra and Rishabh Gold. Mangalsutra is largely handmade and needs real precision. Through Star Mangalsutra, we already sold mangalsutra to major corporates. Shree Rishabh Gold bought one of the robust mangalsutra manufacturing teams in the country and jewelry conglomerates as their customers. The partnership works both ways. As a casting company, our cast elements and design library let them diversify their mangalsutra range sharply. Their monthly volumes have grown from about 20 to 25 kg to 150 kg. One of the trusted conglomerates alone now takes 70 to 80 kg of mangalsutra, and the relationships have opened doors for our other jewelry categories as well. Together, we are today one of the India's most trusted mangalsutra manufacturers. Purvi Gems uncut diamonds. Uncut diamond jewelry is in strong demand and carries high margins. There are only few Indian manufacturers have the expertise of this product segment. We saw that demand from our customers constantly. Purvi was already supplying to reputed retailers, and its management has around 20 years of experience in this category. With our design strength and wider customer relationship, adding this category was a neutral a natural step. Every acquisition moves us closer to one goal: we have created a perfect ecosystem to make our company as a one-stop shop for all the jewelry requirements. Our design work is now recognized beyond our customers. The World Gold Council selected many of our products for its campaigns, including last year's major push on 24-karat jewelry. Today, when the retailers ask the World Gold Council for certain product lines, Sky Gold is often the preferred name it suggests. With De Beers, we have co-created collections and are giving dedicated space to showcase our products at their exhibitions. Capital efficiency and returns. Everything we have described has been guided by a focus on improving capital efficiency.
Darshan Chauhan (Sky Gold And Diamonds Ltd): returns on capital employed. Our advance gold model is an important part of this strategy. Under this model, customers procure and provide the gold while our revenue reflects the manufacturing work performed by us. This reduces our requirement for capital investment and eliminates the need to hold inventory or manage receivables in respect of the gold supplied by customers. Exports are another important contributor to capital efficiency given their shorter receivable cycles. Our earlier disclosures have noted that export receivable days are much less than domestic receivables. In H1 FY27, exports contributed to 811 crore of our revenues. The increasing contribution from advance gold and exports is expected to moderate the working capital intensity of our business. We are also focused on improving manufacturing efficiency through technology and process improvements. The adoption of direct casting, 3D printing, laser technology, hollow stamping, has enabled us to improve the finish of our jewelry and reduce its weight by approximately 20 to 30%. In addition, our efforts to improve manufacturing efficiency have reduced gold loss significantly. Our co-creation and merchandising capabilities also help improve inventory productivity. By working closely with retailers to develop designs based on consumer preferences, we have helped reduce unsold inventory and improve inventory productivity for our retail partners. Going forward, our focus remains on increasing the contribution of advance gold, exports and higher-margin value-added products, including studded and diamond jewelry. While advance gold and exports support capital efficiency through lower working capital requirements, value-added and diamond jewelry provide opportunities to improve margin and returns on capital. The proof is in the numbers. Roughly 398 crore of equity raised over 8 years now supports an annualized revenue base of 9,000-plus crore. In past, we have said that Sky Gold growth would be funded entirely by internal cash generation. We welcome the scrutiny of our business face on operating cash flow. We had earlier guided for 18,000 crore revenue by FY2030, 945 crore of PAT, 20% to 25% of PAT converted into operating cash flow, and a net debt-free balance sheet by 2030. In Q2 FY27, we exited with an annualized revenue of 9,000 crore-plus and annualized PAT of more than 500 crore. We converted 33% of TTM PAT into operating cash flow. In fact, if we factor in the land sale we guided for earlier, net debt in first half FY27 is down 20% from FY26 level. We have a consistent record of setting clear targets and meeting them. Our original growth road map reflected our confidence in business long-term potential, and quarter after quarter, we have delivered ahead of plan. Most tellingly, we have raised our long-term targets several times while continuing to outperform them. That is a result of rigorous planning and disciplined execution. I know many of you have questions about the fundraise we announced recently. In line with the regulatory guidelines, I'm not being allowed to speak about its specific purpose or the use of proceeds. What I can do is share you how we, as a management team, think about the growth and capital. As a management, we believe we should grow along with our customers and not give up market share. Importantly, our customers are working to consolidate their supplier base. They want to work with fewer, larger, established, well capitalized, professionally run and compliant jewelry manufacturers. It was our customer requirement that gave us the
