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Gold Prices hit all time high amid Trump Tariffs
Equities, Markets, Research, Result Updates - February 14, 2025

Sky Gold recorded boom in its net profit by 309 percent YoY in the 3QFY25

Sky Gold recorded boom in its net profit by 309 percent YoY in the 3QFY25 

About the Stock

One of the top jewellery enterprises in Mumbai, Sky Gold Limited was founded in 2008. The company’s operations have included designing, producing, and selling gold jewellery. The company specializes in 22-carat gold lightweight jewellery and uses casting to make jewellery. The company produces Turkish jewellery, Plan gold jewellery, and jewellery with studs of gold.
 With top jewellery retailers like Malabar Gold & Diamonds, Joyalukkas, Kalyan Jewellers, GRT Jewellers, Bhima Jewellers, and Senco Gold & Diamonds, the company operates on a business-to-business (B2B) basis. The company also collaborates with big wholesalers and as a result, has its products in over 2,000 showrooms throughout India. Sky Gold Ltd., recently onboarded the brand Indriya by Aditya Birla Jewellery. Indriya, a luxury jewellery brand that was introduced by the Aditya Birla Group in July 2024, elegantly combines modern design with traditional Indian craftsmanship. This partnership is a significant step for Sky Gold Ltd., which aims to rank among the leading gold merchants in India in the next five years by partnering with prestigious companies that share its commitment to excellence in design and quality.

 

Quarterly Update

Revenue growth surged 116.7% in Q3FY25

Sky Gold Ltd. reported a healthy quarter with topline growth of 116.7% YoY (+29.8% QoQ) to Rs. 99796.92 lakh. This growth was led by an increase in sales volume.

EBITDA Margins improved significantly

EBITDA growth seems robust YoY and QoQ as well, grew 218% YoY (+48% QoQ) to Rs. 5729.17 lakh. This growth attributed to margin expansion and solid topline growth despite higher operational expenses. EBITDA margin expanded 182 bps YoY to 5.74% and increased 70 bps QoQ to 5.04%. EBIT jumped 235% YoY (+48% QoQ) to Rs. 5442.97 lakh despite higher depreciation cost . Depreciation for the quarter stood at Rs. 286.20 vs Rs. 179.99 lakh in the same quarter previous year. EBIT margin hiked YoY and remained fairly stable on a QoQ basis.

PAT surged during the quarter

PAT boom 309% YoY (-0.47% QoQ) to Rs. 3653.98 lakh led by higher other income (up 1451%) and margin expansion. PAT margin stood at 3.66% for the quarter vs 1.94% in Q3FY24.

Successfully raised Rs. 270 Cr. through QIP

SGL raised Rs. 270 Cr. through qualified institutional placement (QIP) on October 17, 2024. A few powerful institutional investors, including Bank of India, Kotak Mahindra Life Insurance Co., and Motilal Oswal Mutual Funds, have joined SGL through QIP. The company plans on allocating this capital towards increasing the range of products offered, especially in jewellery made of 18 carat gold and diamonds, aiming for a total addressable market (TAM) of 65% by increasing capital injection into subsidiaries Sparkling Chains Private Limited and Star Mangalsutra Private Limited.

Changed name to Sky Gold and Diamonds Ltd.

Sky Gold Ltd. changed its name to Sky Gold and Diamonds Ltd., reflecting a strategic shift in the company’s focus beyond gold to encompass diamonds and other precious stones.

Years (In Cr) Q3FY25 Q3FY24 YoY (%) Q2FY25 QoQ (%)
Revenue  997.97 460.44 116.7% 768.85 29.8%
COGS 925.06 435.94 112.2% 718.89 28.7%
Gross profit 72.91 24.50 198% 49.95 46%
Gross Margin% 7% 5% 37% 6% 12%
Employee cost 8.04 3.12 158% 6.16 31%
Other expenses 7.58 3.34 127% 5.02 51%
Total OpEx 15.62 6.46 142% 11.17 40%
EBITDA 57.29 18.04 218% 38.78 48%
EBITDA Margin% 5.74% 3.92% 46.53% 5.04% 13.82%
Depreciation 2.86 1.80 59% 2.21 30%
EBIT 54.43 16.24 235% 36.57 49%
EBIT Margin% 5.45% 3.53% 54.64% 4.76% 14.66%
Interest cost 12.19 4.74 157% 10.13 20%
Other income 7.13 0.46 1451% 19.75 -64%
PBT 49.36 11.96 313% 46.19 7%
Tax expenses 12.82 3.02 324% 9.47 35%
Tax Rate% 26% 25% 3% 21% 27%
PAT  36.54 8.93 309% 36.71 -0.47%
PAT Margin% 3.66% 1.94% 88.75% 4.77% -23.32%
EPS 2.52 0.82 207% 2.75 -25%


