Senco Gold LimitedQ1 FY27 Results & Financial Update

After softer footfalls in May and June, July and August sales have rebounded, tracking roughly 25% year-on-year growth and running 8%-10% above the May-June run rate as festive preparations begin.

The company maintains a Board-approved hedging ratio of approximately 50% to balance liquidity risk against extreme gold price volatility, with long-term intent to migrate toward 75%-80% as macroeconomic stability improves.

Average Selling Price (ASP) increased by almost 40% year-on-year and Average Transaction Value (ATV) increased by 38% year-on-year, partially propelled by a 61% year-on-year rise in average gold prices.

April contributed roughly 55% of quarterly sales (INR 1,500-1,600 crores) driven by Poila Boishakh, Akshaya Tritiya, and pre-planned inventory availability, while May and June contributed the remaining 45% amid seasonal headwinds.

With elevated gold prices (up 61% year-on-year), consumer demand shifted toward lightweight, delicate, design-led, and lower-ticket items. Senco continuously expanded its 9-carat, 14-carat, and lightweight assortments to fit consumer budgets.

Old gold exchange accounted for almost 43% of total sales quantity on a blended basis and exceeded 55% at company-owned stores, driven by industry-wide efforts following government appeals to curb gold imports.

During Q1, Senco added 3 company-owned company-operated (COCO) stores, 4 franchise stores, and 1 Sennes showroom focused on lab-grown diamonds. The company remains on track to open another 12 to 15 stores during the remainder of the year.

Store expansion strategy prioritizes franchise models primarily concentrated in East and North India, aiming to scale from approximately 200 stores currently toward a long-term goal of 300+ stores over the next 4-5 years.

The internal factory subsidiary acts as a robust design and supply hub, successfully powering the introduction of nearly 100 new designs per day to support retail demand.

Management reaffirmed a sustainable operational EBITDA margin guidance range of 7.5%-7.8% across normalized periods, noting that the reported 7.0% margin in Q1 reflected gold price drops, discounting, and customer exchange schemes.

The recent customs duty change generated an estimated gross gain of INR 12-15 crores for roughly 45 days of impact in Q1, with further benefits expected to accrue over the next two to three quarters.

Other expenses rose from roughly INR 80 crores to INR 195 crores due to store renovations during the lean season, customer offers, and brand-building initiatives. Management clarified this run-rate will not recur every quarter and marketing spend actually declined by 19%.

Inventory days stood at approximately 152 at the end of the quarter. Management utilizes AI-based software for store-level productivity analysis and has successfully reduced inventory in both volume and value terms.

Cash flow from operations will be disclosed with H1 results; management noted that lower GML borrowing levels during the quarter may cause operating cash flow to appear negative from an accounting perspective despite profitable revenue growth.

Following tightness in March and April, GML availability has normalised with easing economic pressures, allowing the company to gradually rebuild its GML portfolio.

Management retains its guidance for 20%+ value growth for the full year, aiming to comfortably cross INR 10,000 crores in revenue, alongside a sustainable operational EBITDA margin of 7.5%-7.8%.

The company targets scaling revenue beyond INR 20,000 crores with 300+ stores, driving EBITDA margins toward 8% via a higher stud ratio, achieving a PAT margin of 4.5%-5%, and pushing ROE/ROCE toward the 20% range.

When questioned on why full-year growth is guided at 20% after a 67% Q1 surge, management explained that guidance is intentionally conservative, and performance will be reassessed after Q3 once festive trends are fully captured.

Clarifying a question from Antique Stock Broking regarding the jump in other expenses to ~INR 195 crores, management emphasized that these costs included seasonal store renovations and customer acquisition schemes that will not recur every quarter.

Answering investor concerns regarding margin unpredictability compared to peers, management stated that their ~50% hedge ratio is calibrated to protect liquidity during high volatility, though they intend to scale it up toward 75%-80% over time.