KOCHI: Kalyan Jewellers aims to reduce its non-gold metal loan (non-GML) exposure to approximately Rs200 crore by the end of FY26, down from Rs889.18 crore at the end of FY24, provided the management’s debt reduction plan proceeds as scheduled.
“Since Kalyan is strongly focused on eliminating non-GML, the company is likely to be free of such loans within two financial years,” an informed source said, adding that the reduction is being executed in line with their planned strategy.
Kalyan has been able to reduce the non-GML book by Rs143 crore in the first half of the current fiscal, leaving Rs746.4 crore as of September-end, 2024, and if it is able to bring down the book by Rs300 crore (during Fy25 as a whole) as planned, the non-GML portfolio will come down to about Rs590 crore by end-FY25.
No non-GML beyond Fy27
Ramesh Kalyanaraman, executive director of Kalyan Jewellers, has clearly stated that the company would downsize the non-GML by another up to Rs400 crore during the next financial year (FY26), indicating that Kalyan would have only about Rs190 to Rs200 crore left as non-gold metal loan by that time.
The competition among jewelleries under the organised sector has intensified in the past few years and according to informed sources, Jewellers are barely able to earn any profit from gold itself, making the ‘making charge’ their primary profit centre.
“This has prompted the jewellery managements to explore more avenues for cost cutting and many have indentified non-GML as an area that consumes high finance costs, adding up to the expenditure,” CFO of an established jewellery chain told businessbenchmark.news.
Gold metal loans or GMLs typically carry lower interest rates compared with standard loans (non-GML) because they are backed by physical gold as collateral. This reduces the lender’s risk, leading to favorable borrowing costs.
Non-GML loans, such as working capital loans or term loans, often have higher interest rates, increasing the financing costs.
Works as hedge
Moreover, GMLs essentially allow jewellers to hedge against gold price fluctuations as loan repayment is often denominated in gold, meaning jewellers don’t have to worry about price increases during the loan period.
The Kalyan management has already announced that 40 per cent to 50 per cent of the profits generated by the company will be set aside to pay down debt and rewarding shareholders through cash dividends.
Kalyan Jewellers has recorded consolidated revenue of Rs11,601 crore in H1 FY25 as against Rs8,790 crore in the corresponding period of the previous year, a growth of 32 per cent. Consolidated profit after tax (net profit) for H1 FY25 was Rs308 crore as against Rs278 crore for the corresponding period in the previous year.
