Agree with poor concall part, management was just trying to sugarcoat every answer with their target and margin growth.
Just to be clear about the standalone part,
If you look at the financials, standalone revenue accounts for around 70% of consolidation revenue, so growth in core business matter more in long term POV.
Also the subsidiary might be growing at good growth rate but they are smaller contributer to consolidated revenue and in short-mid term if the subsidiary earns any profit, they would rather invest in their own growth rather than distributing to parent company as a dividend, so core business growth rate is more important in such case, coz that’s going to be the primary driver for value creation.
On the flip side, in case of eternal where revenue of blinkit has surpassed zomato core food delivery business, there we should prefer consolidation revenue or in case of Conglomerate business like Reliance where there are multiple business we should prefer consolidated revenue.
But a small company like Skygold, I believe both matters and I value them by looking at both levels.
However, the recent shareholding pattern on Screener indicates that the promoter group offloaded some of their stake in July as well, which raises concerns about their commitment and consistency — they don’t seem to be walking the talk. Additionally, DIIs have trimmed their holdings slightly. While these developments may not yet constitute a red flag, they certainly represent yellow or orange flags that warrant closer monitoring.
The shareholding shows reduced % - as new shares were issued for Ganna & Gold acquisition to Ganna & Gold promoters. The total outstanding shares have increased leading to lower % for all shareholders. In terms of absolute number of shares there is no change in promoter holding and multiple DII entities. Detailed updated shareholding is availble on BSE where number of shares held by promoter is intact.
Did someone take note that according to the latest concall: Sky Gold charges making charges on a “percentage basis” not on per gram basis. The company’s gross profit is linked to gold prices on a percentage-wise basis.
So what this essentially means is if the prices of gold fall in the future their gross margin will fall as their manufacturing cost will remain same (i.e. cost basis will remain same), but the income basis (% of price of jewelry charged will go down with the fall in gold prices).
Maybe this is the reason why the stock has been falling so much lately, especially after the latest concall, where they disclosed this revenue policy.
So this is a big risk on the portfolios as the gold prices will fall, not only the revenue but the margins and hence PAT will also fall drastically.
Why will the cost remain same ? The artisans they deploy also gets paid in percentage terms unless they are operating in an entirely different manner from rest of the industry.
For example ..unorganised private businesses/jewellery shops pay the artisans like this…say the artisan is making 20 rings of 5gm each . So the shop owner allows 0.5 gm gold loss per 100 gm. This 0.5 gram is the artisans payment … whatever amount of gold he can recover( dust and shavings) from that 0.5 gram is his .
I would assume that skygold also operates this way .If thats the case ,the margin would remain same even if the absolute values drop due to gold price drop .
Disc. Not invested . Have gold artisan relatives and hence the attempt to provide inside knowledge of the sector .I do not really know if skygold operates differently .
Not quite, because Sky Gold’s making charge is a fixed percentage of the gold value, and both revenue and cost move with the gold price.
In my understanding, here’s how it works:
Making charge revenue = X% x jewellery selling price
Gold cost = gold weight x current market gold rate
Other manufacturing costs (labour, overhead) are relatively small and largely fixed per piece, but they’re a minor component compared to the gold pass-through.
When gold prices fall:
Jewellery selling price falls (since it’s gold + making charge).
Making charge absolute rupee amount falls (X% of a smaller base), and so does revenue per piece.
Gold cost also falls by the same percentage, because you’re buying the metal at the market rate.
Gross margin percentage (making charge ÷ jewellery price) stays the same, since both numerator and denominator scale together.
So gross margin in rupees per gram declines when gold prices drop (because X% of a lower gold price is a smaller rupee amount), but gross margin in percent of sales remains intact. In other words, margin % does not compress simply because gold prices have fallen, manufacturing cost moves in lock‐step with revenue base.
IMO: The only time you’d see margin‐percentage compression is if there were a glitch in updating your quoted percentage to customers (e.g., you held an old price quote unchanged while gold rates moved sharply), but in normal operations, the percentage model preserves the margin ratios.
Disclosure: Invested and holding, so my overall views are biased.