Con Call Highlights

  • In the third quarter of the current financial year, the company recorded a growth in EBITDA margin by 217.6  percent YoY which accounts to Rs. 57.3 crores. In the 9-month of the financial year 2025, the company’ EBITDA improved by 115 basis YoY.
  • The net profit in the third quarter and 9-month of the current financial year were about Rs. 36.5 crores and Rs. 94.5 crores, respectively.
  • The company is in line with its target of Rs. 3,300 crores. It is positively supported by its efficient management and operational activities of the new client acquisition.
  • In the present times, the gems and jewellery industry in India is observing expansion of retail exposure by prominent brands in the industry to capture a big share in the organized market. Clients of Sky Gold are also set to aggressively achieve this goal. It will aid in the progress of the company.
  • The company successfully onboarded CaratLane and Indriya of Aditya Birla in its clientele base. Sky Gold expects to deliver monthly 50 kg each from both the companies in the upcoming quarters.
  • The advantage of the new clients is that these clients will give their own gold bullions. It will help the company to not fund debtors and inventory leading to increase in its gross margins.
  • The company earlier had guidance of Rs. 6,300 crores. Now it has increased to Rs 5,700  crore in FY26 and 7,200 core in FY27.
  • In the current gold price volatility, the market is observing strong consumption demand for wedding jewellery.
  • Sky Gold has expanded its market presence by increasing its manufacturing of 18 carat natural diamond jewellery, and lab-grown diamond jewellery. The company has planned to rebrand its name as ‘Sky Gold and Diamonds Limited’ indicating its strategic shift in the product portfolio.
  • India Rating, subsidiary of Fitch globally, has given Sky Gold a credit rating of ‘IND-A-/Stable’ for the company’s bank credits. Further, the company has been assigned ‘IND A-/Stable/ IND A2+’ rating for its fund-based working capital limits and proposed fund-based working capital limit.
  • The updated credit rating of the firm underlines robust operational efficiency and inorganic growth in the industry. It will further the company in lowering cost of funds and collateral requirements. It will also improve ROCE and ROE of the company.
  • Currently, the loan conversion to GML was around 20-25 percent. It faced a moderate process due to one of its banks. It has now moved towards ICICI bank and SBI in process. It is anticipated to reach 55 to 60 percent in the March quarter.
  • The company is currently focused on expanding its manufacturing in 18 carat rose gold, white gold jewellery, and natural diamond. Apart from this, the company successfully shipped its first of lab-grown diamond production to Limelight jewellery, which has 25 stores.
  • There is a rising expectation that the industry will record a shift  to the organized market by 78 percent in the upcoming 5-6 years due to a stable government and its policies.
  • The company is focused on increasing its export levels. It has already onboarded clients from Singapore and Dubai.
  • The plans to expand its facility as it anticipates a surge in growth of lab-grown diamonds and also growing preference for 18-carat.
  • Company is focusing on lowering debtor days and is anticipated to contract to 15 to 10 days. The company is aiming  for clients who will provide bullion advance or focus on cash and carry business model.
  • In terms of receivable cycle from export is around 7, 10, 15 days comparatively faster than India. The company’s goal is to achieve 15 percent of export levels, which is currently at 8 to 9 percent.
  • In the third quarter, the company received Rs. 3.3 cores from the sales of its investments and Rs. 2.4 cores from the interest income.
  • In case of release in this quarter as well, the company will get other income. Currently, Rs. 35 crores of shares are in the release process with the SBI.
  • In the upcoming financial year, debt is expected to be around Rs. 550 to 600 crores due to expansion of its various segments like lab-grown diamonds, natural diamonds, and 18-K carat.
  • The cash conversion cycle is expected to expand by more than 50 percent.
  • The lab-grown diamond is a devaluating asset which was earlier recording big falls and now its contractions are in a limited range. In this scenario, the company plans to order it only when an order for it is placed. This same model will apply to natural diamonds as well.
  • The company provides basic facilities like gymnasium and saloon to its artisans and karigars. Apart from this, the company provides incentives on the basis of their designs and its  performance in the market, and also the amount of production undertaken by them. The company only  needs about 1/3 employees in line with expansion in production due to adoption of the latest technology.
  • Increase in GML will help to improve finance cost to around 0.7 percent or 0.65 percent.
  • The margin guidance in terms of EBITDA and net profit is set at 5.5 percent and 3.5 percent, respectively inFY27. Also, 7 percent for gross margin in FY27.
  • The guidance in terms of volume growth is more than 1,050 kg in FY27.

