THRISSUR: Kalyan Jewellers has eliminated Rs1,324 crore of conventional, non-Gold Metal Loan (non-GML) debt from its standalone Indian operations over three years, marking a significant shift in the way the jewellery retailer finances its business as it pursues an asset-light expansion strategy.
The company's standalone debt, which stood at Rs2,415.2 crore in FY23, had declined to Rs1,198.9 crore by September 2026. More significantly, the entire outstanding amount is now in the form of Gold Metal Loans (GML), with non-GML borrowings reduced to nil, according to the company's latest investor presentation.
However, Kalyan has not become debt-free. It has eliminated conventional borrowings from its standalone Indian business, while continuing to use GML to finance its gold inventory.
The shift to GML also changes the company's exposure to gold-price movements. Since the loan is denominated in gold rather than rupees, a rise in bullion prices increases the rupee value of both the inventory and the corresponding loan liability, provided the quantities are adequately matched. This creates a natural hedge for the business against gold-price fluctuations.
While such a structure limits the potential inventory revaluation gains that a jeweller holding gold against rupee borrowings might enjoy when prices rise, it also reduces the risk of losses when gold prices fall.
For a listed jewellery retailer, avoiding speculative exposure to bullion-price movements and concentrating on its core retail business can be a more prudent approach.
Debt restructuring
The debt restructuring is taking place alongside a significant change in Kalyan's retail expansion model. The number of FOCO (franchise-owned, company-operated) showrooms in its Indian network increased from 15 in FY23 to 246 by September 2026. The total number of Kalyan showrooms in India rose from 147 to 365 during the same period.
The growing reliance on the FOCO model allows the company to expand its retail footprint without committing the same level of capital required for fully company-owned outlets. It is an important element of the company's asset-light strategy.
Kalyan is also unlocking capital tied up in land pledged as collateral.
Release of collateral
Ramesh Kalyanaraman, executive director of Kalyan Jewellers, said half of the collateralised land had been released, with one parcel sold for around Rs86 crore and another transaction worth Rs16 crore expected in the ongoing quarter. "The remaining pledged land is also expected to be released, subject to the completion of the banking process," Kalyanaraman added.
The release of these assets provides the company with an opportunity to monetise properties that were earlier tied up as security for borrowings.
Taken together, the reduction in conventional debt, greater use of GML, expansion through FOCO showrooms and release of pledged land point to a broader effort to reduce capital intensity and make the balance sheet lighter.
The key question now is whether the shift delivers a sustained reduction in financing costs and better returns on capital. GML is not cost-free financing, and the effective cost of gold borrowing will be an important measure of the financial benefit from the restructuring.
