Investment Thesis Report
Senco Gold Ltd.
Company sustains strong store expansion, aligned with evolving
consumer preferences
About the Company: Stock Information
Senco Gold Limited (‘Senco’ or ‘the Company’) is emerging as one of BSE Code 543936
the most promising pan-India organized retail jewelry players, with Equity Shares (Cr.) 7.8
over 165 stores (COCO/FOFO/FOCO - 97/65/3). The company has a Market Cap. (Cr.) ₹ 10,488
market share of 4% in the eastern market and a 12% share of the 52 Week Range ₹ 1,544 / 576
overall organized market, focusing on the lightweight jewelry segment
Free Float (%) 31.6
to keep up with changing consumer preferences. The company utilizes
a hub-and-spoke model to strengthen its regional grip, as the rural
market accounts for 58% of the demand for jewelry. Additionally, it Stock Performance (1-years):
follows a cluster-based approach to enhance its regional influence over Senco Nifty 50
other market players.
Indian Economy and Jewelry Sector Overview:
Despite increasing inflation and the weakening of the Indian Rupee
against the USD, the Indian economy achieved a growth rate of 8.2% in
real terms, which was the highest growth among major advanced and
emerging market economies in FY2023-24. Driven by increasing
disposable incomes, growing fashion consciousness, and rising demand
for branded jewelry, the Indian jewelry market is expanding and is
expected to grow at a CAGR of 5.7% from 2024 to 2030, driven by
rapid shifts in consumer purchasing behavior, transitioning from
unorganized/local to organized channels.
Shareholding Pattern:
Key Highlights:
Particulars Sep-23 Dec-23 Mar-24 Jun-24
• Consolidated Revenues stood at INR 1,403.8 crore, with a YoY
Promoters 68.5% 68.5% 68.5% 68.5%
growth of 8%, whereas standalone revenues rose by 9% YoY,
reaching INR 1,305.4 crore. FIIs 14.5% 14.5% 14.0% 7.7%
• Projected top-line growth is expected to be 18-20% during FY25, DIIs 8.5% 7.0% 7.5% 10.5%
while PAT margins have been revised due to a loss of ~INR 50 crore Public 8.6% 10.1% 10.0% 13.4%
resulting from the reduction in customs duty from 15% to 9%.
• EBITDA and PAT margins are aligned despite competitive pressures Changing Market Dynamics:
and discounting practices in the market.
• The Average Transaction Value (ATV) of the business stood at INR
74,000, up by 12%, and the Average Selling Price (ASP) improved by
13%.
• The company generated a retail growth of 11% and Same Store
Sales Growth (SSSG) of 4%, despite challenges such as elections,
gold price fluctuations, and global tensions affecting retail sales and
footfalls.
• It has opened 4 COCO and 2 FOFO stores, collectively representing
~1/3 of the total stores planned to be opened during FY25.
• Management of the company is very confident and expects their
studded jewelry segment to improve by 100 bps this year, aiming
to reach 15% (industry average) by FY27. Additionally, they are also
Financial Snapshot:
looking to increase sales of diamond jewelry, as it delivers higher
margins compared to plain jewelry. Particulars Mar-24 Mar-25 Mar-26
• The franchise business quality has improved compared to the last Sales 5230 6274 7473
financial year, led by a reduction in opex., further improving the
operating leverage.
Growth (%) 28.3% 20.0% 19.1%
EBITDA 394 481 594
Commentary on Management:
Margins (%) 7.5% 7.7% 7.9%
The company has a strong management team with extensive EBIT 335.33 415.38 521.26
experience and technical know-how. Moreover, independent directors
Margins (%) 6.4% 6.6% 7.0%
bring diverse expertise from various industries. Based on our research,
Key Managerial Personnel are compensated modestly, with an average PAT 189 252 340
increase of 10% from the last financial year. Margins (%) 3.6% 4.0% 4.6%
Investment Thesis Report
Senco Gold Ltd.
Company sustains strong store expansion, aligned with evolving
consumer preferences
Market Landscape (Market Cap. > INR-5000 cr.):
High Margins Note:
-
Growth Rate: Refers to the
topline growth as guided by
the management of each
company during conference
calls.
Moderate Growth High Growth -
Margins: Denotes Operating
Profit Margins (%) used to
gauge the operational
efficiency of each company
Moderate Margins in the jewelry sector.
Financial Highlights:
The company has shown impressive financial growth over the past four years, with revenue doubling from ₹2,420.3 crore in
2020 to ₹5,241.4 crore in 2024, reflecting a steady 21% annual growth rate. After going public in FY2, the company saw a
significant boost in its net worth, maintaining a manageable debt-to-equity ratio of 1.1x. Its efforts to expand across India have
resulted in strong returns, with returns on equity (ROE) at 15.7% and return on capital employed (ROCE) at 12.5%.
Additionally, the company's Profit After Tax (PAT) has doubled, rising from ₹90.9 crore in 2020 to ₹181.0 crore in 2024,
showcasing its solid performance and promising future.
Investment Thesis:
▪ Management’s confidence in the company’s growth is evident through its aggressive store expansion plan, with 18-20
new stores expected to open annually from FY2025 to FY2027. This strategy is anticipated to strengthen their market
presence and boost the revenue base, with a projected annual growth rate (CAGR) of approximately 20% over the same
period.
▪ To align with changing consumer preferences, the expansion of the lightweight jewelry line (EVERLITE) and lab-grown
diamond collection (SENNES) is expected to enhance profitability, projecting EBITDA margins above 8% for sustainable
long-term growth.
▪ The company has built strong brand loyalty, with 51% (300,000) of the 588,000 transactions in FY23-24 coming from
repeat customers, while 49% (288,000) were new customers, reflecting effective market outreach and growth potential.
Its intricate designs and high-quality offerings appeal to a niche, design-conscious consumer base, positioning the brand
well in the premium segment.
▪ Same-store sales growth (SSSG) guidance is expected to remain intact at 13-14%, while gross margins are projected to
hover around 14-15%, reflecting management's commitment to exceeding industry averages. The studded ratio has
improved by 250 bps in the last three years, positively impacting profitability margins.
▪ Effective inventory hedging is achieved through gold metal loans from a consortium banks, along with the use of futures
and options on MCX to mitigate risks from gold price fluctuations. An inventory churn of 2 is maintained in the first two
years, increasing to 3 from the third year onwards, which enhances ROE of the company.
▪ A tailored approach to drive revenues has helped gain a competitive edge in the market. During Q1 of FY25, the
Gathbandhan collection was launched to cater to the rising demand for weddings. The entire industry enjoys a limited risk
of substitution because the underlying demand remains steady.
Key Downside Risk:
▪ Margins are under competitive pressure as organized players seek to expand their reach into tier-3 and tier-4 cities.
▪ High working capital requirements and fluctuations in gold prices may negatively affect profit margins.
▪ The company relies heavily on skilled craftsmen, known as ‘karigars,’ primarily sourced from West Bengal.