 

Valuations

Currently the stock is trading at multiple of 49.8x 7.81 EPS at the current market price of Rs 367. In book terms, trading 15.5x than its book value of Rs. 23.7. As of today, ROCE stands at 18.6% while ROE is 23.2%.

 

Future Outlook

Through the capital raised, Sky Gold which has a strong hold in the 22K gold category, plans on expnding their product portfolio by stepping into emerging categories such as 18K gold, natural grown diamonds and lab-grown diamonds and at same time concentrating focus on value added studded jewelry segment by way of acquisition of subsidiaries to increase total marketable market (TAM). The company also plans on penetrating in international markets such as the Middle East, Singapore, Malaysia with revenue split on exports at ~7% currently.

 

Sky Gold aims to increase its capacity utilization to 1050 kgs per month which currently stands at 447 kgs per month. Further the company plans to expand revenue to Rs. 7,200 Cr. by FY 27, PAT margins to ~3% and a ROCE above 25% (ROCE currently stands at 18.6%).

 

The image added is for representation purposes only

3QFY2025: TCS records PAT of rs. 12444 crore increased by about 12% YoY

 

 

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Why do commodities Exchange Exist?

What are commodities Exchange?

The Commodities exchange allows traders to buy and sell goods. It includes both simple goods and manufacturing goods. The function of Commodity exchange is to provide a centralized marketplace where commodity producers and commercials can directly sell to those who want them for consumption or manufacturing. Commodity future exchange connects buyers and sellers easily. It helps businesses to enhance while there is a buyer for every seller. It makes the economy much more efficient with standardized prices for a commodity. Commodities are into two broad categories: hard and soft. Hard commodities consist of natural resources that must be mined or extracted, whereas soft commodities are agricultural products such as grain, meat, dairy, and livestock. Investors use these commodities to diversify their portfolios. Commodities are considered a risky investment class.
It is affected by many uncertainties and risks, such as epidemics, natural calamities, or other unpredictable circumstances. Individuals can invest in commodities through futures, options, exchange-traded funds, and contracts. There are six major commodity trading exchanges in India:

1. Multi Commodity Exchange (MCX)
2. National Commodity and Derivatives Exchange (NCDEX)
3. National Multi Commodity Exchange (NMCE)
4. Indian Commodity Exchange (ICEX)
5. Ace Derivatives Exchange (ACE)
6. The Universal Commodity Exchange (UCX)

Types of commodities:

1. Metals Commodities – This includes the trading of precious metals such as gold, silver, copper, and platinum. Gold is traded by investors as it is the safest way to diversify their portfolios against any uncertainties like inflation or currency devaluation.

2. Energy – This includes commodities like gasoline, natural gas, heating oil, and crude oil. Normally, oil price fluctuates due to the increasing demand for energy commodities. However, individuals entering energy commodities should be aware of economic reforms, a shift in production by OPEC, and new advances in technology.

3. Agriculture commodities – Commodities such as soya, rice, wheat, coffee, corn, cocoa, sugar, and cotton come under agriculture commodities. These commodities are bought by the wholesaler or a firm that uses them as a raw material. 

