Posted on February 14, 2025, by Niftynews
Shares of Senco Gold, one of India’s leading jewellery retailers, plummeted 19% to ₹363.75, reaching a 9-month low on February 14, 2025. The sharp drop came after the company reported weak financial results for the December quarter, dampening investor sentiment.
Senco Gold Results: Profitability Takes a Hit
For Q3 FY25, Senco Gold reported a staggering 70% decline in consolidated net profit, dropping to ₹33 crore from ₹109 crore in the same period last year. This dramatic fall was primarily due to a one-time impact caused by the customs duty reduction. Despite the drop in profits, the company achieved record revenue of ₹2,103 crore, marking the highest quarterly revenue in its history.
In the same quarter last year, the company reported a revenue of ₹1,652 crore, and its revenue for the September quarter stood at ₹1,500 crore, showing a clear upward trajectory in topline figures, despite the profitability concerns.
The Customs Duty Impact and Lab-Grown Diamonds
On the operational front, Senco Gold EBITDA for the quarter came in at ₹79.9 crore, with year-to-date (YTD) EBITDA amounting to ₹240.6 crore. However, a significant part of this decline can be attributed to the adverse impact of customs duties during Q2 and Q3, totaling ₹29.8 crore and ₹27.6 crore, respectively. When adjusted for these duties, the company’s YTD EBITDA stood at ₹298 crore, with an EBITDA margin of 6%.
Senco Gold also cited the temporary effect of lab-grown diamonds on its stud ratio, which further impacted the profitability of its diamond jewellery. Lab-grown diamonds, though less expensive, have been slowly gaining traction in the market, affecting traditional diamond jewellery segments.
Senco Gold Share Price: A Reflection of Marginal Decline
The Senco Gold share price, which opened at ₹363.75, showed an immediate 19% drop after the results were announced. The sharp decline in profitability is reflected in the market’s negative reaction to the company’s Q3 earnings. Despite these challenges, the company remains optimistic about a recovery in the next quarter.
Senco Gold has indicated that EBITDA margins are expected to stabilize and normalize to around 7%-8% in Q4 FY25, as the impact of customs duties and lab-grown diamonds diminishes. The company is focused on boosting its sales through innovative product offerings and premium pricing strategies. As the second-most trusted brand in the Indian jewellery market, Senco Gold plans to leverage its strong brand presence to overcome these temporary setbacks.
Looking Ahead: Expansion and Growth Plans
Despite the short-term challenges, Senco Gold is focused on growth and expansion. The company has expanded its showroom portfolio to 171 locations, including 70 franchisee-operated outlets. Over the past nine months, Senco Gold opened 12 new showrooms, seven of which were company-owned. For Q4 FY25, Senco Gold aims to open 8-10 more showrooms, continuing its strategy of increasing its market footprint.
The company also revealed that its newly incorporated subsidiary, Sennes Fashion Limited, will enter the consumer lifestyle segment, offering premium leather accessories, lab-grown diamond jewellery, and perfumes. This strategic move is designed to further diversify its product offerings and cater to evolving consumer trends.
Senco Gold’s Long-Term Outlook: Confidence in Recovery
Senco Gold remains confident in the long-term growth prospects of the Indian gems and jewellery industry, which is currently valued at $85-$90 billion. Although Q3 saw a decline in profitability, the company expects to recover in Q4 and beyond, driven by its strong brand, expansive showroom network, and robust demand for jewellery. The company’s CFO, Sanjay Banka, mentioned that the adjusted YTD EBITDA margin stands at 6.0%, and the firm is targeting a 7%-8% EBITDA margin for the full year.
In conclusion, while the recent drop in Senco Gold share price is concerning, investors should look to the company’s strategic initiatives and market positioning for signs of recovery. The company’s focus on expansion, innovative product offerings, and long-term growth strategies is expected to help it rebound from the current slowdown.
Conclusion: Should You Invest in Senco Gold Shares Now?
Despite the short-term hit to its profitability and share price, Senco Gold’s long-term outlook remains positive. With an expanded showroom network, a new subsidiary focused on consumer lifestyle products, and plans to normalize margins in Q4, Senco Gold may present an investment opportunity for those willing to look beyond the current volatility in its share price. The jewellery retailer’s track record, combined with its expansion plans, indicates a potential for strong growth in the coming years.
