Sky Gold & Diamonds Ltd Management Discussions

1. THE GLOBAL JEWELLERY MARKET

The world jewellery market was valued at roughly USD 242.8 billion in 2025 and is estimated at USD 254.1 billion in 2026. It is projected to grow to about USD 387.4 billion by 2034, a compound annual growth rate (CAGR) of around 5.4% over the forecast period. Growth is being driven by rising disposable incomes worldwide, growing fashion consciousness, and jewellerys dual appeal as both a personal adornment and a store of value - a combination that has kept demand relatively resilient even through periods of economic uncertainty.

Market drivers

Two broad forces are shaping demand. The first is purely economic: rising incomes and a growing base of affluent and aspirational consumers, particularly in Asia, are lifting spending on jewellery as both a fashion item and an investment. Cultural traditions reinforce this in specific markets - the practice of gifting gold to younger family members at weddings and festivals, well established in China and India, continues to anchor a large and comparatively stable share of demand that is less sensitive to short-term price movements than purely discretionary luxury spending. The second driver is participation and access: rising female workforce participation (global female labour-force participation stood at roughly 46.3% in 2021, itself a multi-year high) has expanded the pool of women with independent purchasing power for jewellery, while the continued build-out of digital and social commerce - reality television, influencer culture, and short-form video - has widened the addressable market for fashion-forward and self-purchase jewellery beyond its traditional gifting occasions.

Market trends

Design and manufacturing are also evolving. "Smart jewellery" - pieces that combine a conventional gold or gemstone design with embedded technology such as activity tracking, GPS location and contactless payment - is a small but fast-growing category aimed at younger, tech-comfortable buyers. In the higher end of the market, the shift towards lab-grown diamonds continues, as several global players have begun phasing out mined stones from parts of their range in favour of lab-created alternatives that are more affordable and easier to source sustainably. Retailers are also expanding physical networks even as digital sales grow, reflecting a broadly omnichannel model rather than a simple shift from stores to screens.

What is holding growth back

Two restraining factors recur across markets. Governments have generally tightened import and export duties on jewellery over the past several years, which raises the final price to the consumer and can dampen cross-border trade. Separately, several markets have raised value-added tax (VAT) on jewellery; where retailers have absorbed this cost to protect sales volumes, it has squeezed margins, particularly in the wholesale segment, which typically operates on thin, weight-based margins and is therefore more exposed to both tax increases and rising gold prices at the same time.

Regional picture

Asia Pacific remains the largest and fastest-growing region, worth about USD 95.2 billion in 2025 (roughly 39% of the global market) and projected to reach about USD 99.6 billion in 2026, led by India, China and Japan and by regional brands such as Tanishq, Malabar Gold & Diamonds and Qeelin. Within Asia Pacific, Indias own jewellery market is projected at around USD 31.1 billion in 2026. North America is the second-largest region, at roughly USD 89.2 billion in 2025 and USD 94.1 billion in 2026, underpinned by the worlds largest concentration of high-net-worth individuals - the United States alone accounts for a large share of global mania. Europe, valued at about USD 28.6 billion in 2025, benefits from high per-capita incomes and a comparatively high female employment rate, both of which support discretionary jewellery spending. The Middle East and Africa region, though smaller at around USD 9.8 billion in 2025, is a fast-growing luxury hub, led by the UAE, Qatar, Kuwait and Saudi Arabia - directly relevant to the Companys own new sales office in Dubai and its expanding UAE customer base.

2. THE GLOBAL ECONOMIC BACKDROP

Global growth slowed in FY2025-26 as a conflict in the Middle East, which broke out in the final quarter of calendar 2025 and continued into 2026, kept oil prices elevated and pushed businesses worldwide toward a more cautious stance on investment. The International Monetary Funds April 2026 World Economic Outlook - published under the title "Global Economy in the Shadow of War" - put global growth at around 3.1% for calendar 2026 and 3.2% for 2027, below the roughly 3.4% pace of 2024-25 and well under the pre-pandemic historical average of about 3.7%. Advanced economies are expected to grow more slowly still, at around 1.8% in 2026, while the United States is projected to expand faster, at about 2.4%, supported by fiscal spending.

