Monday, October 13, 2025
- Advertisement -

Kalyan Jewellers leverages FOCO model for 40% of revenue

Kalyan Jewellers achieved a 32 per cent CAGR in consolidated operating income from FY2022 to FY2025,

- Advertisement -spot_img

KOCHI: Kalyan Jewellers has successfully transformed its growth strategy by expanding through an asset-light FOCO (Franchise Owned, Company Operated) model, now accounting for roughly 40 per cent of its consolidated revenue.

Since launching the model in FY2023, Kalyan Jewellershas opened 193 FOCO stores – including both its flagship and Candere brands in India, and Kalyan stores in West Asia – compared with just 41 company-owned outlets.

This strategic shift has helped reduce inventory days from 221 to 156 and trim its net working capital-to-income ratio from 41 per cent to 21 per cent between FY2022 and FY2025, substantially freeing up cash, according to ICRA rating agency.

The results have been impressive. Kalyan Jewellers achieved a 32 per cent CAGR in consolidated operating income from FY2022 to FY2025, with Q1 FY2026 revenue growing a further 31 per cent year-on-year. Other metrics also highlight the turnaround: cash accruals nearly doubled to Rs879 crore, Return on Capital Employed (ROCE) rose to 14.4 per cent, and gearing has begun to ease thanks to plans for sustained debt reduction.

Rapid expansion and higher sales have been driven particularly by a pivot away from southern India. Revenue from other regions grew at a 52 per cent CAGR, raising their share in standalone revenues from 34 per cent to nearly 52 per cent. Same-store sales remained strong, up about 20 per cent in FY2025 and 18 per cent in Q1 FY2026, especially from newer openings in tier-II cities, West Asia, and recently launched US.tie-ups.

Challenges galore

Yet challenges are mounting. Kalyan operates in a fiercely competitive market with both organised giants like Titan and regional players such as Malabar Gold, alongside the still sizable unorganised sector. This competition narrows pricing flexibility. Volatile gold prices – hovering near Rs1 lakh per 10 grams – can eat into margins, especially if demand weakens among middle-income customers.

Operating margins have also been impacted by two factors: increased profit sharing with franchise partners and a one-time hit from a July 2024 customs duty cut, which reduced margins by roughly 50 basis points in FY2025.

“Regulatory and macro risks also persist. The industry remains vulnerable to fluctuations in tax policy, bullion import duties, GST changes, and broader frameworks like anti-money laundering regulations in the gem trade,” ICRA noted.

Despite these headwinds, Kalyan’s strong brand and its significant advantage in the FOCO model give it an edge. By keeping capital light and turning risks over to franchisees, the company has elevated efficiency and improved its debt protection.

The key test ahead will be balancing continued expansion with margin discipline – particularly as competition intensifies, gold prices fluctuate, and consumer spending trends shift.

Latest News

- Advertisement -

Latest News

- Advertisement -