They use hedging strategies (mainly via MCX) to protect against gold price fluctuations, and the majority of their contracts with customers are repriced every 15 days. This means that if the price of gold drops, Sky Gold typically revises quotations with customers accordingly, and their margin is maintained on a percentage basis.
Historical commentary from Sky Gold management during previous periods of gold price volatility (such as 2020–2021) confirms that margins have remained largely intact, unless there is an extremely sharp and prolonged drop in gold prices—an unlikely scenario given historical gold price behavior.
Just bought Sky Gold as 2% of my PF. Expect to increase to 5% shortly.
Promoter selling seems to be the only concern. GML is a good thing. Capacity addition story is playing out. I was concerned that there was not much of volume increase in the last 3 quarters, hovering around 450 kgs but with new export orders, there is a visibility to exceed 500+ kgs next quarter and to get to 650 kgs by Q4 as management promised. Whether Gold is going up or down, shouldn’t cause a huge issue over a year and I do believe that Gold going down too drastically like 30% is a less probable scenario.
Therefore, I believe they will get to ~300cr PAT by fy27, just going by management figure of 4.5% margin. By that time, US interest rate going down should bump up gold price as well, company is already into 14/18k gold. So, all in all, probability of price going up 2-3x is much higher than going down 25-50%. If any contrarian view, please let me know.
Recently during my trip, I saw one store of sky gold in Honsur. I was surprised to see it in a small town. Then I checked on the website and found that they have many stores.
Are these manufacturing facilities where they have showrooms to showcase the work? I saw customer reviews as well, so I am wondering what are these?
Also there were many billboards put up for advertisement which we generally do for retail showrooms mostly.
Focus on sustainable 30-35% sales growth.( this will not require any stock dilution)
Focus on being cash neutral in FY26 and positive OCF in FY27 ( a key concern market has been worried about)
Appointment of MNC autidor (improves Corporate governance)
Rise in Advance Gold volumes from 12% to 30-35% over medium term ( higher ROCE)
Appintment of key dsitributors in domestic market
Appointment of a key personnel for exports (current 10-15% to 30% targeted over FY30)
Aim to be debt free by FY30
sales / PAT target of 18000cr/ 1000cr by FY30
implementation of ERP- a senior guy appointed. (ERP is tough to implement in jewellery)
Overall, it seems like company doing all things which an investor would seek. Also, continued to deliver strong results. Guidances have been strong historically but the company never disappointed. Not to mention very low PEG ratio that the stock is trading at.
Disc: Invested
One of my friends are running Jewellery show room. In gold Business where margins are less than 7 percentage no one Keep Repay period of more than 6 month.
For me either 2 of the possibilities
either their designs are not getting sold
Jewellers are not paying them as their designs are not working
I appreciate the concern regarding ₹600+ crore receivables. It’s good to be cautious. But before labeling this as a potential “Gensol-type” situation, do we have hard financial evidence pointing in that direction?
Every business model is different. Comparing a jewellery manufacturer with Gensol Engineering Ltd. (power/renewable infra, project-based, asset-heavy) may not be appropriate. Jewellery manufacturing is typically working-capital intensive. Credit cycles can stretch during aggressive distribution expansion, franchise scaling, or export growth.
Also, history shows that numbers alone can mislead without context. Years ago, Titan Company Ltd. had revenue of roughly ₹300 crore and debt of about ₹750 crore. Many doubted the model then. Yet Rakesh Jhunjhunwala invested because he understood the scalability and brand potential of the jewellery retail business. The outcome is well known.
That said, skepticism is healthy. The real red flags to examine would be:
Is receivable growth significantly outpacing revenue growth?
Are debtor days rising consistently year after year?
Is operating cash flow persistently weak despite reported profits?
Any auditor qualifications or unusual related-party transactions?
If such evidence exists, the concern becomes data-backed and worth deeper discussion. If not, calling it a scam may be premature.
Having a negative lens helps manage risk. But painting every company with the same brush without analysing sector dynamics and financial trends may not serve well in the long investment journey.
Let’s debate with numbers and facts — that benefits all investors.
