Sky Gold Ltd: A Comprehensive Analysis
1final report valpic sky gold.docx (872.0 KB)
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SKYGOLD ; Ministry of Corporate Affairs has approved the incorporation of wholly owned subsidiary of the Company in the name of, Sitaare Gold and Diamonds Limited on 22nd January, 2025
“Sitaare” is established for wholesale and retail trading of gold, silver, jewellery, diamonds (cut, uncut, industrial), precious stones, pearls, and related valuable items.
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Q3 FY25 Highlights
Financial Performance:
- Consolidated revenue for Q3 stood at ₹998.0 crores, up 116.7% YoY from ₹460.4 crores in Q3 FY24.
- EBITDA for the quarter was ₹57.3 crores, showing a growth of 217.6% from ₹18.0 crores in Q3 FY24.
- PAT for Q3 was ₹36.5 crores, compared to ₹8.9 crores in Q3 FY24, resulting in a PAT margin improvement to 3.7% from 1.9% YoY.
- For the 9 months of FY25, consolidated revenue was ₹2,489.8 crores, up 102.1% YoY.
Client Acquisition:
- Successfully onboarded Aditya Birla Novel Jewels’ Indriya brand, a significant milestone.
- Strengthened partnerships with major jewellery retailers, including CaratLane and P.N. Gadgil.
- Existing clients are planning aggressive expansion, indicating robust growth opportunities.
Market Dynamics:
- Strong demand for wedding jewellery persists despite fluctuations in gold prices, with customers adapting to market changes.
- The jewellery industry is witnessing aggressive expansion as brands increase their retail footprint to capture more of the organized market.
Product Diversification:
- Expanded into new jewellery segments, including 18-carat natural diamond jewellery and lab-grown diamond jewellery.
- The rebranding to Sky Gold and Diamonds Limited reflects a strategic shift to encompass diamonds and precious stones.
Operational Metrics:
- Monthly production volume averaged 447 kg , up 66% YoY from 270 kg per month last year.
- Exports contributed significantly with sales reaching ₹71 crores, marking a 12% growth compared to the previous quarter.
Credit Rating:
- Received an ‘IND A-/Stable’ rating from India Rating, a subsidiary of Fitch, which is expected to reduce borrowing costs and improve financial positioning.
- Current borrowings is around 380-400 cr. Gross debt next year would be around 550-600 cr and the increase in debt will be to get GML.
Growth Guidance:
- Revised revenue guidance for FY27 to ₹7,200 crores from the previous ₹6,300 crores due to new client acquisitions.
- Expected PAT margins for the revised guidance are between 3.5% to 4%.
- The company will be cash flow positive by 2027
Capacity Expansion Plans:
- Plans to build a new facility post-FY27 to accommodate increased client onboarding and production needs.
- Current capacity is at 1 ton per month, with future plans to expand to 4 tons.
Challenges:
- The management acknowledges some short-term impacts on retail demand due to high gold prices, but remains optimistic about long-term growth.
- Acknowledged that the gold loan conversion is progressing slower than anticipated, but expects to reach 60-70% by March 2025.
Strategic Initiatives:
- Focus on onboarding clients who provide raw materials, reducing capital employed and improving ROCE.
- The client onboarded are giving SGL the raw material by their own. So, SGL don’t have to fund that inventory and are adding those clients only. They are targeting Reliance also for that and already Tanishq is in pipeline.
- Expecting 30-40% of the revenue from Caratlane, Aditya Birla type of customers who can provide the inventory.
- Exports revenue to be around 15% in the next two years.
- Targeting to convert 70-80% of overall debt to Gold Metal Loans (GML) to lower finance costs.
Employee Retention:
- Initiatives in place to retain skilled artisans and karigars, including project-based incentives and improved facilities.
- Currently employing around 950 people across subsidiaries, with plans for gradual hiring aligned with production increases.
- To double production, the company won’t need twice the number of employees; instead, they will require about 1/3rd fewer employees due to advancing technologies. SGL has already increased US electro-polishing machines and introduced 3D printers, which are reducing the company’s manpower needs.
Receivable days:
- Over the next two years, SGL anticipates that CaratLane, Aditya Birla, and Reliance—and potentially Tanishq, if successfully onboarded—will contribute 50% of their bullion production. With a total capacity of 1,000 kg, 500 kg will come from their raw materials, while SGL will need to finance only the remaining 500 kg and support the debtors. As a result, debtor days will automatically reduce to around 15 days.
- Receivables in exports is around 7 to 15 days, better than India.
Lab-grown diamond:
- The entire industry follows the same model: we procure inventory based on incoming orders and dispatch accordingly. When new orders arrive, we place additional orders. We follow this same process for natural diamonds as well, as their prices, including those of small diamonds, tend to decrease by 10-15%.
- We procure diamonds based on company orders. When new rates are available, we provide updated quotes to the corporates for their approval. Rates are adjusted every quarter or six months, depending on market fluctuations. We purchase at the same updated rates, which is why we maintain limited orders and do not keep inventory.
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A general question. I’m holding this stock since almost 2 years now and for almost a year, the stock has been stuck in the 5% circuit zone. I understand that this is not ESM, because the company crossed the threshold ages back. The stock is in BE group and I’m just confused how or what is it gonna take for SKYGOLD to come out of this pathetic circuit jail.
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- Exit from BE Group – If liquidity improves and trading volume stabilizes, the stock may be reclassified to a normal group like B or T.
- Corporate Actions – Bonus issues, stock splits, or strong earnings can attract fresh interest.
- Institutional Participation – Entry of big investors can break the circuit trap.
- Relaxation of Circuit Limits – Exchanges sometimes review circuit limits if liquidity improves.
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How 5% circuit is affecting your returns from last 2 years? I mean, is there any adverse effect of this circuit?
Aim is to generate north of 15% on a PF level. Stock specific i am keen to focus my time on fundamentals and rotating incremental money to right sectors. 5% or 2% is not something i can control.
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There has been a bonus issue of 9:1 very recently. There were pretty big entrants like Ashish Kacholia
(he also sold some shares). Volumes are usually pretty solid. A respectable market Cap of 5,500 crores. So my point is, there’s usually no way of finding out when or how the circuit limits can be revised.
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It has no major effect on my investment. The stock was a sub 500 crores mcap company when I invested and is at 5500 crores mcap now.
Infact it could be a savior during major correction. However, the growth trajectory of the company has been pretty solid and I believe a company that big should not be stuck in a circuit limit for almost a year. Price discovery is majorly impacted.
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do we have any listed peers that somewhat operate in the same space?
ashapuri , Utsaav CZ and RBZ do have B2B processing for gold
ashapuri is purely in house manufacturing and trading while others have some retail component in them
Last qtr ( March 25) Capacity utilisation was 550 Kg per month compare to 457kg per month in Dec qtr.
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