Ladies and gentlemen, good day and welcome to the Q4 FY 2023 earnings conference call of Kalyan Jewellers India Limited. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Agarwal from Strategic Growth Advisors. Thank you, and over to you, sir. Thank you. Good evening, everyone, and thank you for joining us on the Kalyan Jewellers India Limited Q4 and FY 2023 earnings conference call. We have with us Mr. Ramesh Kalyanaraman, Executive Director, Mr. Sanjay Raghuraman, CEO, Mr. Swaminathan, CFO, Mr. Sanjay Mehrotra, Head of Strategy and Corporate Affairs, and Mr. Abraham George, Head of Investor Relations and Treasury. I hope everyone got an opportunity to go through our financial results and presentation which just got uploaded on the company's website and stock exchanges. We will begin the call with opening remarks from management, following which we will have the forum open for question- and- answer session. Before we start, I would like to point out that some statements made in the today's call may be forward-looking in nature. Disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers India Limited, to give his opening remarks. Thank you, over to you, sir. Thank you. Good evening, everyone. FY 2023 was an excellent year for the company. recorded revenue of over INR 14,000 crore. A growth in excess of 30% over FY 2022. PAT of INR 432 crore. This is despite a one-time extraordinary pretax write-off of around INR 33 crore relating to divestment of certain non-core assets. Excluding the one-time extraordinary write-off, the PAT for the year is INR 457 crore, a growth in excess of 100% over FY 2022. Last financial year has also been a remarkable one in the history of the company. While driving the day-to-day execution, we had developed and successfully rolled out a strategy and roadmap to further improve the cash flow profile of the business and build a robust return on capital profile. Primary area of focus under the strategy roadmap has been to expand showroom network, predominantly through the more capital efficient FOCO model, franchise model. During the last financial year, we launched 15 franchised showrooms in India as a part of our Phase 4 expansion. The first half of this financial year should see launch of around 30 showrooms and remaining 22 showrooms during the second half of the year, totaling 52 showrooms for financial year 2024. We are continuing to receive many inbound franchisee inquiries for the non-south markets in India and have started engaging with prospective franchisee partners for the next set of expansion. In addition, we also have started getting inquiries for south markets. We plan to launch the first set of pilot franchised showroom in south in this financial year. This will be over and above the 52 showrooms planned for the non-south markets. In addition to launching new showrooms through the franchised model, we also have initiated steps to convert some of the existing owned showrooms in South India to franchised showrooms and have made considerable progress in the same. We have also drawn up plans to reduce invested capital in the Middle East and improve its return profile by converting some of the existing owned showrooms to franchised ones and simultaneously expand the showroom network through the franchise model. There has been a slight delay in setting up the vertical, largely due to the local regulatory compliances, and we expect to launch the first franchised showroom shortly. Another significant area of focus has been to undertake divestments of non-core assets and use the proceeds to reduce the capital employed in the business, thereby lightening the balance sheet. We have signed LOIs with prospective buyers for some of the non-core assets and expect to complete the first set of divestments during the first half of this financial year. All of these steps will enable us to witness significantly higher free cash generation during FY 2024, which in part we expect to reduce the existing non-GML working capital loans. This will reduce our leverage and disproportionately reduce our interest expense as we will be repaying the higher interest cost-bearing non-GML working capital loans. Another significant decision has been the announcement of the maiden dividend for the last financial year. Yet another high focus project which we are excited about this is to transform our digital first platform, Candere, into a truly omni-channel one. We have drawn up an exciting network expansion plan of at least 30 showrooms during the current financial year through a mix of owned and franchised showrooms. Talking about the ongoing quarter, we had a fantastic start to the financial year and a very strong Akshaya Tritiya despite continuing volatility in gold prices. We are witnessing increasing momentum in consumer demand, especially around the wedding purchases during the current quarter. We are upbeat about the current season and have fully geared up the system to ensure that we have yet another memorable quarter. With this, let me hand over