Khazanchi Jewellers Ltd Management Discussions

Industry Overview

India remained among the fastest growing major economies in FY2025-26, with real GDP growth of 7.7%, up from 7.1% in the previous year, supported by resilient domestic demand and steady investment. Private consumption grew 7.7% and gross fixed capital formation rose 8.2%, continuing to support discretionary spending on categories such as gold and jewelery.

Gold prices rose sharply during the year. MCX gold spot prices averaged a record Rs.1.6 lakh per 10 grams in the quarter ended March 2026, exchange of old gold accounted for an estimated 40% to 60% of jewellery transactions across retailers, according to the World Gold Council.

India accounted for 22% of global jewellery demand in the quarter ended March 2026 and remained the worlds second largest jewellery market after China, per World Gold Council data. CRISIL Ratings estimates organised retailers share of Indias jewellery market at a little over a third, with the unorganised sector accounting for the rest. Mandatory BIS hallmarking and a preference for certified, transparent purchases continue to favor established jewellery

Studded and diamond jewellerys is gaining share in India as customers move toward design led pieces, with the World Gold Council estimating this segment at 15% to 20% of the countrys jewellery market. Wedding related purchases continue to pivot overall demand.

The long-term outlook for the Indian gems andjewellery sector remains favorable, supported by increasing formalization, policy support and expanding export opportunities. The sector continues to benefit from 100% FDI under the automatic route, growing investments in organised retail, and favorable trade agreements such as the India-UAE CEPA and India-UK Free Trade Agreement, which are expected to enhance export competitiveness. Additionally omni channel retail strategies and premium jewellery offerings are creating new avenues for growth across both domestic and international markets.

Source: World Gold Council, Gold Demand Trends: India Focus Q1 2026 (29 April 2026); CRISIL Ratings, as reported by Business Standard (May 2024).

Company Overview

The business was founded in 1971 by Mr. Tarachand Mehta and incorporated in 1996, and is rooted in Chennai, one of Indias most important jewellery trading hubs. The Company listed on the BSE SME platform in August 2023 and operates across wholesale (B2B) and retail (B2C), with a range of gold, diamond, and precious stone jewellery, designer pieces.

The Companys product approach is built around lightweight jewellery and continuously updated designs, keeping pace with changing trends rather than relying on traditional heavy pieces alone. It positions itself as a single destination across age groups and occasions.

Across the generations that have built Khazanchi and the generations of customers it has served, one thing has stayed constant: the trust earned through every relationship, which remains the foundation the company builds on today.

Operational Highlights

The Company operates in a single reportable segment under Ind AS 108. In FY26, wholesale contributed 90% of revenue and retail 10%, compared with 95% and 5% in FY25.

Wholesale (B2B)

Wholesale remains the core of the business and serves more than 1,000 clients across India. It is the stable, cash generating base that funds the companys retail and premium expansion. Manufacturing is asset light, with the company working through authorised partner manufacturers who operate to its design and quality standards.

Retail (B2C)

Retails share of revenue doubled from 5% in FY25 to 10% in FY26, following the opening of a 10,000 square foot flagship showroom in Chennai. The showroom brings the companys gold, diamond, antique, temple, Calcutta, and Vajraa collections together under one roof. Retail carries higher making charges and more pricing power than wholesale, which is why growing this channel is central to margin improvement.

Vajraa Diamonds

Vajraa Diamonds takes the company into the diamond and studded segment, which carries higher making charges and is less sensitive to gold prices. It is positioned at a higher average ticket than the companys traditional range. Vajraa is in an early phase and is expected to improve the blended margin over the next few years as it scales.

Brand Ambassador

During the year, the Company appointed film actress Ms. Bhagyashri Borse, who works primarily in Hindi and Telugu cinema. The association is aimed at strengthening brand visibility and supporting the companys retail expansion and the premium positioning of Vajraa Diamonds.

