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00:00We are joined by Mr. Mangesh Chauhan, who is the MD and CF of Skygold, who is joining
00:05us now.
00:06Welcome to the show, Mr. Chauhan.
00:08You know, my first question before, you know, I go to company specifics is that we are seeing
00:13a lot of traction when it comes to gold demand.
00:16We are seeing gold prices hitting new highs, fresh highs every day.
00:20What are the kind of trends that you are observing overall in the gold sector and what are your
00:25expectations going forward?
00:29So good morning everyone, 100% gold sector is very boom right now, appreciate, are naturally
00:35appreciating assets, so it has given a very good returns in five years to the consumers
00:41is about 120% return in five years.
00:44So after the duty cut done by our finance minister, there is a very huge footfall in
00:51the retail sector of the customer.
00:53There is a pre-Diwali session going on the retail because consumers are rushing to buy
00:57the gold as there was a 20% duty cut in the market.
01:02So overall scenario is very good as gold is given a good returns to the consumer, consumers
01:08are happy with the returns.
01:09So overall profits are going very much, the unorganized market is shifting to organized
01:14so gold market is at a very good phase right now.
01:19Chauhan, you know, I've picked up three things from what you've said about, I'll take one
01:23by one each of these things.
01:25First of you said that the slash in custom duty has really helped pick up in the gold
01:31demand which was kind of subdued before that because of the high gold prices.
01:36But gold prices are again on the rise, so if you can help me quantify as to how much
01:42of a benefit that custom duty has actually bought in and will it continue going forward?
01:55So my question to you is that, you know, you've mentioned that since the custom duty rate
02:00cut, we've seen that the demand for gold is back.
02:04So I want to understand that if you can quantify that how much of that is benefiting you as
02:09a company, plus do you think that this will continue because gold prices are on the rise?
02:14So 100% custom duty has helped the retailers as we are supplying to the corporates, all
02:23the corporates in India.
02:25So like Kalyan Jodha's, Johar Lukas, Senko Gold, Thangamail, all our clients, our more
02:29big clients are going to be added.
02:32So they are, they have benefited to the consumers, consumers are flowing into the retail and
02:38once again, the orders are coming back to the factories and manufacturers.
02:41So again, the point that gold is rising, that is a good point for the consumer because consumers
02:47are buying gold very heavily because of this appreciating nature, gold is appreciating
02:52there.
02:53They will buy more as they know that they will get the good returns in three years time.
02:57So as per Bank of America statement, that gold is going to be $3,000.
03:02So they are, customers are right now also buying the gold in a heavy quantity because
03:07their expectation that gold will reach $3,000, so they don't want to miss the possibility
03:14of gold price.
03:15So they are helping to the retail corporates also and again, the manufacturers are gaining
03:22the share from that.
03:24And how are you seeing festivities demand pick up?
03:28Sure, festivities demand is very good.
03:31Navratri is in this quarter, Diwali also fall in this quarter, so December quarter will
03:36be, I think, tremendous for the corporates, all the corporates and the manufacturers like
03:40us who are supplying to the corporates.
03:42So this quarter is expected to be a growth of 25 to 30% of the retail level they're expecting.
03:49So festivities demand is very good, positive, customers had good cash with them and in a
03:56good mood to buy the jewelry because gold has given a good returns in last five years.
04:00They are expecting that it will be, it will be keep going, the returns will be keep giving
04:06them in the next five years.
04:09Got it.
04:10Mr. Chauhan, you know, now let's talk about SkyGold as a business.
04:14You know, right now your business mix roughly is from corporate, 65% of your revenues come
04:20and others is 35% right now.
04:22But what you've guided for is that you'll elevate the corporate business to almost 100%
04:26in the next three years.
04:27So I want to understand that what are the kind of levers that will take, you know, your
04:32corporate share from that 65% to 100% and then overall, where your margins are roughly
04:38at, you know, 6%, hovering around the 6% mark, where will the margins go?
04:44So coming to the point of the taking the 65% market share to 100%, we are already expanding
04:51in the corporate, say like Dubai, Singapore, Malaysia, we are, we have started exporting
04:56to the corporates of Dubai who have 200, 300 stores, who have large stores in Singapore
05:01and Malaysia who have 5 to 10 stores, so the share will, they will also play in this role
05:07and of course, in India, we are expanding in existing corporate also and acquiring more
05:14large corporates in two, three quarters and you can see they have announced 500 new stores
05:19are coming in 18 months from all the top 20 corporates of India.
05:23So we will be supplying the gold in approximately 80% store, we will be supplying our jewellery
05:30in 400 stores, new stores, and we are again, expanding our wallet sharing in existing
05:37stores, like existing, which are 1500 stores available, we are supplying to the corporates,
05:44we will expand our wallet sharing there also and our revenue will come from new stores
05:50also, that's why we are targeting in three years, we'll be targeting 100% into the corporation.
