Kalyan Jewellers sparkles from expanded network

Kalyan Jewellers continues to showcase revenue growth, surpassing its peers like Titan with a 32 per cent increase compared to the previous year. This growth is primarily driven by expanding its network through franchise operations, which experienced a 31 per cent year-over-year growth, says an ICICI Securities research report. Moreover, Kalyan achieved performance in Same Store Sales Growth (SSSG), recording an 8 per cent increase compared to the year, though slightly lower than Titan's 22 per cent. The company's decision to extend the Franchise Owned Company Operated (FOCO) model in the Middle East and adopt the format is expected to contribute to its Return on Invested Capital (ROIC).

Furthermore, Kalyan has observed improvements in Return on Capital Employed (ROCE). Return on Equity (ROE) over the past twelve months experienced a rise of 210 basis points to 19 per cent and 15 per cent, respectively. These positive changes more than offset any reduction in operating profit margins. It is important to note two factors. Firstly, Kalyan's revenue from southern regions now accounts for 46 per cent of their total revenue, indicating a positive trend for their overall profit margin. Additionally, the growing jewellery sales serve as an advantage for Kalyan's profit margins, and this positive trend is expected to continue in the upcoming years, even though it might be partially counterbalanced by lower gross margins resulting from franchisee revenue, says the report.

Read the ICICI Securities report here.