to Sanjay to take you through the financials. Thank you. Good afternoon, everybody. Thank you, Ramesh. I'm really very happy to be talking to you all after a solid performance in the just concluded financial year. I'll share some details now, starting with the just concluded quarter. In this just concluded quarter, we reported a consolidated revenue of INR 3,382 crores, an 18% growth over the same quarter in the previous year. Consolidated EBITDA came in at INR 257 crores versus INR 218 crores in the corresponding quarter of the previous year. Consolidated profit after tax, PAT, was INR 95 crores versus INR 72 crores during the corresponding quarter of the previous year. I shall now give you a breakup of the numbers between India and the Middle East, starting with India. Our India revenue for the quarter just concluded was INR 2,805 crores versus INR 2,399 crores when compared with the corresponding quarter of the previous year. Our India Q4 EBITDA was INR 217 crores versus INR 188 crores when compared with the corresponding quarter of the previous financial year. Our India profit after tax was INR 91 crores compared to INR 70 crores in the corresponding quarter of the previous year. Moving now to talk about our Middle East business. Revenue for the quarter in the Middle East was about INR 549 crores compared to INR 425 crores in the corresponding quarter of the previous year. EBITDA in the Middle East came in at INR 42 crores for the quarter versus in the same quarter of the previous year. The Middle East business posted a profit of INR 6 crores for the quarter, compared to a profit of INR 4 crores for the corresponding quarter of the previous year. Talking now about our e-commerce wing, Candere. The business posted a revenue of INR 32 crores in the quarter versus INR 39 crores in the corresponding quarter of the previous year. The quarter recorded a loss of INR 1.9 crores in Candere versus a profit of INR 2.7 crores in the corresponding quarter of the previous year. During this past quarter, we had no bullion sale, and our gold coin sale to retail and corporate customers was about INR 115 crores, approximately 4% of total revenue. Moving on now to talk about full year performance. On a consolidated level, our revenue came in at INR 14,071 crores, a growth of 30% over the previous year. Consolidated EBITDA came in at INR 1,114 crore versus INR 815 crore over the previous year. Consolidated PAT for the year came in at INR 457 crore before a one-time extraordinary write-off of INR 33 crore versus a profit of INR 224 crore during the previous year. Moving on now to give you a breakup of these numbers between India and the Middle East, starting with India. For this just concluded year, our India revenue came in at INR 11,584 crore, a growth of 28% when compared to the previous year. Our India EBITDA for the year was INR 933 crore versus INR 692 crore when compared with the previous year. Our India PAT came in at INR 415 crores compared to INR 214 crores in the previous year, a growth of 94%. Talking now about our Middle East business. Our revenue in the Middle East came in at INR 2,364 crores for the year, recording a growth of 44% compared to the previous year. Middle East EBITDA came in at INR 188 crores for the year versus INR 123 crores in the previous year. The Middle East business posted a profit of INR 50 crores for the year compared to INR 11 crores for the previous year. Talking lastly about our e-commerce wing, Candere. The numbers for the year in revenue came in at INR 157 crores versus INR 141 crores in the previous year. The loss for the year was INR 7.8 crores versus INR 1.6 crores in the previous year. With this, I'm done with the summary of the financials, and we now open the floor for questions. Thank you. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may press star and one to ask a question at this time. We have the first question from the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Yeah. Hi, Ramesh and team. Thanks for the opportunity. Good set of numbers. If you can touch upon in the volatile gold price market, how this last 45, 50 days, because we also had the escalation of the festive season. If you can provide some strength to your numbers? Without telling you the number, I can only tell you what is happening on the ground for the first 45 days in Q1 versus the first 45 days of Q1 of the last year. The growth rate has been extremely strong. It is much stronger than the Q4 growth. I would push because there is one other listed player from TN has given the sales number and quantum for Akshaya Tritiya. I am not sure what is the hesitation. But anyway, I'll go with that. Just tell me how this growth panned out, maybe some qualitative understanding in versus South versus non-South. South and non-South are performing equally well, in the first 45 days of Q1. Okay. Okay. One follow-up here, on the, quarter four performance. When we see that South growth was 4%, in the gone by, and non-South growth was 38%. Was it largely related to