Emerging market and developing economies, which include India, were projected to grow at around 3.9% in 2026 - revised down from an earlier 4.2% - reflecting their greater sensitivity to swings in energy prices and currency markets during a period of heightened geopolitical risk.

3. THE INDIAN ECONOMY

India remained the fastest-growing large economy in the world through FY2025-26. Real GDP growth accelerated over the course of the year - from 7.8% in the first quarter (April-June 2025) to 8.2% in the second quarter (July-September 2025) - and provisional full-year estimates put growth at around 7.6-7.7% among the strongest showings since FY2021-22. Growth was underpinned by resilient consumer demand, GST and income-tax rationalisation, softer fuel prices for much of the year, and continued government spending on infrastructure. The Reserve Bank of India (RBI) revised its own full-year growth estimate upward more than once during the year, ending at around 7.4%.

On the production side, manufacturing was a particular bright spot, expanding by an estimated 10.7% up from 9.3% the year before, while services such as trade, hotels, transport and communication accelerated to around 11% growth from 6.6% previously. Agriculture grew more modestly, at around 3%, underlining the sectors continued dependence on the monsoon. Headline inflation stayed comfortably within the RBIs target range for most of the year, giving the central bank room to hold interest rates broadly steady and support growth.

The picture changed somewhat in the closing months of the fiscal year. The Middle East conflict that emerged in late February 2026 pushed crude oil above USD 110 a barrel, and the rupee depreciated by more than 11% over the course of FY2025-26, touching record lows against the US dollar as foreign portfolio investors pulled money out of Indian equities - net portfolio outflows for the year were around USD 16.4 billion, against inflows of USD 3.6 billion in FY2024-25. Foreign direct investment, by contrast, held up well, rising to about USD 6.9 billion from just USD 1.0 billion the year before, suggesting the disruption was concentrated in short-term portfolio flows rather than longer-term investment commitments.

Indias external buffers nonetheless remained strong. Foreign exchange reserves stood at about USD 691 billion at end-March 2026, providing import cover of roughly 11 months and covering about 90% of the countrys total external debt - comfortably above the international benchmark of three months cover typically used to judge reserve adequacy. By its August 2026 policy review, the RBI had raised its FY2026-27 growth forecast to around 6.9% while trimming its inflation forecast to about 4.6-5.0%, citing resilient domestic demand, steady investment and improving supply conditions even as global trade uncertainty persisted.

For a B2B gold jewellery manufacturer such as the Company, this combination - strong headline growth, a still-large and youthful consumer base, but a weaker rupee and a more expensive external environment for imported gold - cuts in two directions: it supports underlying jewellery demand at home, while adding to the cost of gold procurement and reinforcing the case for the Companys export diversification and advance-gold sourcing strategies.

4. INDIAS GOLD AND JEWELLERY INDUSTRY

4.1 Market structure

India is one of the largest markets in the world for buying, making and exporting gold and diamond jewellery. Jewellery in India carries a cultural weight well beyond adornment: it is deeply tied to weddings, festivals and family savings, with bridal jewellery alone estimated to account for 50-55% of total gold jewellery demand. The market is typically classified into gold jewellery (plain and studded), diamond and precious-stone jewellery, silver and platinum jewellery, and antique, bridal or designer collections.

A large part of the market - traditional, family-run jewellers - remains unorganised, but the organised segment, made up of brands and listed companies, is both growing faster and gaining share. Industry estimates put the organised segments share of the overall Indian jewellery market at roughly 36-38% in FY2024, rising to about 42-43% by FY2028, as more customers move towards certified, hallmarked jewellery bought from recognised brands and, increasingly, online or through omnichannel formats. This organised-retail shift is structurally important for the Company: as a B2B manufacturer, its own growth is closely tied to the expansion plans of these organised retail chains rather than to unorganised, owner-run jewellery shops.

