MAXIMISING A GROWING DEMAND
Dear Shareholders,
I am delighted to share our third
Annual Report, which reflects our continued solid progress despite a challenging market
backdrop in recent years. The demand for jewellery, particularly for organised formats of
retailing, has witnessed an upswing, attributed to increased incomes and the resumption of
customary festivities and celebrations. This year marks an inflexion point in our journey.
India's Strong Economy
The Indian economy has demonstrated resilience and steady growth despite external
shocks, thanks to the optimism of the Indian consumer and the government's policies and
initiatives. Recent surveys indicate improved consumer confidence, driven by a healthy
economic climate and increased spending. With the resumption of daily activities, the
demand for gold has risen, particularly during wedding festivities and celebrations. Given
that wedding jewellery plays a significant role in India's jewellery industry, and serves
as a common asset for savings, our strategy is well-positioned to capitalise on the
opportunities presented. India's position as the second-largest gold market, with 70% of
gold demand attributed to jewellery, reinforces the potential for growth in the organised
retail segment. Organised retail can effectively cater to local consumer preferences with
minimal risk of inventory obsolescence, as jewellery is inherently recyclable.
Adapting our Strategy to Change
Maintaining our prominent position in the Indian jewellery industry requires a flexible
approach that addresses gaps arising from market conditions and evolving business
environments. We are implementing a two-pronged strategy to capture both urban and rural
market demand. Our hyperlocal business model targets smaller demand pockets across Metro,
Tier 1, Tier 2 and Tier 3 cities, establishing regional connections and tapping into
untapped markets. Simultaneously, our online store, ‘Candere,' caters to youngsters
and working women with its wide range of ultra-lightweight range of jewellery, leveraging
digital marketing analytics to expand product offerings and diversify distribution
channels.
In fiscal year 2024, we will enhance our showroom network by continuing to adopt the
franchise model. We will convert some of our own showrooms into franchise outlets,
particularly in non-Southern India. In southern India, we will opportunistically convert
existing owned showrooms to franchised ones. We also plan to launch new pilot FOCO
showrooms in Southern India and the Middle East. As we navigate economic and market
shifts, our unwavering focus remains on adapting strategies without compromising our
growth objectives.
Marking a Robust Performance
FY23 witnessed a remarkable enhancement in our return profile compared to the pre-COVID
era and this achievement can be attributed to two key factors. Firstly, our well
capitalised infrastructure has provided us with the resilience to navigate through
challenging market conditions. The government's initiatives to formalise the jewellery
sector have also helped in creating a conducive business environment. As a result, Kalyan
Jewellers has experienced substantial improvements in profitability, scalability, returns,
and overall growth. In FY23 the consolidated revenues were Rs.140,714 mn compared to the
figures of pre-COVID (FY20) levels of Rs.101,009 mn. Similarly, the Adjusted Profit After
Tax1 of Rs.4,569 mn in consolidated business (record PAT for the
Company) was significantly higher than pre-COVID (FY20) levels of Rs. 1,423 mn. Current
Company RoCEis approximately 20%.
Growth Ready with Asset-Light Model
We have also taken strategic measures to drive growth and lighten our balance sheet.
The asset-light expansion will lead to faster growth without deploying our own capital.
This will lead to much higher levels of free cash generation and expansion in return
ratios.
This has enabled us to allocate resources more efficiently and strengthen our financial
position.
Furthermore, with superior growth rate this year coupled with our commitment to debt
repayment and divestiture of non-core assets we should be able to generate sustainable
returns for our shareholders. We are pleased to announce our maiden dividend, reflecting
our strong financial performance.
Additionally, we have successfully expanded our retail revenue, with ~40% now coming
from non-South markets, showcasing our ability to penetrate and capitalise on new
opportunities. To date, we have 32 franchised showrooms in non-South markets. Utilising
our Franchise-Owned, Company-Operated (FOCO) model, we aim to optimise our return on
capital employed.
Our Road Ahead to our Vision 2025
Vision 2025 sets our sights on a clear goal as we intend to achieve the earlier target
of achieving 50% share from non-South markets by the end of FY24 or early FY25.
Strengthening our presence in non-South markets is a key part of this plan, and we aim to
achieve this by adding more than 50 showrooms in the region—an unprecedented
milestone for our Company. With a steadfast focus on growth figures, strategy revisions,
and expansion, we are steadily progressing towards our objectives.
In addition to the expansion, we are dedicated to bringing about significant
improvements in our return ratios and the Company's ability to generate higher levels of
free cash flow. By implementing strategic revisions and focusing on growth figures we are
steadily progressing towards achieving our objectives. These efforts will not only
strengthen our financial position but also enhance our overall operational efficiency,
ensuring sustainable growth and long-term success.
I extend my heartfelt appreciation to all our stakeholders—our dedicated
employees, loyal customers, and supportive shareholders. It is their trust in Kalyan that
has been the foundation of our success. Together, with our shared vision and collective
efforts, I am confident that we will continue to evolve, grow, and exceed the expectations
of each stakeholder.
Warm regards,
T. S. Kalyanaraman
Managing Director