Financial Performance Review Five Year Financial Trajectory

Particulars	FY22	FY23	FY24	FY25	FY26	CAGR
Total Income (Rs. in Crores)	258.00	481.82	821.53	1,772.53	2,051.02	67.91%
EBITDA (Rs. in Crores)	8.53	16.78	41.78	64.93	126.93	96.41%
PAT (Rs. in Crores)	3.27	7.56	27.32	44.96	89.42	128.68%
EPS (Rs.)	3.29	7.62	11.04	18.18	36.10	82.00%
ROCE (%)	7.48%	13.84%	17.11%	21.76%	29.38%	4x

The five year record shows steady, compounding growth: from Rs.258 Crores of total income in FY22 to Rs.2,051 Crores in FY26, an ~8x increase, with EBITDA up ~14x and PAT up ~30x over the period.

FY26 Performance

Particulars	FY25	FY26
Total Income	Rs. 1,772.53 Cr	Rs. 2,051.02 Cr
EBITDA	Rs. 64.93 Cr	Rs. 126.93 Cr
EBITDA Margin	3.66%	6.19%
Profit After Tax	Rs. 44.96 Cr	Rs. 89.42 Cr
PAT Margin	2.54%	4.36%
EPS (Rs.)	18.18	36.10

Total income rose from Rs. 1,772.53 Crores in FY25 to Rs. 2,051.02 Crores in FY26, supported by higher value per transaction, an improved product mix, and growing retail footfall.

EBITDA grew 95.50% to Rs.126.93 Crores, and the EBITDA margin improved by 253 basis points to 6.19%, mainly on operating leverage as costs grew much more slowly than revenue. Tighter cost control and the gradual shift toward retail and studded jewellery also supported the margin.

PAT grew 98.87% to Rs. 89.42 Crores, and EPS roughly doubled to Rs. 36.10. Book value per share rose from Rs. 93.53 to Rs. 129.63, with earnings growth translating cleanly into per share value since the share count has not changed.

Revenue Mix

Particulars	FY24	FY25	FY26
Wholesale share	94%	95%	90%
Retail share	6%	5%	10%
Tamil Nadu share of revenue	84%	71%	75%
Other states share of revenue	16%	29%	25%

Retails share of revenue doubled from 5% to 10% in FY26, the first real shift in the channel mix. The geographic spread is also widening, with states outside Tamil Nadu contributing 25% of revenue in FY26 against 16% in FY24.

Key Financial Ratios

The table below sets out the companys key financial ratios for FY26 against FY25, computed on the basis used in the audited financial statements.

Ratio	FY25	FY26	Reason for change
Current Ratio (x)	4.08	3.03	Current liabilities grew faster than current assets, as current borrowings rose to Rs. 110.40 Cr to fund inventory. The ratio remains comfortable above 3x.
Debt-Equity Ratio (x)	0.28	0.35	Current borrowings rose from Rs. 60.04 Cr to Rs. 110.40 Cr to fund higher inventory, while long term borrowings were fully repaid.
Interest Coverage (x)	17.30	24.58	The improvement in the Interest Coverage Ratio is primarily attributable to the significant growth in EBIT, which exceeded the corresponding increase in finance costs.
Return on Net Worth, ROE (%)	19.43%	32.42%	ROE improved sharply on account of significantly higher total comprehensive income driven by improved margins and operating leverage on a larger revenue base.
Operating Profit Margin, EBITDA (%)	3.66%	6.19%	Operating leverage on a largely fixed cost base, supported by tighter cost control and an improved product mix.
Net Profit Margin (%)	2.54%	4.36%	Net profit margin improved significantly due to higher gross margins arising from favorable gold price movements during the year.
Inventory Turnover (Days)	49.13	63.36	The increase in the inventory holding period is primarily attributable to a substantial increase in gold inventory, resulting from strategic stocking to cater to expected demand and favorable market conditions.
Trade Receivables Turnover (Days)	4.58	3.87	Receivables stayed near Rs. 22 Cr even as the business scaled, improving collection efficiency.
Trade Payables Turnover (Days)	0.73	2.91	Trade payables rose from Rs.5.64 Cr to Rs. 27.35 Cr as the Company availed more supplier credit, extending average payment days.
Cash Conversion Cycle (Days)	52.99	64.31	The cycle lengthened mainly on higher inventory days, partly offset by faster receivables collection and longer payable days.