the FOCO addition or there is a qualitative growth in terms of the core, standard portion which is also contributing? Both of them, yes. Of course, all the, most of the new showrooms were added in non-South, and that is why the non-South revenue has grown. Over and above that, one thing is that Q4 has never been a very strong quarter for South. Okay? Actually, if you look at a couple of years before, suddenly after the COVID comeback, the Q4 revenue had a very high base, and we could at least de-grow only by 6%, 7% in the last Q4. Even then, Q4 base is high for us, for South players. Okay? That is the reason why SSG is a bit softer for South. The non-South revenue growth, of course, the SSG is stronger than South India. Over and above that, this much% difference is because of the new store additions which we have done. Okay. Okay. Just one clarification on FOCO. As on date, we have 15 stores. Yeah. In the opening remark you said that you will add 52 stores. As of date is not 15. As of March 31st is 15. As of today it is 22. Okay. Okay. No, what I wanted to clarify, in FY 2024 you have guided that 30 stores and 20 stores which will come. Yeah. Total 52 stores you are expanding under FoCo model? Yes. Correct. So- All non-South. All non-South. Correct. Yeah. Correct. Would you spend a minute or two saying that because you've been saying this FOCO opportunity in the Middle East also? Yeah. Which you have not said anything. maybe if you can give some color. Okay. In Middle East, we had signed an LOI for a franchise and we were supposed to open in the Q4 or at least early Q1. There has been a delay in implementation there. We still go with that LOI and we are. Now I think all the technical issues there has been solved and I think hopefully it should be opened in Q1 or maximum of early Q2. After that, after the pilot phase, then Middle East expansion with franchise, et cetera, we will explore more. Would you have any number in mind which we can build in in our model for FY 2024? FY 2024 better be safe. We don't put a model for expansion, too much of expansion in the Middle East. We will be keeping on updating you know and better put it that way. Okay. Okay. My last question on the gold metal loan. As of March, 2023, would you be able to give us or quantify some more details? What is the quantum? What is it that we want to achieve and what is the rate at which we are expanding? Shirish, Abraham here. Yes. The gold metal loan balance as on March 2023 is INR 1,853 crores. Okay. This is consolidated. Of which India is INR 1,091, and the remaining is Middle East. We have been able to increase this number from INR 1,496 last year. We've made meaningful increase in the Middle East and we've done about INR 100 crore increase in India. From here we have probably another INR 50 crore- INR 75 crore headroom in India to increase. Beyond which we will need further sanctioning of limits, sub-limits from the overall banking limits. Abraham, thanks for that, I'm just reading, little more in detail. You said that there is a divestment of non-core assets which is going to happen. Yes. Directionally, that money should come in and our gold metal loan should come down by half. Is that assumption is right? No. No. Whatever debt repayment that we are planning for the financial year, we are planning for repayment of the higher cost non-gold metal loan debt. In parallel, we will also be trying to increase the gold metal loan limits within the bank. In any case, gold metal loan will not come down from this level. What is the non-gold metal loan debt today? It is INR 1,650 around. Okay. Okay, that's helpful. I'll come back to the queue. Thank you. Okay. Thank you. Thank you. The next question is from the line of Nihal Jham from Moon Capital. Please go ahead. Thank you. let me just drive a little bit deeper into this growth question. you know. Sorry to interrupt. Mr. Jham, your voice is muffled. Could you please use your handset to ask a question? Yeah. Hello. Is it better? Thank you. Yes, sir. Please continue. Yeah. Okay. I wanna talk about the growth for fiscal 2024. 52 new franchisee stores to be added, plus the fact that at least 23, 24 stores added this financial year or last financial year, those stores will mature. Can you give some sort of indication of how the growth is likely to pan out? You know, even companies like Titan have been giving a indication of what the growth is. I agree with Shirish, you know, why there's so much reluctance to give a broad range of growth guidance for fiscal 2024? Yeah. There is no, what do you call, hesitation. I will tell you, I can give you a view on it, wherein as you rightly said- Yes. Yes. ... 