P N Gadgil Jewellers Ltd (NSE: PNGJL) Q2 2025 Earnings Call dated Nov. 13, 2024
Corporate Participants:
Saurabh Gadgil — Chairman and Managing Director
Kiran Firodiya — Executive Director and Chief Financial Officer
Analysts:
Naveen Trivedi — Analyst
Unidentified Participant
Pranav Shrimal — Analyst
Deepak Lalwani — Analyst
Bala Muralikrishnan — Analyst
Vikrant Kashyap — Analyst
Arpit Shah — Analyst
Dinesh Kulkarni — Analyst
Sanjaya Satapathy — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to P N Gadgil Jewellers Q2 FY25 Earnings Conference Call. As a reminder, all participant line will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Naveen Trivedi from Motilal Oswal Financial Services. Thank you and over to you, sir.
Naveen Trivedi — Analyst
Yeah. Hi, good morning, everyone. On behalf of Motilal Oswal, I am Naveen Trivedi, would like to welcome you all to the P N Gadgil Jewellers Q2 FY25 Earnings Conference Call. From the management today, we have Mr. Saurabh Gadgil, Chairman and Managing Director, Mr. Kiran Firodiya, Executive Director and Group CFO. Since it is the first conference call after IPO, I would request management to give some background and introduction about the company and their future plans.
I hand over the call to the management for the opening remarks. Over to you, Saurabh and Kiran.
Saurabh Gadgil — Chairman and Managing Director
Thank you, Naveen, and good morning, everyone. Like Naveen said, it’s our first conference call, so we start with a brief on the company. PNG Jewellers draws its legacy from 1832, from the City of Sangli, that’s where the company started from. In 1958, the company further expanded to the City of Pune, and then from there, it’s been a journey all over Maharashtra. Today, PNG Jewellers is one of the oldest legacy brands in the country, having more than six generations of family members. Today, having more than three generations of Karigars [Phonetics] with them, having more than 30 lakhs, 40 lakhs of dedicated loyal customers.
Along with that, today, PNG Jewellers is, as of September 30th, present in 39 cities in Maharashtra and Goa, out of which 28 are company-owned stores — company-operated stores, and 11 are franchisees, which is a FOCO model. PNG, as of September, had a top-line of around INR3,600 crores, with EBITDA of around INR130 crores and a PAT of around INR70 crores. PNG draws its legacy from a deep understanding of the jewelry market. It’s a unique example of an organized family jeweler, where on one side, it functions like a family jeweler when it comes to customer flexibility, customer orders, being like a family doctor to a jeweler. At the same time, it’s a very strong process-driven, system-driven organization.
We have a lot of highlights when it comes to the peers, which our CFO, Kiran, will touch upon, and we are on a fast road track. Post IPO listing on September 17th, in the month of October, during Navratri, nine days, the company started nine stores, which itself was a big feat, and today, the store tally is at 48 stores. Going ahead, the company has plans to further expand in the state of Maharashtra. The IPO goal was to be the largest player in terms of the number of stores in Maharashtra. Today, we are at number two, and the plan in next year is to be the number one player in Maharashtra, both in terms of number of stores and in terms of the top-line and the business.
So, now I’ll pass the mic over to Kiran to talk a bit on the financials and other USPs compared to the market peers.
Kiran Firodiya — Executive Director and Chief Financial Officer
Good morning, everyone. This is Kiran Firodiya from PNG Jewellers. In continuation with what our Managing Director, Dr. Saurabh Gadgil, just now informed you about the company and whatever we have demonstrated post-IPO, the results are now with us, and we have demonstrated the revenue growth of almost 40% on year-on-year basis, as well as we have demonstrated the EBITDA margin also increment by 41.92%, and that has straightway increased — maintained the PAT also by 59.28%. At the same time, there is an improvement in the cost of goods sold, that is also by 0.5%. We have improvised as compared to last H1. This is the same strategy what we have committed to all our investors during our roadshow and IPO journey. That is what exactly we have demonstrated.
As far as object laws of our IPO is concerned, we are keen on utilizing the funds for expansion purpose, as there is no investor that time also, and today, the end utilization of funds, we have committed to open nine stores by March ’25, which I think Dr. Saurabh just now mentioned that we have delivered in less than 30 days. At the same time, we have discussed also that we will restructure the bank borrowing so that there will be reduction in the finance cost. So we have successfully completed our IPO on 17th of September, and that is hardly just two weeks closer to the Q2. But having said that, we have utilized the funds to swap the existing bank facility.
Now restructuring will be in the pipeline and that definitely we will update to you once that has been restored. So, there are the object laws, the status of the object laws is that we have opened the ninth store that is the commitment for March ’25, and utilization of the funds for restructuring of the bank borrowing that entire debt has been reduced drastically and restructuring is in the pipeline. So, this is with respect to the commitment which we are giving at the time of IPO as well as the current financial status.
Saurabh Gadgil — Chairman and Managing Director
And gentlemen, just to continue ahead, when it comes to revenue per store, when it comes to revenue per square feet, we have the best performance in the industry. Our revenue per square feet is upward of INR6 lakh per square feet. Our revenue per store is upward of INR95 crores for the half year ended September. Our ROCE, ROE both are attractive. Our growth for the last three year-four years combined CAGR has been upward of 40%. When it comes to employees, when it comes to longevity, we see a very low labor turnover. Our company is known for its strong bonding along with its customers, with its karigars, and also with its employees.
We have one of a unique model where almost 50% of our entire sales come from made-to-order business and this helps us to work with lean capital as compared to the competition. So, my store investment in capex and opex is almost 40%, 45% lower than compared to the market and this gives us higher stock turns than the industry. Our stock turns today would be upward of five on a company level, and along with this is a strong understanding of the jewelry market, being in the market for almost 20 decades, understanding customer collections, understanding customer needs is what the company takes pride in.