4.2 Demand in FY2025-26: fewer grams, higher value

Sharply higher gold prices reshaped how Indian consumers bought gold in FY2025-26. Jewellery demand by weight fell by around 26% year-on-year in the first half of the fiscal year, as buyers scaled back on ornamental purchases, while demand for gold coins and bars - bought primarily as an investment rather than to wear - rose by around 15% over the same period, reflecting a shift towards gold as a store of value. Even so, listed

jewellery retailers reported strong revenue growth of 37-51% in the October-December 2025 quarter, as price increases of more than 15% during the quarter more than offset the decline in volumes; plain gold jewellery and gold coin sales in particular saw strong growth, and digital and e-commerce jewellery channels reportedly grew even faster, with some retailers posting online revenue growth of over 100% for the year.

Ahead of the year, the rating agency ICRA had projected the domestic gold jewellery industry to grow 1214% in value terms in FY2025-26, helped by a higher-than-usual number of auspicious wedding dates on the calendar and by a normal monsoon supporting rural demand, which typically contributes a large share of overall gold consumption. ICRA also expected operating margins for organised retailers to improve modestly during the year, helped by scale efficiencies, even as gold metal loan (GML) rates ?€” the cost of financing gold held as working-capital stock ?€” rose somewhat over the year.

4.3 Formalisation: the shift to certified, branded jewellery

More than 2.08 lakh gold jewellers are now registered with the Bureau of Indian Standards (BIS), the body responsible for certifying gold purity in India, supported by around 1,610 approved hallmarking (purity-testing) centres nationwide. This continuing shift towards mandatory, certified purity favours larger, compliance- ready manufacturers and retailers ?€” the same segment the Company both belongs to and supplies ?€” over smaller, informal jewellers who find compliance costs harder to absorb.

4.4 Exports: Indias role as a manufacturing hub

Indias gem and jewellery exports had a mixed but improving FY2025-26. Cumulative exports for the first half of the year reached about USD 14.1 billion, a modest year-on-year rise of around 3.7%, after a weak opening quarter was more than offset by a strong second quarter: exports rose about 24.7% in July 2025, a further 8.1% in August, and an exceptional 61.3% in September, taking overall Q2 FY2025-26 sector growth to around 12.1% year-on-year ?€” described by the Gem & Jewellery Export Promotion Council (GJEPC) as a broad-based recovery across gold, diamond, silver and platinum jewellery and synthetic stones. Studded gold jewellery exports ?€” a category the Company also manufactures ?€” rose about 7.6% to roughly USD 1.6 billion in that quarter, while silver jewellery exports, boosted by a sharp rise in silver prices that made silver a relatively more accessible export category, grew by an exceptional 37.8%.

India has also strengthened its position in diamond jewellery specifically, becoming, by some industry estimates, the worlds second-largest diamond jewellery market with around 12% of global demand, overtaking both China and Japan ?€” a trend directly relevant to the Companys own move into 24-carat diamond jewellery manufacturing during the year, discussed further in Section 6.

5. GOVERNMENT SUPPORT FOR THE INDUSTRY

Several government steps taken during the year directly help gold and jewellery manufacturers like the Company:

?€? Wider hallmarking coverage: BIS extended mandatory hallmarking (compulsory purity testing and marking) to more districts during the year, taking the total to 380 districts by the sixth phase, effective June 2026. More than 60 crore pieces of jewellery have now been hallmarked with a unique ID number since the scheme began.

?€? A renewed push for the Gold Monetisation Scheme: industry bodies gave the government a plan this year to revive this scheme, which lets people deposit idle household gold with banks and earn interest on it, instead of it sitting unused. If revived, this could bring more gold into the formal supply chain and reduce the need to import gold.

?€? Easier exports: the industrys Authorised Economic Operator (AEO) status with the finance ministry continues to speed up customs clearance for exporters and cuts the size of the bank guarantee needed ?€” useful for the Companys growing export business out of its new Dubai office.