Darshan Chauhan (Sky Gold And Diamonds Ltd): guidance in 2024 to grow organically and expand our capacity. In the past, our customers have also played an important role in guiding our inorganic growth. Our industry has a number of jewelry manufacturers with strong vintage and strength in certain product categories. Many of them are struggling with working capital, the compliance burden, and succession. Several of our historic acquisitions were guided by customers who believed we are the logical and preferred acquirer of these companies. We have track record of good acquisitions and we have handled post-merger integration well in every acquisition so far. We have a cultural familiarity with the companies we acquire. But we succeed largely because we have a close relationship with the end customer, the jewelry retailers. Let me give you some historic examples of companies we have acquired at attractive valuations and how we have grown their revenue and profit after acquisition. Shree Rishabh Gold Mangalsutra, acquired at less than ₹10 crore, monthly volumes have grown from about 20 to 25 kg to around 150 kg and revenue from 49 crore to 175 crore, with the profit from 1.6 crore to 18.8 crore. We are now one of the India's reputed mangalsutra manufacturer. Purvi Gold, uncut diamonds, acquired at ₹9 crore versus book value of ₹6 crore. We can use Sky's design team and wider customer relationship as well. Following our customer has never let us down. At home, when Kalyan, Senco and P N Gadgil listed and expanded rapidly, we grew with them into every new store. When Shree Rishabh Gold joined us, large conglomerate become our major customer and that relationship is now opening doors for our other categories. Abroad the story is the same. Our export began because Indian large jewelry retailers have asked us to supply to the stores overseas. That gave us credibility in Singapore and Malaysia. Then the confidence to open our Dubai office. And then we added reputed regional players in UAE. Exports have grown from about 35 crore plus a year in FY '23 to roughly 18% of our business today. I repeat, FY '23 as a whole we did 35 crore of exports while in current quarter alone we have achieved 435 crore. This is around 1,600 crore on annualized basis. In each case, we invested ahead of the order because our customers told us where they were going and in each case the returns followed. This is a high-return business model and our quarterly result shows it. Nearly 16% of our volume comes from advance metal which employs no capital of ours. Together with exports, which carries short receivable cycles, this segment make up more than 35% of our volume. In first half FY '27, we delivered an annualized PAT run rate of more than 500 crore. And our net debt is also down versus FY '26 levels. The right test for any growth investment is simple. Does each rupee we invest earn more than its cost of capital? If it does, investing it creates value. Even if free crash flow is lower in the near term, what matters is the spread between ROIC and cost of capital and how long we can sustain it. Consider Walmart. Between 1973 and 1986, the years it was building out its store network, it had negative free cash flow in every one of those 14 years. Yet its ROCE averaged 18%, well about its cost of capital. And its stock returned 33% a year, about three times the S&P 500. Walmart was not burning cash. It was putting every dollar it could to work at high returns while the opportunity was in front of it. We see real parallels with
Darshan Chauhan (Sky Gold And Diamonds Ltd): For, like Walmart then, we are early in structural shift, in our case, from unorganized to organized jewelry manufacturing. Like Walmart, our growth follows a clear demand signal. Our customer are consolidating their suppliers and asking us to grow with them, and like Walmart, we earn returns well above our cost of capital, helped by advance metal, which needs no capital of our, and exports, which pay quickly. So, the real question is not whether cash flow dips while we invest. It is whether every rupee we put to work earns well above its cost of capital and deepens our relationship with customers. Our record says it does. From 2020 to 18 IPO to the 2024 QI, QIP, each round of capital was followed by a step change in scale. A business that can reinvest at this returns should do so. Even if me, if it means giving up some cash flow today, the benefits play out over the long term. Why the cash flow will come? Our fundamentals gives us every reason for confidence. Our founders are in the mid-40s, with the decades of building ahead of them. Our market is expanding as the manufacturing shifts from unorganize, unorganized to organized, and our unit economics are extremely solid. When growth runs in line with returns on capital, a business like ours will generate strong cash flow. We remain focused on one measure above all, earning well above our cost of capital on every rupee we invest. Let me bring it together. We started as a South Indian gold jewelry manufacturer with a small design team and one big ambition. Today, we serve India's reputed retailers in every region, supply the Gulf and the Far East from our own Dubai office, and offer gold, diamond, mangalsutra, and uncut jewelry all under one roof. We got here by investing in design, technology and people, by growing with our customers, and by putting every rupee of capital to work. That discipline is not going to change. As I said at the start, in line with SEBI guidelines, we're no longer give forward guidance, and you will not find it in our presentation. We would rather let our record speak. We set clear targets, we beat them, and we raise them several times over. Thank you. Before we take your questions, Mahendra bhai, the eldest of our brothers, would like to say a few words. Thank you very much.
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