We have — Madhuri Dixit has been the brand ambassador for the brand for the last 10 plus years and it’s a very successful association. I can also proudly say that the company enjoys a very strong footfall to conversion ratio. Out of 100 footfalls, more than 93% are converted into actual customers, so this gives us a very high conversion ratio and does enable us to work with medium-sized stores as compared to competition. And these medium-sized stores give us an edge when it comes to operating costs and when it comes to having a high turnover of stocks. So, the company is today professionally managed.
Our CFO, Mr. Kiran Firodiya, has been a veteran for more than 25 years in the industry. Along with this, our purchase team, sales team, HR, marketing, e-com, all are professionals, each with the company for almost 10 years, and cumulatively have experience of more than 20 years-25 years individually. So, it’s a very strong professional management team. We are a great place to work for the last three years in a row. We are a great place to work in the retail category Pan India. We are in the top 10 for the last year.
So, the company is focused on growth. The company is focused on delivering its results, focused on efficiency, and the IPO has helped the company to reach a different platform with more resources and a bigger playing field to further fuel its dream and achieve further growth. Thank you, Naveen.
Questions and Answers:
Operator
Sir, we will start the question-and-answer session.
Saurabh Gadgil
Sure.
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Semanto [Phonetics] from HS Securities. Please go ahead.
Unidentified Participant
Yeah. Hi, sir. Thanks for providing the opportunity. So, basically, on the cut of the custom duty, what is the impact of that in our inventory?
Kiran Firodiya
Yeah, thank you for the question. This is Kiran Firodiya. The custom duty impact, which has been on the 22nd of July, the Government of India has decided to cut down the duty, and basis of that and the impact of the reduction in the custom duty is INR18.5 crores reduction in the profit.
Unidentified Participant
Okay. So, is this only for this quarter or will it be carried in the next quarter also?
Kiran Firodiya
No, no. This has been done in the same quarter only, that is in Q2. At the same time, we have done the replenishment model aggressively, but if you say the cumulative effect, then there will be only INR3.31 crores is the net impact, but purely if you are asking me what is exactly the impact of custom duty on reduction of the duty, then it is INR18.55 crores.
Unidentified Participant
Okay. And as you said, are we planning to expand outside Maharashtra also or like we are looking for the market leader in Maharashtra, and then we are looking for expansion plan?
Saurabh Gadgil
Yeah, this is Saurabh. So, to answer your question, the first phase is to be the leader in Maharashtra. So, we are close to that. We had said that we want to be around a 55-store to 60-store company in Maharashtra. Today, as we speak, we are a 48-store company. We will be adding another five stores to six stores in Q3 and Q4, so that way that will take the tariff to close to 55. And then in the financial FY25-FY26, we will be further adding another 10 more stores in Maharashtra. And post that, we will be looking at expanding in the neighbouring state. As we have mentioned time and again that we would want to follow the Peshwa route, and by that, I mean, post-Maharashtra, we will be looking at Madhya Pradesh, Chhattisgarh, Bihar, UP as the state will further expand.
Unidentified Participant
Okay. And what was the stud [Phonetics] ratio for this quarter?
Saurabh Gadgil
So the stud ratio for the quarter was around 11%.
Unidentified Participant
Okay. And what we are targeting for the whole FY25?
Saurabh Gadgil
So, I think FY25 we will be at, I think, around 11% only, because there has been a diamond, and our study as a category was new to PNG, started only around six years back, which has shown very good growth. So, I think we are targeting in the next two years to reach the target of 15% for studded.
Unidentified Participant
Okay. Thank you. I will get back in the queue.
Operator
Thank you. The next question is from the line of Pranav from PINC Wealth Advisors. Please go ahead.
Pranav Shrimal
Hello.
Operator
Yes, sir, your audible.
Pranav Shrimal
Yeah. My question is, sir, in the press release, you have given branch-wise profitability, so what is that branch-wise, basically?
Kiran Firodiya
So, basically, as a company, we have by 30th September, we have 39 stores, and we have — as a policy, we are keeping track on per branch. So, we are keeping track of, so there will be allocation of expenses properly, cost center-wise, so each store is a profit center. So, we are allocating cost as per the branch and we are keeping track on that. So, basis on that, we are coming with the branch-wise profitability. With respect to overhead, their basis on revenue, their basis on the inventory, their basis on the manpower, so accordingly that revenue will split up. So we are coming up with that, and then the figure comes to branch-wise profitability.
Pranav Shrimal
So, is it similar to revenue per profit — sorry, per-store profit?
Kiran Firodiya
No, no. That is, categorically, we are doing it per-store-wise, and when we are talking about, in general, then whatever is my total profit, that we straightaway utilize my number of stores as a denominator to arrive at the per-store profitability.
Pranav Shrimal
Okay. And, sir, the revenue per store, which we have seen uptake in the H1 FY25, since we have opened nine new stores, so do we see that further, this revenue per-store, we are going to see an uptick?
Kiran Firodiya
See, to be honest with you, the same thing we also elaborate in our IPO roadshow also, whenever we are opening a new store, there is a timeline which requires to achieve to a particular inventory level. So, first target when we open a new store is to reach to breakeven, and as far as our historical data, which is successfully demonstrated for quite a few stores, we arrive at minimum 15 months to 18 months required for each store to reach at breakeven, and then post that, that particular store started contributing to the net profit kitty.
So, as far as new stores, which we have opened in Q3, because these stores open post-September. So, these stores will be definitely profitable in a year’s time, because we have opened it before Diwali. So, again, there is a [Indecipherable] in that. If we open the store before the main festival, then chances are high that we can reach to breakeven in 12 months to 15 months also.
Pranav Shrimal
And, sir, any update like how has been the response, is it as per your expectation?
Saurabh Gadgil
The response for the store has been as per expectation. Like we had said before, the stores are in Maharashtra. The stores are followed by a very diligent way of doing a market survey, doing exhibition in those cities, and then opening stores. So, the response has been good, and being the festive season, being in the prime of the entire Dussehra, Diwali period, the stores have shown very good performance, and we are happy with the way each store has picked up right from the inception.