?€? Better trade access to the Gulf: the India-UAE trade agreement already gives Indian jewellery preferential access to the UAE, and a new India-Oman trade agreement is expected to open up more of the Gulf market.

?€? New manufacturing infrastructure: the industry, with the Maharashtra government, is building one of Indias largest dedicated jewellery manufacturing parks at Ghansoli, near the Companys own Navi Mumbai base, with room for over 5,000 jewellery-making units.

6. SEGMENT-WISE OPERATIONAL PERFORMANCE

The Company operates a design-led, B2B (business-to-business) manufacturing model, supplying finished jewellery to organised retail chains rather than selling directly to consumers. Its FY2025-26 performance is best read across its main product and channel segments.

Gold jewellery

Plain and studded gold jewellery remains the Companys core segment, sold under long-standing relationships with major retail chains. Within this segment, the Company extended its 9-carat gold range in partnership with Senco Gold ?€” launched on 19 September 2025 ?€” aimed at younger, more value-conscious buyers seeking a lower price point than traditional 22-carat gold, in line with the industry-wide shift towards lighter, more accessible jewellery.

Diamond and studded jewellery

The Company expanded into higher-value diamond jewellery during the year, launching Indias first 24-carat diamond jewellery collection at the GJS exhibition ?€” a first for the domestic market and a direct response to rising Indian and global demand for diamond jewellery. Studded and diamond jewellery typically carries better margins than plain gold, and management has linked part of the years gross-margin improvement to a growing share of this category in the overall product mix.

New categories added through acquisition

Two acquisitions completed during the year added new manufacturing categories. The purchase of Speed Bangle Private Limited (formerly Ganna N Gold Private Limited), completed in mid-August 2025, gave the Company a specialised line in lightweight, Italian-style gold bangles. Separately, the Companys wholly owned subsidiary, Starmangalsutra Private Limited, completed the purchase of a 51% stake in Shri Rishab Gold on 11 December 2025, for about 9.6 crore, adding traditional mangalsutra (a type of gold necklace worn by married women) manufacturing and broadening the Companys customer access within that segment.

Export and international segment

The Company opened its first overseas office, a B2B sales office in Dubai, in early November 2025, as the hub for its Middle East growth strategy. Export sales is routed through the Dubai office 150 crore from first full quarter of operation, and the Company has onboarded new international customers including DAMAS and KANZ in the UAE. Management has guided for exports to rise to around 20% of total sales by FY2029-30, with the UK, Malaysia and Singapore identified as additional growth markets alongside the existing Gulf business.

Manufacturing and quality infrastructure

All segments are supported by the Companys Navi Mumbai manufacturing facility, which combines in-house design and R&D capability with multi-stage quality control, including XRF and Fire Assay purity testing. An upgraded resource planning system introduced during the year has helped reduce gold wastage in the manufacturing process from about 1.5% to about 0.5%.

7. RISKS AND CONCERNS

As a gold jewellery manufacturer operating a working-capital-intensive, B2B business model, the Company is exposed to a number of risks common to its industry, alongside some specific to its own customer base and growth strategy. The table below sets out the principal risks and the Companys approach to managing each one.

Risk	Description	Mitigation
Gold price volatility	Gold prices moved sharply through FY2025-26, driven by the global uncertainty. This raises the cash needed to hold a given quantity of stock and can dampen demand for jewellery by weight, even as value growth continues.	A growing share of "advance gold" business, where the customer funds the gold and the Company earns primarily through making charges rather than exposure to the gold price itself; tighter inventory and receivables management, which cut the working capital cycle.
Customer concentration	The loss of even one large retail partner could have a disproportionate effect on sales.	Onboarding of new large customers, including DAMAS and KANZ in the UAE and GIVA and PMJ Jewels new age jewellery segment in India; growing the export and Dubai-office business so the Company is not solely reliant on a few large customers.

