Gold Duty Shock Or Wedding Boom? Shringar House Reveals What’s Driving Mangalsutra Demand | ET Now

[00:00:11]Hello and [music] welcome. Couple of weeks ago you had the hike with regard to the duty on gold and as a result of that there could have been some amount of demand compression in the gold space.

[00:00:24][music] Now Shringar House is not exactly a pure play gold play. It's more [music] of a wedding play, but nonetheless it's something that we'll get [music] a sense of in terms of what are the trends playing out as a result of the uh hike in import duty [music] and the impact of that on demand. Also the second piece is there's been a sharp ramp up with regard to capacity utilization volume more than capacity utilization.

[00:00:51]The production The production level has gone up uh substantially. How does that look like in FY '27? What's the full picture looking like and what's the pipeline for FY '28? They're guiding for 30% plus growth in both of these years.

[00:01:05]How much of that is value? How much of that [music] is volume? How does it shape up?

[00:01:09]The third piece is or rather the fourth piece is with regard to margin [music] increase. Uh as capacity ramps up, what's the kind of impact of that on margins because efficiency [music] gains will likely come through. We'll get a sense of that. And the last piece is the key drag The key headwind is [music] the working capital and that's a big challenge. Uh and and uh we'll try and understand that and how that unwinds likely >> [music] >> in FY '27 or whether we wait till FY '28 for that to unwind. We'll have with us Viraj Ghodeshwar who's part of the promoter group and the promoter group family. But taking a bit of a step back, incorporated in 2009, market cap around 2050 crore. And uh you've got uh uh what essentially does is designs, manufactures, and markets mangalsutras.

[00:01:54]It does this on a B2B level. It's family owned. purely B-to-B business is what it does. In terms of products, it largely around around jewelry, right? And and that's really the list of products that they have. They also have a premium branded mangalsutra line called Zia, which also they market and which also they sell, but everything largely is B-to-B. Now, looking at bridal jewelry range, necklaces, bangles, nose rings and the like. You've also got gold jewelry job work manufacturing for corporate clients.

[00:02:31]Now, this is sharply lower in terms of profitability and margins, but they do it anyway because a lot of this is also volume driven and that is what is important.

[00:02:41]In terms of geography, more than 95% over the last 3 years is the India or the domestic geography that it caters to. Export is very, very low at just 5%.

[00:02:51]In terms of export, it does Middle East exports as well and maybe that could be one line of questioning to try and understand as to what's playing out there as well. When you're looking at the state-wise, the concentration is sharp. Maharashtra is nearly 50%, nearly 50%, 49 and 1/2 basis of FI 25 financials, and then it has a very strong presence across Karnataka, UP, MP, and Tamil Nadu. That's where a bulk of the revenue really comes from.

[00:03:17]Looking at the business model and it largely manufactures bridal jewelry for other jewelers, the likes of a Malabar, which contributes nearly % of top line in FI 25. So, the customer concentration is the other piece, but basically that's what they do. They manufacture for some of the retailers, they sell to retailers, wholesalers, and corporate chains as well.

[00:03:39]And you're looking at no retail shops per se, it's purely B-to-B. They design all of their jewelry in-house and thereafter produce it in their factories in Mumbai. The company buys gold, of course, manufactures jewelry, and sells finished goods.

[00:03:56]That's broadly the way in which it works. The value that they derive is the gold plus the design plus the margin.

[00:04:02]That's where the the cost and the uh the the value is derived from from whatever they sell.

[00:04:09]There are two models with which they operate. One is the outright sales model. So, that they do for most of their customers where they have design they manufacture it for the customer and sell it outright to the customer. Then there's job work. Based on what the customer wants in terms of designs, they thereafter manufacture it. Now, margins there are far thinner in the job work uh you know, model, but under the under the direct sale model or the outright sale model, the margins are far better. In fact, three times better in terms of profitability, the outright sales. 70% of whatever they do is in terms of revenue is outright sales. Around 30% is job work. So, really that's the split.

[00:04:49]But, there's going to be a ramp up with regard to capacity as well as a ramp up with regard to production. Thereafter, how does the revenue mix shape up is what will be crucial to understand. And that's what we're seeing here. The old installed capacity was 2,500 kg. New capacity now takes it to 4,000. You've got FY26 blended at 2,625 because it started only in February of this year.

[00:05:14]And FY26 utilization was at a staggering 87%. So, very, very optimal in terms or nicely optimized in terms of the manufacturing setup that they have.