Pranav Shrimal
And, sir, we are seeing some correction in gold prices, so if this trend continues, let’s say, for one quarter, so are we going to see an inventory hit, like inventory loss in our books for the next quarter?
Saurabh Gadgil
See, to answer that, post IPO, we had said that we will be reducing the funds, loans, and convert non-fund-based limits to use for gold metal loan, so that is being done aggressively and we should be looking at hedging to a good extent in Q3. And along with our stock terms, which help us to plan our replacement very effectively, I don’t see much impact, even if prices go down. And the other effect would be that if prices remain a little soft for this quarter, considering the number of weddings which are happening in the country, this should give a big boost to consumption, and we could further enhance the top-line and the sales. So, all in all, I think it would be a positive impact if prices remain low.
Pranav Shrimal
Okay. Thank you, sir.
Saurabh Gadgil
Thank you.
Operator
Thank you. The next question is from the line of Deepak Lalwani from Unifi Capital. Please go ahead.
Deepak Lalwani
Hi, sir. Thank you for the opportunity. So, my first question is on the festive demand. Can you just give a flavor of how the festive demand panned out for us and, yes, and on the industry in general?
Saurabh Gadgil
So, the festive demand has been good for us, considering that we have opened more stores and we are visible along with our new two collections we had launched with Madhuri Dixit, the diamond collection ENA and the gold collection Saptam, so the demand was strong. In terms of volumes, we would have grown around 7% to 8% over last Diwali, but in value we are up around 35% to 40%. Bullion had been strong continuously in the entire period where it was seen to be primarily investment demand and the impact of Gold-Sovereign bond being discontinued. Natural diamonds have remained strong and there has been no impact of natural diamonds on the sale, which has seen a steady growth over last Diwali. All in all, if you look at its value-wise, we have seen a good Diwali and most of the — almost all the stores have shown good performance. So, I think overall it’s been a good festive season.
Deepak Lalwani
Sure. That is good to hear. Sir, this 35% value growth, does it include the new stores, or the existing stores itself did 35% growth?
Saurabh Gadgil
So, if you consider new stores, the growth would be higher, what we are talking right now is Apple-to-Apple, so talking of the 39 to 38 stores, before the opening of nine stores. So, the value growth is in Apple-to-Apple comparison.
Deepak Lalwani
That’s great to hear. And the new store economics, can you just share the revenue per store that we do on a steady state basis and how much are we at today for the new store?
Kiran Firodiya
So, new store, we are targeting to achieve 1.5 stock turn and that we are targeting to reach by first quarter of ’26.
Deepak Lalwani
Okay. Sir, in revenue terms, what would that mean, 1.5 stock turns?
Kiran Firodiya
So, typically it will reach to around INR60 crores, INR65 crores.
Deepak Lalwani
Okay.
Kiran Firodiya
Because when we are opening new store, that time we are putting the inventory of around INR30 crores to INR33 crores, which — with considering the costing aspect, then it will reach in the range of around INR50 crores to INR60 crores.
Deepak Lalwani
Okay. Sure.
Saurabh Gadgil
[Speech Overlap] inventory level at our stores is a little lower than the competition, so that’s why we work with a lesser — with more linear inventory level, because almost one-third of my business comes from made-to-order business, which is completely customer-advanced based, and I don’t need to have inventory for that. So, that’s why at our store, when they mature, we reach around a 4 stock turn to 4.5 stock turn. But here, when we’re looking at 1.5 stock turn, so that will be around INR60 crores, INR65 crores of top-line.
Deepak Lalwani
Okay. And as they mature, what would be the revenue per store that we should pencil in?
Saurabh Gadgil
So, I think around INR120 crores to INR130 crores should be where we should be looking at when the store matures.
Deepak Lalwani
Got it, sir. And sir, on the opex run rate, today we are at an INR80 crore run rate, INR27 crores employee and other expenses of INR54 crores, since we have opened these new stores, our run rate will likely go up, so if you can indicate what should one be budgeting in for this?
Kiran Firodiya
Yeah, I agree with you, because the moment we open the new store, then there will definitely be increment in the salary cost, increment in the other expenses, as well as increment in the marketing cost. But having said that, we are keeping the same momentum and that is what we have demonstrated in our entire business plan also, that these stores will require minimum 1.5 Saptam [Phonetics] to come at the breakeven. So, our main target after opening these stores is to reach to a breakeven so that cost can be compensated.
Deepak Lalwani
Okay. Got it. Okay. And sir, on the restructuring of that part, what is exactly pending? You said that you had a pipeline, so what is exactly pending and by when should that be completed? And after we do this, what should be the hedging percentage that the company will sort of continue with?
Kiran Firodiya
Yeah. So that is really a good question. So, in terms of restructuring, first is that we repay the entire term loan and working capital and we have break the consortium, because pre-IPO, we are working in a consortium model, wherein the State Bank is the leader in the consortium, now the consortium has break, we have repaid the entire amount. Now, the status is that we are really tied up in opening nine stores and Diwali festival being the primary festival of our industry, so we are concentrating on that festival. At the same time, we are in talking terms with all the existing bankers to release our security, so that they have completely released the charge also. So, that modification charge is already in the pipeline. And we are hoping that by this Q3, all the banking activities can be restored, and we are definitely going ahead with the GML facility activated. So, right now, if you are asking me, as on, say, mid of the November, we are hedging through GML around 20%-25%.
Deepak Lalwani
Okay. So we have INR1,500 crores of inventory, out of that 25% order is through GML, correct? Is that understanding correct?
Kiran Firodiya
No, no. Actually, now — after festival, the inventory per store has been reduced because these are my festival inventory. So post-festival, the inventory right now is at the — to the tune of INR1,200 crores, out of which we are utilizing GML for around 20%, 25%. And aggressively, we are doing the replenishment of the gold bullion that is to the tune of 30%. So, that is also considering under the hedge. But considering that replenishment as well as hedge, then we are definitely in the range of 50% to 55%.