52 new showrooms which we are going to open in the running financial year, that itself should take care of at least a mid-teen, late-teen revenue growth. Okay? Okay. Late-teens from the franchisee stores. Okay, sir. Yeah. Again, in addition, SSG of the showrooms is usually 5%-6% of the existing showrooms. Right. The full year revenue for the showrooms which we opened in the last financial year, that full year revenue should also come for the next financial year. Got it, sir. We are looking at 18+ SSG, plus the fact that the old stores mature and you get the full impact of those revenues coming through for the full financial year in fiscal 2024. That is very clear. Thank you, sir. The other question is on margins. You know, for the quarter you reported what about 7.7% operating margins. This appears a little bit lower in context of, you know, what you've said in the past before the franchisee stores opened up. Really the impact of franchisee stores for this financial year is gonna be fairly low, given that there are only 15 stores as you close the financial year. 7.7% margins for this quarter, given the south non-south mix also has improved through the financial year, how should we think about margins going forward? I understand that there's gonna be 52 of these franchisee stores opened up, and last year you or last quarter, I think you spoke about 5% PBT margins, I think, for these stores. Yeah. How should we think about margins going forward? I think, you know, first of all, let us do a deep check analysis on this. If you look at the gross margin, no, in Q4, it was, in India it is like 15.6%. Okay? Mm-hmm. Meaning franchisee revenue, according to you, what should be the percentage of franchisee revenue on the top line? Normally, I would take it as about 60% of your Kalyan store. Yeah, per showroom. Yeah. 15 showrooms of franchise with the first time revenue of the what? 9 showrooms which we opened in Q4. Okay? The revenue, if you look at for, just for a conversation, if you keep it as 10% of the revenue come from franchise at 8%, the rest 90% actually have delivered the gross margin is becoming better. Okay? It is in the, what? 16-16.5 range. Again, it's coming to back to our old 16%-16.5% margin on gross level. EBITDA, I think we should slowly start moving from EBITDA margins and gross margins to PBT margins so that we are both on the right direction. Because as we said, the next year expense is completely going to be on FOCO model. Okay? We might also start doing south franchisee. If we go in this direction of trying to build an EBITDA margin, I think we will get lost somewhere because we'll not be looking in the same direction, no. Thank you. Ladies and gentlemen, in order to ensure that the management. Yes, sir. Did I answer you? I'm sorry, sir. The participant has left the queue. Oh, okay. Maybe he will rejoin, I'll take him back. Yeah, sure. Okay. ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We have the next question from the line of Gaurav Jogani from Axis Capital. Please go ahead. Thank you for the opportunity, sir. My first question is with regards to the CapEx number. If you see for the year FY 2023, as per the cash flow, it comes to around INR 187 crores on the control basis and around INR 160 odd crores on the standalone basis. Now we understand, you know, that the CapEx for the store is around INR 5-6 odd crores for the stores that you have opened. I think we have opened own stores of around 11 or 12 own stores. In that context, what is the remaining CapEx for? CapEx will be what, INR 80 crore-INR 90 crore will be maintenance CapEx itself, and rest will be for the new stores which we opened. The new stores which we open also, the FOCO model, even in the FOCO model, we have done a model wherein, except the first three showrooms, the fit-out CapEx was done by Kalyan Jewellers. That is the CapEx increase that you see. Okay. Okay. Sorry, in future also. Out of the 23 showrooms opened last year, Uh- 20 showrooms CapEx we have only added. Okay? Okay. Plus the 90 crore maintenance CapEx. That is how it should be looked. Sure. Going ahead also, like, the FOCO store that will be opened, will the CapEx be incurred by us or... I mean, how should we build the CapEx going ahead, given, you know, that we were thinking that this FOCO would be an asset-light model in that sense? You are talking about the 52 showrooms of the. Yes. Yes. Right? Yes. These 52 have been signed as CapEx done by Kalyan, wherein the fixed asset will be done by Kalyan. That is a model which people are opting. Actually we have 2 models. One is that full CapEx, meaning inventory plus fit-out will be done by franchise. That is model number 1. Model number 2 is that inventory will be put by them and fit-out will be done by Kalyan. Preference for people is to put money on inventory rather than into fit-out, and people opt for the option 2. The 52 which we have signed is for meaning all the 52 has been signed for that. One follow-up here. In that case, does the margin profile changes with the partner there? Can you tell me once more? Sure. I'm saying because, There we have put a fee for AMC, meaning at for the asset which we build for them. There's an AMC, there's an AMC in case the asset is on us, we charge them. Okay. If you can share that number, so it will help us to build in the margins. We charge what? 1%, right, Sanjay? Yeah. About 