Outlook

Wholesale remains the stable, cash generating core of the business and continues to fund the companys expansion, while retail and the Vajraa Diamonds brand are the main levers for improving margins through a richer product mix.

Retail contributes around 10% of our business today, and the company is targeting Rs.500 Crores in retail sales much earlier than the expected timeline. This will be supported by opening new showrooms, expanding the Vajraa Diamonds range, and shifting further toward higher margin products.

The Company also plans to launch dedicated platforms for B2B trade and B2C e-commerce, extending both channels from a strong regional presence toward a national one and widening its reach beyond the showroom floor.

SCOT Analysis Strengths

• More than five decades of operating history, with deep industry relationships and established customer trust.

• An extensive jewellery design portfolio and a strong wholesale network across India.

• Strong return ratios, with ROE of 32.42% and ROCE of 29.38% in FY26.

• A growing retail presence anchored by the flagship showroom.

Challenges

• Retail is still a small part of total revenue compared with wholesale, even though it earns better margins.

• The retail footprint is concentrated in South India, limiting brand visibility elsewhere.

• The business is working capital intensive, and debt to equity rose from 0.28x to 0.35x during the year.

Opportunities

• Organised retail currently holds a little over a third of Indias jewellery market as per CRISIL Ratings, leaving room to grow as the shift from unorganised trade continues.

• Studded and diamond jewellery, estimated by the World Gold Council at 15% to 20% of the market, carries higher margins and is gaining share.

• Tier 2 and Tier 3 cities are becoming important centres of organised jewellery demand, offering huge potential for the B2B business.

• Indias large wedding economy provides recurring, relatively resilient demand for high value jewellery.

Threats

• Volatility in gold and precious metal prices affects inventory values and margins.

• National jewellery chains are expanding aggressively in South India.

• Changes in import duty, GST, or hallmarking rules can disrupt cost structures and operations.

• An economic slowdown or sustained inflation could reduce discretionary spending.

Source for opportunities data: World Gold Council, Gold Demand Trends: India Focus Q1 2026 (29 April 2026); CRISIL Ratings, as reported by Business Standard (May 2024).

Risk Management Commodity Price Risk

Gold and precious metals are the largest part of the companys inventory and procurement cost. The Company manages this exposure by planning procurement against demand forecasts, keeping inventory tight, and buying forward opportunistically during price corrections.

Regulatory And Compliance Risk

The sector is subject to evolving rules on hallmarking, GST, import duty, and KYC norms. A dedicated audit team maintains full BIS hallmarking across all products, with GST compliance supported by documented transaction trails.

Competitive Risk

The market is consolidating, and national chains are expanding into South India. The Company competes on design through its large design library, on experience through the flagship showroom, and on premium positioning through Vajraa and its brand ambassador.

Liquidity and Working Capital Risk

The business is working capital intensive because of high gold inventory and seasonal demand. The Company maintains strong banking relationships, runs customer advance schemes, and keeps inventory turning, with interest coverage at 24.58x.

Internal Control Systems And Their Adequacy

• The Company carries out physical stock counts and applies inventory valuation controls, given the sensitivity of gold and precious metal prices.

• Customer credit limits, receivables aging reviews, and revenue recognition checks apply across wholesale and retail sales.

• Financial reporting is governed by segregation of duties, regular bank reconciliations, and GST controls.

• IT systems and digital payments are protected through access controls and security protocols.

The Audit Committee receives regular reports from the internal and statutory auditors and oversees the closure of any control gaps, in line with the Companies Act, 2013 and the SEBI Listing Regulations.

Human Resources

The companys people are central to the quality of its customer experience and to its operations across wholesale and retail. The workforce grew to 86 employees, around two times its size a year earlier, reflecting the pace of the companys retail expansion and the staffing of its new flagship showroom.

Cautionary Statement

The statements in this Management Discussion and Analysis that describe the companys objectives, expectations, or projections are forward looking statements within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied, on account of changes in economic conditions, the regulatory environment, gold prices, competition, and other factors beyond the Companys control. The Company does not undertake to update these statements publicly.