Deepak Lalwani
Understood. Got it. And sir, do we follow any hedging mechanism on the MCX, through the MCX route also that we hedge through forward contracts?
Kiran Firodiya
Yeah, we have, but that is not aggressively because considering the premium and considering the amount that is required for the particular purpose, we are right now not activated that aggressively because we are genuinely looking for GML. Because these — by going with the GML, then there are two benefits. One is that we can always take the benefit of hedging, and at the same time, we can save the finance cost also, so that is our primary focus that we will increase our GML portion first. And then in case required, we are going ahead with MCX. That portion we have already activated, but not that aggressively as we are looking for GML.
Deepak Lalwani
Sure. Understood. And sir, my last question is, on your store expansion strategy, if you can break up the 48 stores today that we have into own stores and franchisee stores and going forward, in which format will we add stores and how many stores will we add?
Saurabh Gadgil
So, out of the 48 stores, 11 are franchisees. By franchise I mean company-operated and the rest all are company-owned stores. And in the Phase One, when you are going to be the leader in Maharashtra, all the other coming stores ahead, so another five stores in Q3, Q4 of this financial year and 10 stores in the next financial year would be all company-owned, company-operated. This is the area of focus.
Along the way, we may add two, three franchises in smaller towns if a good opportunity comes up, but that will not be the focus area. So, we are looking at being around a 65-store company by the end of next financial year, being the number one player in Maharashtra in terms of number of stores, and post that, the journey will move to the neighbouring states.
Deepak Lalwani
Understood. And sir, one question for Kiran sir. We had a higher other income in this quarter, so, any one-off in that number?
Kiran Firodiya
Yeah. So now — that is also a good question because we have received the income tax refund from tax authorities, so that refund has an interest portion. So, that portion is around INR3.8 crores, so that is the reason that other income has shot up.
Operator
Mr. Deepak, does that answer your question?
Deepak Lalwani
Yes, ma’am, thank you.
Operator
Thank you. The next question is from the line of Bala Muralikrishnan from Oman Investments Advisor. Please go ahead.
Bala Muralikrishnan
Hi, good morning. So, regarding the margins, everything is good. The return is good, and we have very good cash store sales. So the margins are very low as compared to the competitors, so when we can expect the margins to reach the competitor levels and what are the actions we are planning to reach that level?
Kiran Firodiya
Yeah. So, typically, we are working in a retail and non-retail model wherein our focus going forward is to increase the retail portion, wherein currently we are having almost 12% as a gross margin, but when we compare retail and non-retail, then the margin slightly goes down. But when we are focusing on retail margin improvement, you will definitely going to see next two quarters, that is Q3 and Q4, definitely there will be improvement in the margin, and we are in line with the competitors.
Bala Muralikrishnan
Okay. So we can expect a 7% kind of margin.
Kiran Firodiya
So, typically, we are planning to reach 10% to 12% gross margin in the next two quarters to three quarters.
Bala Muralikrishnan
Okay. And regarding hedging, what is the current percentage of hedging we have and what could be the — after making these changes and bullion and this gold from the bank, we are going to borrow, so after that what could be the hedging percentage?
Kiran Firodiya
Yeah. So, currently, we are doing hedging through GML is around 20% and through replenishment model around 30%, so that is around 50% to 55% we are currently doing. Our target is to reach around 70% by March ’25, because as we just now informed you that we are in the restructuring with the banker. So, hopefully, these restructuring will complete by Q3 and it’s real benefit you can able to see in Q4.
Bala Muralikrishnan
Okay. And this is a follow-up on that. So, in some media interaction told that we are going to get some inventory gains because of the hike in the gold, but this has not reflected in even Q1 or Q2 numbers, so — and as asked by the previous participant, if the hedging is 50%, so definitely we are going to take some inventory loss in the next one or two quarters if there is correction in the [Speech Overlap] why there is not inventory gains?
Kiran Firodiya
No, no, that is what. So I am coming to that since we are not hedged, our — right now we are not able to book the profit of almost INR19 crores because the inventory which we are carrying in the books is at the rate of INR7,700, but as compared to the mark-to-margin, it is INR7,850. So, we are following the average inventory model wherein cost or market price whichever is lower. If I am going ahead with the 100% hedging, then definitely my profit will be high and INR18.95 crores is the profit that I have parked for next quarter. So, if I have done the 100% hedging, then you will see the gross margin also affected that way. But since we have not hedged fully only 50%, so INR18.95 crores, which is for Q2, that we are able to see the profit jump in Q3.
Bala Muralikrishnan
So — but my question is that whatever the gold purchased in maybe Q1 mid or before Q2 at the lower price, maybe you would have sold at a higher price, so there should be some gains. If you are hedging 100%, maybe there will be marginal gains, but if you are hedging 50%, that is what was told in the media interaction also. So we are going to see very huge inventory gains in the coming quarters. So, if you are hedging very less percentage, then it is the case. So we will see the inventory gains. But even though if you are hedging 50% only, we are not able to see any inventory gains. So, this going forward [Speech Overlap]
Kiran Firodiya
Yeah. So, this quarter, which is Q2, there is no hedging gain for us, means if you are saying that in your profit, what is the amount that is lying on account of hedging, so there is no hedging gain, which we have observed in the Q2. In fact, we have shown the gross profit at actual. If we go ahead with the hedging, then there will be nullifying effect, but that effect of gain is all around INR19 crores, which definitely going to see in Q3.
Bala Muralikrishnan
I am asking about inventory gain. There is no inventory gain.