[00:05:26]That's how it's structured.

[00:05:28]Now, let's talk about the financials and get straight to it. In terms of uh okay, uh sorry. Customers as well. In terms of customers, they have around 1,333 customers globally. This is basis Q4 FY26. Corporate clients around 35, wholesalers around 1,061, and then you've got around 240 retailers who they sell to. But, there is a customer concentration risk, right? I spoke about how Malabar alone contributes nearly 15% of top line. But, that's the tilt. Let's talk about the financials now. In terms of the revenue, it's grown at a 33% Kager. Some part of that also because of the gold uh price and and the way in which gold has moved. You'll see FY23 to 24, we've not seen that move. But, now you'll start to see volume-driven move as well. Given the fact that you've got such a large capacity ramp up. If capacity utilization is in the late '80s, you could well see very sharp growth. We'll try and understand how this plays out FY27 and thereafter FY28, what's the kind of confidence, especially with regard to volume versus value as well. The second piece is EBITDA and EBITDA margins have gotten better as we've uh as we've gone along uh from FY23 to FY26. And therefore, you're seeing that sharp increase in EBITDA of 60-plus percent. PAT has gone up by 71% as a result. Mind you, they buy gold and therefore some of their working capital is lying in gold, some of their working capital is lying in inventory.

[00:06:52]Uh so, those are uh possible problems uh where working capital starts to get uh starts to get, you know, uh get get occupied to a large extent. You also have, for example, receivables. And those are some of the angles that we'll explore. But, for the moment, you look at profitability, very strong growth there.

[00:07:12]Margins have gone up from 4% to 4 and a half to 6 and a half to 7.1. So, journey of margins has been quite strong.

[00:07:20]Balance Around 680 crore is the size of the balance sheet. Of course, it's gone up FY25 versus FY26. There's been equity issue. And you can see that the profits and reserves have inflated as as a result of that. That equity issue obviously impacting the balance sheet.

[00:07:35]You've got around 700 crore on the book.

[00:07:37]And it trades at approximately three times book. That's uh the metric.

[00:07:41]Borrowing has also gone up because working capital needs have gone up and as a result of that you'll see around 180 crore on the borrowing number. Cash bank sitting at around 130 crore. No concerns from a balance sheet perspective, but working capital going up is a cash flow problem and we'll come straight to that. What's happened is you see negative operating cash flow in FY26 and FY25 and FY24, but the real negative has been in FY26. This is where the problem lies. If we can fix this, we'll try and get a sense how quickly do we fix this and what the possible inefficiencies are, but cash flow is clearly the concern.

[00:08:20]Let's talk about return ratio. It's been very good. So So frankly, while working capital keeps getting occupied, the return ratios are surplus of 20% and in fact in good years, they they come through to nearly 32% in terms of return ratio. So very very strong where return ratios are concerned. There you go on your screen. When you're looking at shareholding pattern, currently sitting at 75% is the is the promoter shareholding pattern. So again, very strong. There's some amount of FI DI interest and then there's public sitting with 18%. No concerns on the shareholding pattern either. There's very good promoter interest in there.

[00:08:55]When you're looking at valuations now, your valuations are actually at rather the pre-IPO level valuation. So this is promoter holding pre and post IPO.

[00:09:04]That's fine. The valuations correct. So this is at 19 and 1/2 times was when is what what this one traded at pre-IPO.

[00:09:12]Post IPO and post dilution, it was 26 times. It currently trades at 18 times.

[00:09:17]Now, this may well be favorable, but mind you, it's a B2B business. Low margins. It's not like your Titan, Malabar and the like, right? Or Kalyan, which are facing the customer straight up and therefore there could be some some bit of a discount that this one trades at versus is business. That's something you want to keep on on your mind and therefore we've given this a neutral with regard to the rating. The pre-IPO was around 19 and a half times, currently at 18 and therefore we've given this a neutral.

[00:09:47]Now, let me bring on board Mr. Viraj Thakkar who is the CEO and executive director at Shringar House and of course part of the promoter group as well.

[00:09:54]Viraj, great having you. Let me first start off by what's the impact of the ADD on your business as well as the business of your customers. More importantly, business of your customers.

[00:10:05]What are you hearing from the industry?

[00:10:07]What is the pulse telling you?

[00:10:10]>> Uh see, like lately we've been observing a lot of fluctuations in the gold rate and also the market trend has been changing a lot drastically.

[00:10:21]So, I would say that it's not the first time. If you see the past record of gold, gold has always been very much volatile and has shown a large amount of growth.