Risk	Description	Mitigation
Working capital and financing cost	Gold procurement is inherently working-capital intensive, and gold metal loan (GML) rates rose during the year, adding to financing costs.	A stated roadmap to be net debt-free by FY2025-30; an asset-light, leased manufacturing model; the February 2026 credit rating upgrade to IND A/Stable, which should support lower borrowing costs; net debt reduced by more than half during the year.
Currency and export market risk	Sales into the Gulf, Southeast Asia, the UK, the US and Australia expose the Company to currency movements, import regulations and demand cycles specific to each destination market.	Diversification across several export markets rather than reliance on one; the Dubai office providing a regional base closer to Gulf demand; ongoing monitoring of trade agreements such as the India-UAE CEPA and the prospective India-Oman CEPA.
Regulatory and compliance risk	Mandatory hallmarking coverage continues to expand, and compliance requirements can change with limited notice.	In-house purity testing (XRF and Fire Assay) and multi-stage quality inspection already aligned with BIS hallmarking standards; ongoing monitoring of new hallmarking phases and other regulatory developments.
Competitive intensity	Existence of large number of B2B jewellery manufacturers.	Significant share of B2B manufacturing remains in the unorganised sector, providing substantial headroom for growth.
Talent and key-person risk	Design-led jewellery manufacturing depends on skilled artisans, designers and technical staff, who remain in short supply across the industry.	The Employee Stock Ownership Plan (ESOP) introduced during the year, giving eligible staff a direct stake in the Company; on-site employee wellness infrastructure; continued investment in training.

8. STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS

Strengths	Weaknesses
\u2022 Long-standing relationships with major retail chains such as Joyalukkas, Malabar and Senco Gold	\u2022 High requirement of working capital due to requirement of funds in receivables.

Opportunities	Threats
\u2022 Continuing shift from unorganised to organised, hallmarked jewellery retail across India

9. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Companys design-led manufacturing model depends on skilled artisans, designers and production staff, and it continued to invest in its people through FY2025-26. Employees at the Navi Mumbai manufacturing facility have access to rest and wellness infrastructure alongside ongoing in-house and external training, aimed at keeping technical skills and product knowledge current as the Companys product range expands into new categories such as diamond jewellery and Italian-style bangles.

The most significant change to the Companys people strategy this year was the launch of its Employee Stock Ownership Plan (ESOP), giving eligible employees actual shares in the Company rather than compensation through salary alone. Management has described the Company as one of the first in its industry to introduce an ESOP, directly tying employee reward to the Companys long-term share-price performance and reinforcing retention in a competitive artisan and design talent market. The Company also strengthened its senior leadership during the year, with the Board elevating Mr. Akash Talsara to Chief Executive Officer as part of a broader move towards more professional, arms-length management as the Company scales.

Industrial relations across the Companys establishments remained harmonious through the year, consistent with the Companys stated objectives of avoiding industrial conflict, maintaining fair working conditions, and reducing labour turnover and absenteeism through skill development and clear channels between management, employees and employee associations.

10. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE RESULTS OF OPERATIONS:

1. Net Revenue from Operations: (In Lacs) Particulars	FY 2025-26	FY 2024-25	Change	% of Change
Revenue from operations	6,29,488.68	3,54,801.96	2,74,686.72	77.42

2. Other Income

(In Lacs)

Particulars	FY 2025-26	FY 2024-25	Change	% of Change
Other Income	3,639.70	3,295.71	343.99	10.44

3. Gross Profit

(In Lacs)

Particulars	FY 2025-26	FY 2024-25	Change	% of Change
Revenue from Operations	6,29,488.68	3,54,801.96	2,74,686.72	77.42
Less: Cost of Consumption	6,10,023.30	3,39,324.26	2,70,699.04	79.78
Changes in Inventory	(33,744.45)	(9,611.38)	(24,133.07)	251.09
Gross Profit	53,209.83	25,089.08	28,120.75	112.08

4. Profit before Tax

(In Lacs)

Particulars	FY 2025-26	FY 2024-25	Change	% of Change
Profit Before Tax	37,906.42	17,421.78	20,484.64	117.58

5. Total Comprehensive Income (After Taxation)

(In Lacs)