Kiran Firodiya
I am giving the answer for inventory gain only. Okay. Okay, fine. And regarding this store opening, you listed around September 17 and the store opening started in October 2, so we have consumed around INR280 crores of the store openings as per the capex. So, I think a company would have already invested this amount before listing for store opening, because it is not feasible to open that many stores in those 15 days, 20 days period. So, if they are already invested, then what is the purpose of utilizing these capex again for the same stores? Yeah, you are right. So, whatever — so at the time of IPO and during the roadshow also, we have clearly demonstrated, we have leave and license, we have all the agreements in place, we have identified the place, we have already signed up the LOI with the landlord, so everything is in pipeline. We are only waiting for the IPO to complete and so that that fund can be utilized to infuse the inventory. So, the things are very well planned in advance. It is almost three months exercise to rigorously follow up everything. And for particularly each store, we are utilizing around INR1.3 crores to INR1.5 crores as a capex. So, most of the capex initially like advance to landlord for three months to four months rental. So these things we have already taken before the IPO, when we got the NOD from SEBI and this stock exchanges.
Bala Muralikrishnan
Okay, understood. Lastly, on this Q1 number. So, most of the competitors have posted good growth in the top-line and bottom-line, but ours is not the case, we have a decline in the bottom-line, so what is the reason for this one and what is the reason for the margin stop in the Q1? We have not conducted any call after Q1 release, but even though a lot of companies who came to IPO at your time, after releasing the Q1 results, they have conducted a conference call. So [Speech Overlap]
Kiran Firodiya
Yes, that is really a good question. So, to be honest with you, as we discussed in the initial — one of the questions — answer to one of the questions, that we have completed the IPO on 17th of September, so there is hardly two weeks to complete the quarter. Even though after completing the IPO, we are utilizing, and our keen interest is to focus on the object clause. Immediately, we cannot expect that margin will be improved overnight or kind of thing. There is some exercise which we need to do. That plan has already been established, signed off by the management and that is now in the deployment stage.
At the same time, as I mentioned that due to reduction in the custom duty, we have seen the dip in the margin as compared to other peers, that is to the tune of INR17.5 crores. So, these are the main reasons wherein we saw some slight negative returns in terms of as compared to Q1 versus Q2. But definitely, sale is continuously happening because there is other side to the reduction in the custom duty that our sale has increased by 20%, 25% after 22nd of July. So, when we see at the one side, there is reduction in the gold prices, on the other side, we also observe that there is increment in the 20%, 25% sale as well. I think Saurabh also wants to add something.
Bala Muralikrishnan
My question is regarding the Q1 numbers from the Q4 of the last year. So, there is some marginal improvement in the top-line, but the bottom line declined significantly, so what led to this?
Kiran Firodiya
No, I think our margins are intact. Mean, if you are talking about March ’24 or even talking about Q1, then our margins and our top-line, bottom-line is intact.
Bala Muralikrishnan
No, the bottom line in March ’24, it is INR55 crores and when it comes to June ’24, it is INR35 crores, so the margins are [Technical Issues]
Kiran Firodiya
Yeah. So, typically, this March ’24 figure is a consolidation of 12-month figure, it is not only for one quarter. So, definitely, when we are in the beginning of the first quarter, in our industry, you will observe that, first quarter and third quarter is really well. But in terms of first quarter, the Gudi Padwa and Akshaya Tritiya happens in the beginning. On first week of April, we are facing Gudi Padwa, and on 11th of May, we are observing this Akshaya Tritiya.
Post that, there is totally 45 days silent period, and during that period, we are also focusing more on IPO activity, roadshows. Our more focus is on to complete the compliance part. So, I totally agree that focus on business is rather than we are also doing some LOI activity, further expansion plan, so these are the things in the pipeline. But I will ensure you that next two quarters, you will definitely see a sharp increment in the bottom-line.
Bala Muralikrishnan
Yeah, sure. Thanks a lot. All the best.
Operator
Thank you. The next question is from the line of Vikrant Kashyap from Asian Market Securities. Please go ahead.
Vikrant Kashyap
Good afternoon and congratulations on good numbers. First, could you please highlight what is your goal sourcing mix? How much [Indecipherable] 20%, 25% is currently GML and what does the risk proportion come from, bullion dealers, et cetera? Where do you source gold from?
Kiran Firodiya
Yes, so good morning. So, right now, we are going ahead with almost 20%, 22% through GML, and that GML facilities predominantly we are able to utilize the IPO proceeding for getting the GML. At the same time, this proportion is definitely going to increase and reach to 50% to 55%, which is currently 20%, once we seal the bank restructuring. So, there will be definitely increment in the hedging portion. And the other portion is that with respect to sourcing, currently we are procuring gold from banks as well as IIBX and also we have few vendors who are KYC compliant and with whom we have a very strict agreement in place as a bullion supplier. But first priority is to buy the metal through GML way and the second is by way of IIBX that is in the GIFT City.
Vikrant Kashyap
So, can you please give me the mix right now? What is the current mix in the last quarter?
Kiran Firodiya
Mix in terms of what, you are talking about [Speech Overlap] gold, silver, and diamond?
Vikrant Kashyap
I am just talking about gold sourcing. So 20% is from GML. There will be some portion from IIBX, some from banks, some from bullion dealers, so how is the mix? I am just trying to understand. What is the ratio?
Kiran Firodiya
So, you can say that typically 50% to 60% we are buying spot by paying the upfront amount because there is a very heavy demand for us to open the nine stores, so inventory has to infuse in less than 20 days to 25 days. So 50% to 60% of our entire gold procured spot from the vendor, remaining we are almost, 10% to 15%, we are procuring from…
Saurabh Gadgil
To answer your question, you are saying the mix of the entire gold, so like Kiran mentioned, 25% is GML, around 30% is old gold which we receive, which we recycle, and the balance 45% is what we purchase from the open market. Now, this is from bullion dealers spread across Mumbai, Ahmedabad, or through GIFT City, IIBX.