[00:10:34]But when we see at the volumes before 10 years or that and now today at this gold rate, we've always seen a rise in the volume growth, the consumption of gold in India.

[00:10:47]So, lately currently we feel there are ups and downs in the market, but when we see the larger picture, a long run or the entire financial year, the it sets to come up, it sets to compensate for the downs and currently looking at our particular the product category we are dealing in, mangalsutra, that is the core product we are in right now. Uh we see that the demand has always been increasing because it is a it is a product which is linked to our culture, it's a sentimental product and the most essential product in a wedding.

[00:11:25]So, currently we are focusing more on the growth. Yes, there are ups and downs, but over the years we have always overcome it. And for this also, we are looking for a better upcoming season.

[00:11:38]But, as you say, sir, the designs are changing, the concepts are changing, the way people look at Mangalsutra is changing now. Earlier, it used to be a traditional product, but now it's a design-centric product.

[00:11:51]People are more aware of designs, international designs coming in. So, with the new manufacturing setup, as you know, we have uh hired a lot of new young fresh mindset, new designers who are creating concepts which can not only grow business in India in the younger generation, but also internationally.

[00:12:13]So, the vision is very clear.

[00:12:16]We are looking at to innovate and to grow in all the segments, all the age group in the country.

[00:12:23]>> Right. Viraj, I'll take a bit of a step back. So, last 2 months, has there been a change in the demand pattern for jewelry and for Mangalsutras in particular? Likely not for Mangalsutras, but what about for jewelry? On the jewelry side of things, has there been a change just given the fact that there is an ADD on gold, as well as the fact that gold prices have been volatile? Any change in demand pattern that you or or your clients are seeing on ground?

[00:12:52]>> Uh so, one personal observation, I would say that currently there are months which do not perform well, which is called the off season, maybe during the peak summers.

[00:13:05]But, the last if you talk of the last few months, particularly about myself I talk about, we have seen a decent amount of growth and a nice business. Reason being, as you know, we are a B2B company. Uh we cater to the all the retailers and the big chain stores of India. So, these customers have many aggressive plans.

[00:13:27]They have already have their new stores coming up lined up and for that they they have to build up their inventories.

[00:13:33]They have to stock up. So for because of that maybe currently and in the past two months also, we have seen coming in orders, coming in business and with the new setup as you are as you already mentioned, the capacity utilization of the setup has also raised up. That is purely and purely because of the customer base we are having and the customers which we have and their future plans are so they're so aggressive in terms of development, in terms of growth. So currently our focus is to just fulfill their needs, what they want in the market.

[00:14:12]I would say that the leaders whom we are following and whom we are associated with, they have very aggressive plans and that's the reason of our main the core reason of our growth.

[00:14:24]>> Perfect. So So your business remains unaffected. That's the way That's That's what I'm hearing from you.

[00:14:30]In terms of the the shift upwards of capacity from 2500 kgs to 4000 kgs, what is your capacity utilization likely to be for full year FY27 and what is the impact of that on top line that you get?

[00:14:44]Give us a sense of that. Top line growth and capacity utilization.

[00:14:49]>> Definitely with the new the enhanced manufacturing capacity which we have made, it's because of there are several reasons, mainly because of the customers feedback about in the coming years the the growth pattern which which is required right now and to fulfill the needs of our customers in future. And also one big reason for the capacity growth is Shingar has always been a mangalsutra company mangalsutra manufacturing company as a core product. But now with because of our customers and the feedback from our customers, they want Shringar also to supply us bridal category uh supply them bridal category.

[00:15:27]So, that is a new category in the existing manufacturing setup. We have started manufacturing and uh with the utmost high skill labors and better designers and better technology.

[00:15:40]So, with this new setup, we are we are looking forward at a good high better utilization of the capacity with by not only Mangalsutra, but also other categories like bridal category which we have already started supplying to our corporate customers, the names which you just mentioned.

[00:15:59]>> Hm. Revenue growth, Viraj, for FY27?

[00:16:02]>> Uh definitely, we are looking at a positive revenue growth because of the developments what is happening and the confidence which we have which uh from our customers and their future plans.

[00:16:14]Uh I see it that that the revenue is also going upside and it will be a good year for us.

[00:16:21]>> So, so 30% growth maybe uh you know, 28 15,000 crores for that?

[00:16:26]>> uh consistently following the pattern which we have kept growing and we would be constantly on it aggressively working towards it and probably we are looking for more than that, but 30% is something which we will and we have to achieve.

