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Informist, Monday, Jan. 13, 2025

 

By Sandeep Sinha and Ashutosh Pati

 

MUMBAI – P N Gadgil Jewellers Ltd., a prominent Maharashtra-based gold jewellery company, plans to grow the "Peshwa Way" as it looks to expand its network beyond its home state, said Chairman and Managing Director Saurabh Gadgil. "We plan to manage our growth in a profitable and sustainable way, prioritising growth outside Maharashtra to follow the Peshwa route," he told Informist in an interaction.

 

The company's revenue in 2023-24 (Apr-Mar) was INR 61 billion and for FY25, Gadgil expects the top line to be around INR 80 billion. It reported a net profit of INR 349.1 million and revenue of INR 20 billion for the September quarter after a bumper listing on Sept. 17 on the National Stock Exchange. The stock was listed at a premium of 73% to the issue price of INR 480 a share. On Monday, the shares closed 4.7% lower at INR 607.25 on the NSE. 

 

The company, in a quarterly update on Wednesday, had reported a 24% on-year revenue growth for the December quarter, driven by a strong increase in same-store sales growth, and festive demand in Dussehra, Diwali and the wedding season.

 

Set up in 1832, the company currently has 48 stores, of which 20% are operated by franchisees. Going forward, it plans to have the same ratio, Gadgil said. Beyond Maharashtra, the company plans to focus on growing its presence in Madhya Pradesh, Chhattisgarh, Jharkhand, Bihar, and Uttar Pradesh. We plan to take our total branch tally to 100 stores in about 5-7 years, Gadgil said.

 

However, he was cautiously optimistic with regard to expansion. "Our growth will be in a structured way and will not be just for growth's sake. Growth has to be profitable," he said, adding, "It seems that there is a good interest and customers are visible in the gold market. So overall the business environment is good."

 

West India accounts for around $20 billion in the Indian jewellery market, of which Maharashtra's share is 60%. "That's a huge market size when you compare jewellery for a particular state, almost like a $10 billion-plus market for Maharashtra," he said. Gadgil pointed out that a lot of jewellery brands from north, east, and south India are currently coming to Maharashtra.

 

GOING DIGITAL

Gadgil said rising investors' interest in gold coins and gold bars is visible, given that there has been no fresh issuances of sovereign gold bonds and demand is mostly being fulfilled by physical gold. Physical gold remains the king in the market, and we are working on providing buyers with the options of physical as well as digital gold, he said. Sovereign gold bonds were launched on Nov. 30, 2015, under the gold monetisation scheme to curb demand for physical gold and carrying an annual rate of interest of 2.5%. The last issue of sovereign gold bond was in February 2024.

 

Asked about the changing consumer trend, Gadgil said everyone buys jewellery as per their requirements. "If someone has marriage in the family, they will buy heavy jewellery--they look at more serious shopping. If someone wants to give an anniversary gift, they will buy accordingly. I think more than old and new, it is about the requirements of the customer and what they want at that time," Gadgil said. "And we always strive to fulfil what the customer requires. So if he requires antique jewellery, then we should have that. If he requires temple jewellery, we should have that."

 

POST COVID-19

The company had a 'Plan B' when COVID-19 struck. They rationalised the existing cost structure and resized the stores. At that point, the company realised that they received a lot of orders through digital and physical catalogues, WhatsApp, and FaceTime calls. "We did a brainstorm that this could become the mainstream for us post-COVID and that was the Plan B, which today has been successful," he said.

 

After stores opened post COVID, the company operated with 30% lower inventory than in pre-COVID times. It was aided by a hybrid model for taking customer orders, backed by sound digital and physical catalogues, and samples in copper and silver. Around 30% of the company's business currently comes from made-to-order, which is supported by a karigar (artist) network in Pune which has worked for them for generations.

 

Plan B helped the company lead the industry in terms of stock turn, Gadgil said. "Because we work on leaner stocks, compared to the competition, our stock turns are very high. We do more than upwards of 5.5-6.0 stock turns annually," he said. A stock turn is a measure of the number of times inventory is sold and replaced over a specific time period.

 

"Our revenues per square foot are very high because we work on fewer stocks, and work in smaller stores. Our stores are functional, decent sized, and can accommodate the needs of what we have to do in terms of stock."  The company's revenue per store is about INR 1.5 billion and revenue per square feet is about INR 600,000, he said.

 

CHANGING TRENDS

"We ensure that we always keep on tracking what is happening in the market and always strive to be ahead of the competition. We track everybody and ensure that we learn good things about what the competitor is doing. We also keep a track of where the market is heading in terms of trends. We will focus on our strength and how to further develop our own strengths," Gadgil said.

 

Gadgil believes going ahead, recycled gold will drive consumption. "Gold imports going down is what the government wanted because they want to look at recycled gold. The government is focusing on giving more licences to set up refineries for recycled gold," he said. "As far as we are concerned, we look at jewellery, so the mode of payment can be currency or old gold. It doesn't matter as long as we are able to sell new jewellery and keep on growing."

 

Gadgil does not expect the high gold prices to have any impact on the demand for the yellow metal. "I think gold has seen an appreciating trend," he said. "However, sudden ups and downs can create a little wait and watch mode, but the market looks bullish. I think people have kind of adjusted to that fact and the market will remain strong." .

 

GROWTH POTENTIAL

The Indian jewellery industry is growing at around 18-20% on year, which is very healthy and positive, Gadgil said. Gold consumption in the country is also growing, and we are looking at a good future, he added.

 

The market share of the organised gold jewellery sector will rise to 40-45% in the next two-three years (from current 35%), Gadgil said. "The industry will change, and the organised sector will see a fast shift, because that's now become the need of the hour, and as people in smaller towns too want their jewellers to be organised. You have also seen even single stores getting organised. You don't have to be a chain to be organised, it means you have to get your operations organised," Gadgil added.

 

He said that hallmarking of gold jewellery has brought a level playing field for the entire industry. The industry's quality is now being guaranteed, so malpractice will not happen, he added. A BIS hallmark indicates that the jewellery meets the purity standards set by the Bureau of Indian Standards. In 2021, the government introduced hallmarking gold with a unique identification number to digitise information on purity and quality of gold jewellery. 

 

"I think it's a very progressive step. Also it is the consumers' right to ask for certification, the right to ask for a mark, which is a great step for the government. It will also bring a lot of level playing field and a lot of good respect for the entire industry, as some people (jewellers) due to their unscrupulous methods of dealing, had brought disrespect to the industry," Gadgil said.  End

 

US$1 = INR 86.58

 

Edited by Tanima Banerjee

 

 

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