Vikrant Kashyap
Okay. So when you were talking about hedging, inventory gain, and losses, so 45% of the inventory is on direct risk of market movement in gold prices. So in the last quarter [Speech Overlap] so in the last quarter, we must have gained in terms of inventory, but looking at the gold prices and their volatility, if you are not hedging up to the mark, so you are in a big risk when the prices fall.
Saurabh Gadgil
No, no, we have also mentioned this pre-IPO that we will be hedging, we will be moving to the industry’s handover [Phonetics] of 75% to 80%, and like our CFO mentioned that currently the non-fund-based limits with banks are being processed, so the GML portion, which is currently at 20% to 25%, will move to — close to 50%, and then 30% would be my mix of old gold. So that will ensure that we will be around 75% to 80% hedge and in tune with the market. So, this will happen in Q3.
Vikrant Kashyap
Okay. And could you also give me the numbers of volume growth in the last quarter? You mentioned 7%, 8% of the volume growth during Deepavali and what was the volume growth in the last quarter for gold in kgs and for diamond in carats?
Kiran Firodiya
Yeah. So, if you are asking me only with respect to Q2, then Q2 as compared to last year Q2, that last year we have 1,142 kg against which current Q2 is 1,360 kg, so that is 19.12% growth we are observing only gold. Silver is almost stable. That is, last year we have done [Technical Issues] the term is around 10,500 kg and that is more or less stable this quarter also. In terms of diamond, last year Q2, we have done 3,400 carats and this year we have done 4,400 carats. So, overall, there is improvement of 11% only with respect to Q2.
Vikrant Kashyap
Okay. That is really good to see. Most of the competitors have not grown in volume terms and it is good to see that our company is growing. And also…
Saurabh Gadgil
Our operations are more seem to — we are focusing on a state, going deeper in that state and that is why we have seen our merchandising very strong, market understanding is strong, and that is why we have been able to grow consistently year-over-year.
Vikrant Kashyap
And in terms of gold making, so you have your own Karigars, and do you also outsource to other large players [Speech Overlap]?
Saurabh Gadgil
Yeah, it is a mixture of both. So, we have in-house and contract-minded Karigars and also we work with almost all the major manufacturers right from the industry players like Sky Gold, to players in Calcutta, to players in Jaipur, depending on the merchandise and depending on the need.
Vikrant Kashyap
Okay. Sort of one question on competition. So, everyone has highlighted that there has been rising competition and there has been offering on discounts on making charges even with gold exchanges, so do you see this is a risk going forward as you are opening new stores every year to attain the ratio — the run rate that you are selling? So how will competition play into your planning?
Saurabh Gadgil
See, we look at ourselves — we benchmark upon what we have been doing in the past, we benchmark on it, we try to understand what the market is and how uniquely we can position ourselves. So our entire premise is trust, our entire premise is transparency, honesty, and we have — the company never focused on discounts or we are not a discounted company, and even going ahead we will be focusing on the same. So we are rightly priced, we have fair value, and we ensure that we are with customers for decades and that has been our USP. So, discounting will never be a focus area for us.
Vikrant Kashyap
Okay. And one question, after seeing the sharp rising gold prices, have you seen a rising demand for 18 carat gold compared to 22 carats? Do you see that there is [Speech Overlap]
Saurabh Gadgil
18-carat gold is already there in the diamond jewelry category, which is accepted in Pan India. [Speech Overlap] When it comes to gold jewelry, these are early days still, people are toying with it, people are experimenting, but it is not mainstream. Time will say whether it will be accepted and whether it will be used, but as of now it is still 22 carat, which is being bought and sold.
Vikrant Kashyap
Okay. And our last question is with regard to lab-grown diamonds. So, in the western and northern parts we are hearing a lot of buzz about LGD, and everyone is looking at it very aggressively, so do you have any plans to foray into lab-grown diamonds to your own store, maybe different formats or you are happy with diamond standard gold jewelry only?
Saurabh Gadgil
We track the market. We always keep a tap on demand from our consumers, and as of now, there isn’t any net demand for us to start lab-grown diamonds or go in that category. We are seeing growth in the natural diamond space, and we are happy with that. Our customers are happy with that. So the company as of now has no plans to enter that space, but like they say, never say never. If the market demands for that and if our consumers are demanding for that, the company can explore the options.
Vikrant Kashyap
Okay. Thank you, Saurabh. And last question on your customer base. So, you have a very strong loyal customer base, can you show some numbers on how have they moved in the last two years to three years?
Saurabh Gadgil
So, the customer base has been growing. We track the customer base very minutely. We have a very strong loyalty program and more than 2.53 million customers, who are active customers in the program, so we are in constant touch with them, and we categorize them as per their shopping pattern, as per their longevity. So it’s a program which we really work actively on.
And like I mentioned before also that, we believe in a lot of one-on-one communication with the customer, being in real-time touch with them, and all our branches, all our people are really employed to undertake a lot of these detailed activities to ensure that the consumer outreach is properly done.
Vikrant Kashyap
Okay. Thank you for answering my question. Wish you very best of luck, Saurabh and Kiran. And I have more questions and I would like to connect with you later. Thank you very much.
Saurabh Gadgil
Sure, sir. Thank you.
Operator
Thank you. The next question is from the line of Arpit Shah from Stallion Asset. Please go ahead.
Arpit Shah
Hello.
Operator
Yes, sir, you are audible.
Arpit Shah
I have a couple of questions regarding the business. I just wanted to know what is the difference between the retail and the non-retail side of our revenues? Because in this quarter, I think we have put about INR2,000 crores of revenue and the retail sales have been around INR1,200 and INR1,250 crores, so what is the difference on that? What is the non-retail side of the business?
Kiran Firodiya
Yeah, so that is really a good question because we are considering retail means the business we have carried out across my stores and non-retail means my e-commerce franchisee, then my refinery sale. So these are my sales which is not happening across the store. These we are considering non-retail. And this portion we are going forward, trying to reduce and we have more focusing on retail stores only.
Arpit Shah
Got it. So, refinery, you mean bullion sales, is that the one?
