KOCHI: A recent Kerala High Court order has quietly rewritten the financial story of Josco Jewellers, one of South India’s leading jewellery groups, according to documents obtained by businessbenchmark.news.
The verdict, which required the group to change its method of valuing inventory, has had a striking two-fold effect – a stronger balance sheet and a steeper tax bill. In other words, an accounting adjustment meant to align with regulations has ended up reshaping both its reported profits and its liabilities.
The order, issued in May 2024, directed Josco Group to switch from the Last-In, First-Out (LIFO) method of valuing gold inventory to the Weighted Average method, in line with India’s IndAS accounting standards. (will be explained later)
The transition, applied retrospectively from 2018–19, came after the group’s earlier accounting approach was challenged before the court. The restatement of books of Josco Jewellers resulted in a gain of about Rs491 crore being added to retained earnings, instantly lifting the group’s net worth.
But the change also came with a price. The retrospective recalculation of profits created an additional tax liability of Rs187 crore, including Rs70 crore in interest. Josco Jewellers has already paid Rs127 crore of this amount, with the balance scheduled to be cleared by the end of FY26.
The company’s revised books reflect a dramatic shift in its reported numbers. The inventory revaluation alone led to an improvement in its profitability and capital structure.
Profit before interest, lease rentals, depreciation and taxation (PBILDT) margin rose from 6.57 per cent in FY23 to 9.28 per cent in FY25, aided by the accounting change, focus on high-end designs, and stabilisation of newer showrooms.
A quick look at Josco’s financial trajectory shows how the restated numbers played out. The group’s operating income climbed steadily from Rs3,035 crore in FY21 to Rs4,796 crore in FY25, marking a 12 per cent compound annual growth rate (CAGR).
Profit after tax surged from Rs141 crore in FY24 to Rs267 crore in FY25, while the first quarter of FY26 alone delivered Rs13 crore in net profit on revenue of Rs1,339 crore – a pace that suggests FY26 could be another record year.
Essentially, the accounting switch altered how Josco’s vast gold inventory is treated on paper – and that made all the difference.
Court verdict impact explained
Jewellery retailers hold large quantities of gold, and how they value that stock directly affects their profits. Josco earlier followed the Last-In, First-Out (LIFO) method, under which the most recently purchased and typically costlier gold is considered sold first. \
That raises the cost of goods sold and lowers reported profit on paper – a method not permitted under India’s accounting standards (IndAs). The Weighted Average method, now mandated by the court, averages out the cost of all purchases, smoothing price swings and often reducing the average cost.
For Josco, this shift inflated its retained earnings over the years and improved debt ratios, but it also opened up earlier years to fresh tax exposure. The combined effect – a healthier-looking balance sheet alongside a heavier tax outgo – underscores how a single accounting policy change can move headline financials in opposite directions.
Even so, the group’s underlying performance has been robust. With 22 showrooms across South India, including 19 in Kerala, Josco’s focus on premium jewellery lines and strong brand recall continues to sustain its margins. Its gearing ratio improved sharply from 0.94 times in FY23 to 0.51 in FY25, aided by the expanded net worth, while debt protection metrics strengthened with total debt-to-cash accruals improving from 8.1 times to 2.5 in two years.
The court-induced clean-up, therefore, may have turned into a blessing in disguise – forcing compliance, but leaving behind a stronger, more transparent balance sheet.