4. Meat and livestock – This includes commodities like feeder cattle, pork bellies, lean hogs, and live cattle. The trading of livestock is not popular in India. It is mostly done in the US, UK, China, etc.

 

Ways to Invest:

A derivative Contract (Financial Instrument) is a contract between two parties for deriving value from any underlying assets. As the Price of underlying assets changes, the value of underlying assets also fluctuates.

 

The types of Derivative Contracts:

Options – Options are contracts where the buyer has a right to buy or sell a particular security at a predefined price. It is commonly known as a strike price. However, they don’t have obligation to buy or execute the option. One who executes the contract is known as the option writer.
Forwards – It has an obligation in the contract, which is unstandardized and not traded on stock exchanges. Forwards are available over the counter only and cannot de traded directly on market. However, forwards can be customized according to the parties involved. Forwards contract has third party risk. There are chances that the other party defaults in the payment or delivery of the product are not done as there is no regulatory party involved.  
Futures – This is the same as forwards, but futures are standardized and allow holders to sell or buy security at a specified price and date. Futures can directly be traded on market.
Swaps – It involves swapping of obligations between the two parties depending on cash flows which are depended on the rate of interest and agreed upon at the period while entering into the contract. Here, one cash flow is fixed and the other depends on the market interest rate and usually, these rates are swapped.

The best way to trade in commodities is through futures contracts. An agreement to buy or sell a commodity in the future agreed on a date at a pre-determined price.

 

Role of commodity market:

1. Food security – Farmers can use the future market more effectively by selling at a future price by fixing the price. This will ensure that they are not susceptible to future fluctuation in price. Hence, food security can be achieved using the commodity market. Many times commodity markets help farmers in hedging the commodity which is prone to uncertainties and risk. 
2. Agricultural ecosystem – Substantial amount of food grains are lost in the transmission process. The commodity market helps farmers, brokers, middlemen, and customers. If the food gains are not stored properly they get attacked by rats and pests.  
3. Aggregation – Currently, the middleman acts as an aggregator which is not a transparent mechanism. So, commodity exchange provides an organized and guaranteed mechanism for all the essential commodities.
4. Hedging and risk – One important role and function of the commodity market is to hedge and distribute the risk in the market.
5. Speculative excess – The commodity market absorbs speculative excess risk in the market, especially in the spot market. It helps various retail investors to participate in the new asset class.

 

What are Gold funds and what are the benefits?

 

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Gold set for best month in 4 years

Gold set for best month in 4 years

On 30th April, the gold prices had a surge, en routing to its best month in the last 4 years. This is because of the increase in expectations about the monetary ease provided by the central banks and the continuous stress over the global recession which increased the demand. Spot gold showed a surge of 0.2% at $1,713.75 per ounce by. The US gold futures showed an increase of 1.1% to $1,732.10 per ounce.

 

How the gold prices surged?

Eugen Weinberg, the Commerzbank analyst stated the immense monetary support received at the movement is helping gold. Regardless of the increasing risk appetite, the gold prices stayed above $1700 ounce even though it has faced pressure from the equity markets. Carlo Alberto De Casa, Kashif analyst of Activtrades said to the media that the investors will remain confident about quick solutions for the coronavirus. The central banks will be forced to print a large amount of money leading to hyperinflation in such economic turmoil.

 

Interest rates:

United States Federal Reserve preserved the interest rates and it should be left unchanged for sometime. The unexpected monetary influence provided by both the European Central Bank and the Federal Reserve will probably increase the demand for gold in the future.

Over the last six weeks, the European Central Bank left the interest rates unchanged after revealing various stimulus measures including a plan to buy 1.1 trillion euros worth of debt this year. The Federal Reserve kept the interest rates near zero on April 29. They also promised to extend the emergency series of measures needed to help the battered and bruised economy.

In the first quarter, the US economy contracted at its shortest pace since the Great Recession. In the second quarter, it is likely to show a more sharper contraction. The Bullion showed an increase of more than 9% in the last month. It is boosted by several stimulus measures from the central banks to handle damage caused from the corona virus outbreak. The unchanged lower interest rates will reduce the alternative cost of holding non yielding gold. It is always considered as a risk against inflation and canker currency.

 

 

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