1%. Yeah. It's like 1% of the revenue we charge for assets. Okay. Sure. Thanks for that. My next question, you know, is with regards to the interest cost. If you see the interest cost on a quarterly basis, it is, you know, kind of consistently going up. I understand that, you know, the interest rates have also moved in the interim. If you can help us out, how should we build in the interest cost given that, you know, you will also be reducing the debt during the same period, and some portion would also be shifted to the gold or metal loan, which would be a lower interest cost loan. How should we build the interest cost going ahead? Yeah. Interest, the conversion to gold loan is not going to be predominantly majorly high for the running financial year because we have a headroom only what, INR 50-75 crore more for us to increase our gold loan. Okay? Debt reduction plan is, yes, it is there. It will start with the cash which is going to come in from aircraft and of course, there is going to be free cash flow for the company in this running year. There are going to be savings. The savings is going to be disproportionately higher than the percentage of debt reduction, which we will do. The plan for this financial year, debt reduction should be in the range of 15% on a gross level, and interest reduction should be more than that because this is going to be reduced. The non-GML is going to be reduced. All the 15%. Okay. Okay. Okay. sir, when you say gross, I mean that is, the total, loan of around INR 3,000 odd crores? That's the number you're saying? Hello? Yeah, I cannot... Ma'am... 15% on a gross level. Yes, you are right. Yeah. That's like INR 3,400 odd crores, right? India. Sorry. India. Okay. Okay. Okay. Sure, sir. I will come back in the queue, sir, for more questions. Thank you. The next question is from the line of Anurag Dayal from HSBC. Please go ahead. Oh, hi. Thank you, Ramesh and team, for taking my question. Hi. Hi. I have just one basic question. Now you have around 22 odd franchisee stores opened across North India, and few of them are open for more than six months. I mean, how has been your experience so far in terms of, you know, how the store are delivering as per the throughput you expected, inventory turns or Studded ratio? Are they different from your own stores? Some color on that would really help. Hi, this is Sanjay here. Yes, Sanjay. In terms of difference, there's no real difference to talk about except that some of these outlets are, you know, slightly smaller in size as compared to our regular outlets. Some of them are as good, as big as our larger outlets. Just to give you a frame of reference. This outlet we opened in Agra this month, last month is as big as any of our flagship outlets. Similarly, Gorakhpur. Essentially it's a market specific strategy. Mm-hmm. This has now been running for about nine months from the earliest outlet, and we've had, you know, good experience. Our franchisee partners have also had a good experience. I think the studded ratios are in line with what we have budgeted and modeled. We have already got the same franchise partners who's, you know, signed up for the initial outlets, putting their hands up for multiple outlets, which they have asked for in other locations. In summary, I'd like to say that, you know, it's been progressing the way we envisage it to pan out. Great. Great, Sanjay. Thank you a lot. Just a small question. Basically I can see that apart from your expansion in non-South, you're looking for expansion to franchisee model in South, then you're looking for expanding the Candere model as well as the Middle East. You don't understand how much the management bandwidth, is it getting too stretched because already you have ambitious plan of opening 50+ stores? How, you know, you are managing this entire I mean, expansion plans? Do you have certain leaders who have assigned to different region to look into this? I think the only, you know, different thing that needs to be done is to get the model right at the start. We have kind of got that down to our satisfaction in the India context for the North as well as the South. You know, those things are stable. The modeling phase in Candere is now in progress, and I think we will sign a few partners in this quarter. To that extent, we will have some activity there, but it's handled by a separate team. I don't see any challenges there. Same thing in the Middle East. We've got the model rolled out. The first couple of LOIs have been signed. There were some, you know, time lags in the franchisee partners getting their documentation and their incorporation of forms, et cetera, stabilized. That's now done. So in this first half of this financial year, the first franchisee outlet in the Middle East will come online, as also, for Candere. South India will also definitely happen. Thanks. Thanks a lot. All the best for new year. Thank you. Thank you. Thank you. The next question is from the line of Naresh Vaswani from Sameeksha Capital. Please go ahead. Yeah, thank