Kiran Firodiya
Yeah, yeah. That is the old gold which we received from the customer that we have to recycle, and we have to get a pure gold in the format, so that is the way we are doing it a refinery sale.
Arpit Shah
Got it. And if you can just split out the store economics, so let’s say, for FOCO and COCO, so what kind of store economics do we have and what kind of store sizes, what kind of sales per store, inventory per store, how the unit economics look like and what is the ROC per store, if you can give out between COCO and FOCO?
Kiran Firodiya
So, start with this FOCO store because typically we are planning to infuse around INR30 crores to INR32 crores of the inventory and INR1.5 crores to INR1.75 crores is the investment that we are doing in terms of capex. When we open the new store, that company store, that store size is around 3,500 to 4,000 square feet and the initial focus is on to reach breakeven because 1.5 stock turn [Phonetics] is required to reach to a breakeven for newly open stores. So, our focus is when we open a company-owned store is to reach to a breakeven. Now, there are two ways to look at it.
If we are able to open the store before our main festival like Navratri and Diwali, then we have observed based on our historical data around 12 months to 15 months required to reach to a breakeven and if we open the stores post-Diwali, then it is taking three months extra that is 15 months to 18 months to reach to a break even. And once that breakeven has been completed, then definitely that particular store is also contributed to the bottom-line. With respect to the gross margin, my retail store is currently working with 11% to 13% as far as gross margins are concerned, and EBITDA, we are working with 7%.
Arpit Shah
[Speech Overlap] Is it pre-industry or post-industry?
Kiran Firodiya
Sorry, post-industry.
Arpit Shah
Post-industry, so what are the rentals after that?
Kiran Firodiya
So, rental is considered in that.
Arpit Shah
So, it is pre-industry, right?
Kiran Firodiya
Yeah, yeah.
Arpit Shah
Okay.
Kiran Firodiya
And with respect to this franchisee operation, so franchisee, they are operating with the space of around 1,500 square feet to 2,000 square feet, so they are almost one-third of the company store size and company store economic. So, they are carrying around INR11 crores to INR12 crores of the inventory and they are doing some INR0.5 crores or INR0.75 crores on the capex part and they are typically doing 3 to 3.5 stock turn in 20 months to 24 months and that is how they are reaching to INR40 crores to INR42 crores with the turnover, and they are also getting around 5% to 6% EBITDA, so that is how the franchise is doing.
And they are — the first franchise we started in 2018, so almost it is like five years to six years. So all rate gain is also with the franchisee, all expenses bear by the franchisee, only branch manager is on our payroll, so entire remaining cost is bear by the franchise owner. There is no fixed commitment that company is giving to them with other competitor or few of the competitors are working. We are not working on that model. So, it is purely a plain business. Whatever material we are transferring to this franchisee that is considered as pure cash sale for us. We are doing the entire business in advance. So, all the marketing is done by the company for the franchisee. We are also — we are — so the franchisee is getting around 8% to 9% as far as the returns are concerned and plus the rate gain is also lying with the franchisee. So roughly 15% to 16% they are earning with us.
Arpit Shah
8% to 9% percent means what, sorry?
Kiran Firodiya
15% to 18% they are earning with us.
Arpit Shah
That would be their ROC, right, 15% to 18%?
Kiran Firodiya
Yeah, that is how the amount they have invested. So, to be honest, with few franchisees they have their own source of funds then they can save on finance. They have their own premises, then they can save on rental. So slightly 2% to 4% deviation here and there but around in that range only all franchisees are earning with us.
Arpit Shah
And what kind of gross margin we make after selling it to franchisee? [Speech Overlap]
Kiran Firodiya
So, it is around 2% to 3% we are getting. So, there are two ways to look at it. One is with respect to gross margin and other is that we are also charging some royalty and management recovery also from them, so 0.5% by that way. So, 3% is the amount that we are gaining from the franchisee.
Arpit Shah
So, 2% to 3% is gross margin, 0.5% is royalty from the franchisee.
Kiran Firodiya
Yeah, so totally it is coming to 3% gross margin.
Arpit Shah
Got it. So what kind of ROC do we do on the COCO, let’s say, after [Indecipherable]?
Kiran Firodiya
You are talking about COCO?
Arpit Shah
Yeah, COCO.
Kiran Firodiya
So, COCO if you are asking me, then pre-IPO we are in the range of 28%. Now, post-IPO since we have offered shares, so I think the ROC and ROE ratios are little bit hampered, but definitely in next two quarters to three quarters, once the business is settled and profitability is also settled then definitely it will again reach to that level.
Arpit Shah
So, on the peak inventory — on the peak sales you will be doing about 5x inventory, right? So, that is about INR150 crores sales. On that INR150 crores sales you will be making on, let’s say, a margin of 12%, so that would be around INR18 crores, and you will be making EBITDA margin of 7%. So about INR10 crores would be the EBITDA. Your capex would be around INR35 crores, which is inventory plus this. So…
Kiran Firodiya
No, capex is not INR35 crores, capex is only INR1.5 crores to INR1.75 crores.
Arpit Shah
Yeah, I mean capex meaning the building cost plus inventory, I mean that, so that’s around INR35 crores including the capex cost, so you will be making INR10 crores on INR30 crores, INR35 crores kind of investment over a two-year, three-year period once the store is matured then that is how it [Technical Issues] How will your sales look like, let’s say, in year one, year two, year three?
Kiran Firodiya
You are talking about sales?
Arpit Shah
Yes, sales.
Kiran Firodiya
Yeah, so sales, if you are asking, H1 versus H1 — last year H1 versus this year H1 then there is a growth of almost 33% and total overall growth [Speech Overlap]
Arpit Shah
[Speech Overlap] No, no, I mean on the new store, let’s say, if you open a new store what will be the year one sale, year two sale, and year three sale?
Kiran Firodiya
So, you are talking about the recent store which we have opened?