Particulars	FY 2025-26	FY 2024-25	Change	% of Change
Total Comprehensive Income (After Taxation)	27,240.30	13,293.05	13,947.25	104.92

KEY FINANCIAL RATIOS

Sr. No	Particulars of Ratio	31.03.2026	31.03.2025
1.	Debtors Turnover Ratio	11.48 Times	13.90 Times
2.	Inventory Turnover Ratio	11 Times	6.02 Times
3.	Interest Coverage Ratio	5.66	5.34 Times
4.	Current Ratio	1.68 Times	1.49 Times
5.	Debt Equity Ratio	0.58 Times	0.78 Times
6.	Operating Profit Margin (%)	7.39%	6.21%
7.	Net Profit Margin (%)	4.52%	3.80%

DETAILS PERTAINING TO NET WORTH OF THE COMPANY

Particulars	31.03.2026	31.03.2025
Net-worth	1,20,588.39	68,379.71

DETAILS OF SIGNIFICANT CHANGES (I.E., CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS. ALONG WITH DETAILED EXPLANATIONS THEREFOR. INCLUDING:

Inventory Turnover Ratio: It has increased primarily due to lower average inventory levels coupled with higher consumption/sales during the year. The increase reflects improved inventory management and faster conversion of inventory into revenue.

Debt Equity Ratio: It has decreased due to repayment of borrowings and/or increase in shareholders equity resulting from retention of profits and strengthening of reserves during the year.

DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other generally accepted accounting principles in India.

During the financial year under review, the Company has followed the accounting treatment prescribed under the applicable Indian Accounting Standards in the preparation of its financial statements. Accordingly, there has been no deviation from the prescribed Accounting Standards requiring disclosure under Regulation 34(3) read with Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

11. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains a system of internal financial controls proportionate to its size and the complexity of its operations, designed to give reasonable assurance that financial records are accurate, that assets are safeguarded, and that fraud or errors are identified and corrected promptly.

Key features

Manufacturing-level quality and purity controls: every piece passes through XRF and Fire Assay purity testing and multiple stages of inspection before leaving the Navi Mumbai facility, supporting both product quality and the accuracy of stock and cost records.

Independent audit oversight: the Board appointed M S K A & Associates LLP, a member firm of the international network BDO, as statutory auditor during the year, and re-appointed Ms. Aasna Shah as Internal Auditor for FY2026-27; management has also indicated plans to bring in a global audit firm from April 2026 for additional oversight.

Systems-driven accuracy: an upgraded ERP (enterprise resource planning) system, tracking production, inventory and finance in one place, has helped reduce gold wastage in manufacturing from about 1.5% to about 0.5% directly improving the reliability of inventory and cost records.

Governance through Board committees: the Audit Committee, with a majority of Independent Directors, oversees the internal audit function, financial reporting process, and the adequacy of internal controls.

Documented processes and authority matrices: major business processes across procurement, manufacturing, sales and finance are supported by defined standard operating procedures and segregation of duties.

As the Company continues its transition to an asset-light, leased-manufacturing model under its "Sky Gold 3.0" strategy, controls around lease accounting, third-party manufacturing oversight and land-monetisation transactions are being correspondingly strengthened.

12. CAUTIONARY STATEMENT

This Management Discussion and Analysis contains forward-looking statements that reflect the Companys current views and expectations with respect to future events and financial performance. These statements are based on certain assumptions and are subject to risks and uncertainties, both known and unknown, which could cause actual results, performance, or achievements to differ materially from those expressed or implied by such forward-looking statements.

Such forward-looking statements involve various assumptions, risks, and uncertainties, including but not limited to changes in market conditions, government regulations, economic developments, geopolitical factors, interest rates, raw material prices, consumer preferences, and other factors beyond the control of the Company.

The Company does not undertake any obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by applicable laws.

Accordingly, these statements should not be regarded as guarantees of future performance, and the actual results may materially differ from those anticipated. Readers are advised to exercise caution and not to place undue reliance on these statements, which should be considered in the context of the prevailing market and economic conditions.