[00:16:41]>> How much will be volume? How much will be value?

[00:16:45]>> Uh so, basically looking at the market, the rates and everything, we uh as you see as you know that we have shown 15% volume growth in the previous uh the previous quarter. So, we are also looking at not only just the value growth, but also the volume growth.

[00:17:01]So, it is all uh value and volume both go hand in hand.

[00:17:06]So, uh the main focus will always remain the volume and uh that will again by by of course will push the revenue ahead.

[00:17:15]>> And how much of this top line will now be bridal jewelry? How much will be Mangalsutra and how much will be job work? Because that's a lower margin segment. Is bridal jewelry the better margin segment? How much of the revenue will come from there?

[00:17:30]>> Firstly, bridal jewelry fetches us a better margins and creating for the giants, the big chain stores and the organized players.

[00:17:43]And we are not only just making, we are innovating in it. So, and it's been just a few months we have started this new category and we are aggressively working on it and our plan is that in a few years we match it with the same quantity as as Mangalsutra we are doing.

[00:17:59]>> Okay.

[00:18:01]Should we look at PAT margins for you or is EBITDA margin the best metric to look?

[00:18:06]Give us a sense of that.

[00:18:09]>> Of course, see eventually we ultimately want to grow the PAT margin.

[00:18:15]Because that is the main all it all sums up to the PAT margin.

[00:18:20]So, we are aggressively working how do we increase the PAT margins and by innovating, by creating something new.

[00:18:28]>> is it going to be product mix which is going to contribute to better PAT margins, capacity expansion? What contributes to better PAT margins for you?

[00:18:35]>> So, of course, the creativity adds on because the more better creativity we do, something new we add in the market, that fetches us better PAT margins. So, currently with the new setup, with the new team coming in, our main motto is to create something new in the market that fetches us better margins and better demand in the industry.

[00:18:55]>> On working capital uh is is there a challenge? How do you resolve that? And how quickly?

[00:19:02]>> Uh so, I would just like to explain our business module. So, we are a B2B player and we cater to organized as well as unorganized retailers and wholesalers.

[00:19:13]So before us the core of the product is the working capital which we need to keep in ready inventory which will help us so the more the working capital I have the more products I can display to my customers and if you see in the from the last year we have also have increased in the number of customers as well.

[00:19:32]So that only and only because of the better range the better quantity of the products we keep and as you're aware so we now in the last year we have also expanded our reach to two more two two more branches one in Delhi and one in Pune.

[00:19:47]To cater the interiors of India so that we can also get more volumes from the tier two tier three cities. So to get that we need working capital more more inventory so we can showcase to our customers and fetch more volumes and more revenue from it.

[00:20:04]>> Understood Viraj. When do you turn cash flow positive?

[00:20:08]Operating cash flow positive. Do you turn FY27? Do you wait for FY28? For how long do you keep investing in the business?

[00:20:16]>> Sir this is a business module we always need to keep ready inventory with us in a large volume. So the pattern will always follow the same way only thing is we have to plan we are working on improving the more churnings and better turnover issue.

[00:20:36]Which we are constantly working towards it and we we will probably you'll see the results in the coming few quarters as well.

[00:20:45]>> Okay. Okay non-committal.

[00:20:48]Can you give give us a sense with regard to customer concentration? That's the other possible risk which is there. How should one look at that?

[00:20:56]>> Sir customer if you see the right now currently we are having around more than 1300 customers in the previous year we have worked with so the customer base is very large and there are still outright sales there is job work sales also happening. So we have been planning to grow in both the segments and when we speak about Maharashtra I would like to emphasize that that like the major corporate stores corporate chains they have stores in several different states of the country but when but they are head office always remains in Mumbai or Maharashtra somewhere.

[00:21:34]Supply to them and they distribute their products. So it is not just Maharashtra centric but the products eventually gets distributed and to all different stores around the country.

[00:21:48]>> So the exposure we are going to talk about.

[00:21:51]Right. It is spanning India. Please complete.

[00:21:55]>> So the exposure when we talk about it looks that 50% Maharashtra but it's basically because all the chain stores have their head offices in Maharashtra but eventually these products get distributed to all different states as per their requirement to different parts of the country.

[00:22:14]>> Understood. Point taken. Viraj thank you so much for coming in and speaking to us. It's been a pleasure speaking. Thank you. Viewers that's all the time we have with regard to this edition of all about your company. Thanks so much for tuning in.