Arpit Shah
No, in the past, let’s say, if you would have opened stores, how the unit economics would have looked, let’s say, you would have opened a store, let’s say, in 2021 or 2020, what is the year one sales? What is the year two — how would the maturity be increased once the store like hitting the highest inventory?
Kiran Firodiya
Yeah. Typically, two years to 2.5 years the store will get matured in terms of, they are reaching to a stock turn of in the range of 3.5 to 4.5.
Arpit Shah
Okay, that is in two years, two and a half years, and when…
Kiran Firodiya
Yeah, 30 months is the period which we consider as a period for getting it matured because by that time my employees settle there, they understand the surroundings, they understand the competitor, they can have many BTL, ATL activities wherein they connect with the customer. At the same time, we are also doing pitching in terms of marketing aggressively. There are some events. There are some roadshows. There are new collection launch. We can also understand the nerve of the people who is staying nearby. So around 30 months to 35 months the store will get matured and by saying matured it will reach to a stock turn of 3.5 to 4.5.
Arpit Shah
Got it. And how should we look at the growth, let’s say, in FY25 and FY26 because this quarter we have grown about 47% driven by gold prices as well as volume growth for us. So how should we look, let’s say, FY25 and FY26? What kind of revenue growth are we targeting?
Kiran Firodiya
So, with respect to the — just hold on. With respect — I’m just opening it.
Operator
Thank you. The next…
Kiran Firodiya
Yeah, with respect to the top-line we are targeting around INR8,000 crores for March ’25 and around INR9,500 crores for March ’26.
Operator
Thank you. The next question is from the line of Dinesh from Finsight Ventures. Please go ahead.
Dinesh Kulkarni
Hello, sir. Can you hear me? Am I audible?
Operator
Yes, sir.
Dinesh Kulkarni
Okay, sir. First of all, thank you for taking my questions, and really congratulations on a really great set of numbers. So, my question is, see I stay in Chinchwad, so I see quite a few jewelry stores nearby around. I happen to visit mostly the P. N. Sons there because that’s the nearest one to my house. My question is how do you differentiate between P N Gadgil, and PNG Jewelers and P. N. & Sons there? It’s very — because I’ve been a frequent buyer of gold here and now and then every few years. I really don’t see any differentiation between you know the two franchises. I mean they look very similar. How as a customer I should differentiate that I’m sure this is across most of the buyers in Maharashtra? I hope you get my question.
Saurabh Gadgil
I’ll answer your question. For this I think it has been handled very long ago. Today, buyers are very much aware primarily because PNG as a brand is only used by us. In all the communication, the other side only says P N Gadgil & Sons, the PNG logo, the PNG [Indecipherable] with us. We are very differentiated, and the biggest differentiator is in the customer relationship, in design, in the store layout experience. So, there’s been enough and more awareness activity is done, and today, I think when you talk to customer at large, there is no confusion.
Somebody may choose to go to his choice because of the convenience and distance, but beyond that there is no other point which will really confuse the customer. Having said that there has been no growth from their side for the last four years or five years. We are a fast-growing company and we are there in all the relevant pockets of the city. So, I don’t see this as being a challenge for us even now or in the future also.
Dinesh Kulkarni
Okay. So are you seeing any competition among the two branches or the two groups? I mean, like [Speech Overlap]
Saurabh Gadgil
[Speech Overlap] We don’t track them separately. We look at them at any other competition and we always strive to benchmark and be even better than the competition, so that is how we look at them.
Dinesh Kulkarni
Okay. Sir, another question like on the similar lines. I see — I think Tanishq has somewhere around 65 stores to 70 stores in Maharashtra and you are saying that we will be the number one store in next maybe two years, so can we expect our [Technical Issues]
Saurabh Gadgil
Hello.
Operator
Mr. Dinesh? Due to no response from the current participant, we will move on to the next participant. The next question is from the line of Sanjaya from Ampersand Capital. Please go ahead.
Sanjaya Satapathy
Yeah. Hi, sir. Thanks a lot for the opportunity and you’ve already explained most of the things. I just wanted to reconfirm that you are looking at your gross margin to expand to some 11%, 12% over next one quarter or two quarters, is that correct sir?
Kiran Firodiya
Yes, correct.
Sanjaya Satapathy
And is it because of some that inventory loss which you had provided for in quarter that will reverse or what exactly it is?
Kiran Firodiya
There is no loss or anything as such, but as we are planning to increase the studded portion, we are working on aggressively to increase the jewelry sale as we have added nine new stores also in our total store count, so that is definitely going to increase the stock turns as well. So having said that, this is collective effort on terms of sale, at the same time, we are planning to reduce the finance cost, because earlier we have a cost of debt is around 9%, which we are planning to reduce to 5% to 5.5% by going ahead with the gold metal loan.
And at the same time when we are procuring gold from IIBX then there is a reduction of almost 0.7% to 08%t on the total procurement cost. Also, we are we have started already negotiating with the existing Karigars to reduce the making charges also. So having said that, collective efforts from all these segments will definitely improve my gross margin by, you can say, that next 1% to 2%.
Operator
Thank you. Ladies and gentlemen, due to time constraints we will take that as the last question. I would now like to hand the conference over to Mr. Naveen Trivedi from Motilal Oswal Financial Services for closing comments.
Naveen Trivedi
Yeah. Thank you, everyone, for participating in the conference call. Thank you, Saurabh and Kiran, for sharing the insightful session. Any closing comments from Saurabh?
Saurabh Gadgil
So, I think, Naveen, thank you for organizing this. Thank you for all the participants for showing interest and being here in the conference and asking questions. If you need any further information, the management is more than happy to answer queries, and this was a great experience for us being the first conference post listing. It was a wonderful experience. I hope you were able to answer questions but surely if you have any further questions, any further clarification the company is more than happy to answer them. Thank you once again, everybody.
Operator
On behalf of Motilal Oswal Financial Services that concludes this conference. [Operator Closing Remarks]