05:56So, again, the market share we'll gain from exports also, we'll gain the share.
06:02All right, and then margins, do you expect margins to expand on the back of this?
06:07Right now, they're at 6%, three years down the line, where will the margins be at?
06:12We are expecting a gross margin, we will sustain up to 6% in the coming years, but fat margins
06:19will improve half a percent as we are about to save over the finance cost, we are moving
06:24our debt to gold metal loans, that will help us to improve our fat margins by half a percent,
06:30so we are targeting our fat margins to grow up to 3.5%, but gross margins will be 6.5%,
06:36we can sustain it.
06:38All right, and Mr. Chauhan, you're already supplying to big pockets like Kalyan Jewellers,
06:42Jwalukas, Senko Gold, Thangamal Jewellery, all of these big pockets, but the biggest
06:49one, that is Titan, and from what I understand is that you were in talks with Titan to get
06:54their part of business as well, any progress there?
06:59They are not our clients right now, but we are continuously showing them the products,
07:05we are in talks with them, so we have a huge manufacturing facility, we have a
07:12timeline, we have a community time of 20 to 25 days, which is very low in the industry,
07:18so we can supply them into 25 days, but let's see in one or two quarters we are expecting to
07:22onboard Titan. So one or two quarters you are expecting to onboard Titan as a client,
07:28that's a big step, Mr. Chauhan. Let's also talk about the recent acquisitions that you've made,
07:36to name Star Mangal Sutra and Sparkling Chains, give us more details as to how this will add
07:42revenues to your overall business, and where will this take your business?
07:47So 100% our parent company is making a casting jewellery segment, which is 30% in retail store,
07:54you can see 30% casting jewellery store, Mangal Sutras are sold 15% in the retail store,
08:0020% chains are sold, we will be in 60% product which are sold in the retail jewellery, we will
08:04be in 60% with this through subsidiary and with parent company, so in Star Mangal Sutra and Sparkling
08:10Chains we are expecting this year sales 600 crore together, and next year we are expecting
08:15900 crore, so let's see about the three years we have already given the guidance,
08:24so we will be growing 30-35%. So then your guidance of 6700 crore,
08:30does that change because if you are expecting 900 crores itself from the new acquisitions,
08:35do you think that you will be able to do better than that 6700 crores?
08:39No, already we have given together with the subsidiary together, the guidance has been
08:45with the subsidiary together, cannot give the much data about that because of the limitations.
08:52All right, all right, no worries. Mr. Chauhan, you know your current capacity utilization stands
08:57at roughly 45%, and this I believe is excluding the acquisitions that you have made, so I want
09:02to understand going forward by the end of FY25, where will the capacity utilization be at from
09:09that 45%? So right now in the current year, we are at 50% utilization, and by 2027 we will be
09:20at 100% utilization in the parent company, and subsidiary we are at 25-30% utilization, so all
09:25the three will be at 100% utilization by FY27, so we have a capacity together of 1050 kg per month
09:33with all the subsidiaries, so currently we are at 50%-55% utilization in the current year,
09:39so we are expecting to go to 100% in 2027, so altogether we have a capacity of 1050 kg per month.
09:46All right, so you expect that 50-55% to go to 100% by the end of FY27, is that correct?
09:54Sure. Okay, you know moving on, when we talk about the jewelry sector, we always talk about
10:00the organized and the unorganized sector, and you know we are seeing a shift where you know
10:07the clients, the customers are now moving towards the organized space because of trust, because of
10:14quality and everything, so what is the kind of trend that you are observing there, your observation
10:19in terms of demand as well as pricing? 100% in India, you can see 5 lakh crore market is
10:25organized, unorganized market and 9 lakh crore is expected to be unorganized, so there is a huge
10:30market share of unorganized which can be captured by the brokers, retail channel scores, so I think
10:38there is a huge drastic shift into unorganized, and after this duty cut, they were expecting in
10:445 years there will be organized market of 65%, now we are expecting in 3 years only 65% organized
10:51market will be there, so there is a large shifting into the organized market because of this duty
10:57cut. All right, and Mr. Chauhan, you know right now, you know your R&D department, you've said
11:04that you introduce 2000 designs every month mostly, so I want to understand the breakup in terms of
11:10how much do you spend on R&D as a percentage of sales, how has that shaped up overall and
11:17going forward, how is it shaping up? Okay, so we have a R&D team, localizing team and we are
11:25approximately launching 1500 to 2000 designs, looking about the state-wise, we launch design
11:30because there is a different taste of Andhra, Karnataka, Kerala, UP, Delhi, so North-East, South-East
11:37or in India there is a different taste in every 200 kilometers, so we launch different designs
11:42from different sectors, so we have a good R&D team, every month we are
11:52creating expenses of approximately 80 lakhs to 1 crore for the marketing and R&D expenses.