you for the opportunity. Sir, first question is on the margins. If I look at full year FY 2023 versus 2022. I'm sorry to interrupt. Sir, your audio is not clear. Yeah. Now. Sir, maybe it's better to use your handset. Is it proper? Yes, sir. Please continue. Thank you. My first question is on the margins. For FY 2023, EBITDA margins were 7.9%, which were flat compared to last year, full year FY 2022. If you see our Studded ratio in non-South share has gone up meaningfully in this year. I understand that you mentioned that franchisee margins will be lower, again, the contribution from those stores would be pretty low right now. If you can throw some color on it. Second, next year for 2024, since all the stores will be on the FOCO model, what sort of EBITDA range would you guide us? Yeah. Thank you. We should slowly move out from the EBITDA calculation and go to PBT percentage. Otherwise it is very hard for us to give a guidance because franchise model is scaling up in such a way that all the expansion is doing, meaning is being done by franchisee. Okay? EBITDA margin, if you look at this year, it has been in the range of what, 4.7%-4.8% annually. I think we should focus on that. You should see a growth in the PBT margins as a% to revenue. Okay, got it. Second on the inventory days. If I compare from first half, it has gone up from 175 days to 182 days. I understand that in franchisee you would be requiring very less inventory days, hardly 10, 15 days. For again, for FY 2024, where should we see the inventory days going? Because I presume it should go down substantially. Any guidance on that you should give if you want to share. You are talking about the inventory turn, right? Yes, correct. Yeah. Inventory turn, if you look at our inventory, the revenue went up by 30% and inventory went up by 20%. Okay? We are surely in a direction where the inventory turn is going up. Over and above that, we should consider a few things. One is that we opened 11 own showrooms in this financial year. We again opened, we had to keep inventory for the 5 new showrooms which we opened in April, wherein franchisee billing will happen only in April, but we would have stocked in March itself. In this financial year, Akshaya Tritiya came in April 3rd week instead of last year it was in May, so we had stocked heavily in all our stores by March end itself. That also comes as a stock in, March itself. Okay. Over and above all that We also renovated and actually upgraded 11-12 of our tier one showrooms to gain market share as well as to compete the leading players there. Okay. When your gold price increases, of course, we cannot keep the same volume because then you will have to invest the same kind of money. For example, 15% there was increase in gold price in the last financial year, and if I keep the same volume in all my stores, I would have to keep 15% additional inventory increase there, which we have not done because we have worked in such a way that we have been not maintaining the same volume at the stores. Some increase in inventory is also because of the gold price increase. Growth, of course, is going to be predominantly franchise-driven, and going forward, inventory turn improvement should be there and that's what I want to tell you. Yeah. Just, you know, to ask it another way. For franchisee stores, what would be the inventory days on our books, if you can guide us some range like this? Would it be more than 10, 15 days or? It will be 15 days. Yeah, 15 days. You'll have to keep inventory on 15 days anyway. Okay. Okay, thank you. One last question. Wanted to know your payout policy for from here on. I know that for 2023 it is 12% of PAT, going ahead, should we expect improvement from here on? We will surely come up with a dividend policy, very soon. Our intention for the next financial year, meaning running financial year, is to at least deploy 40%-50% of our profits generated for repaying debt as well as rewarding investors. Oh, okay. Okay. Thank you. Thank you. The next question is from the line of Ashish Kanodia from Citi. Please go ahead. Hi. Thank you for the opportunity. On the gold metal loan, you know, you talked about reducing the, you know, the gross borrowings at India level by maybe 15%. Yeah. Which basically means maybe around, you know, INR 300 crores worth of repayment of borrowings. Is it fair to say that at least the gold metal loan will, you know, go up by INR 300 crores? Because even if we assume that the sanction limit does not change, you will use that repayment of borrowings to increase the gold metal loan. Second related question on that is, you know, for the sanction limit to increase, right, what are the drivers or, you know, I mean, how can we increase that limit? First thing is that, we will be repaying the debt and the debt repayment will be for the non-GML. Okay? It does not mean that the GML as an amount will increase. It only means that the proportion of GML versus the other loan will surely increase because the repayment is going to be non-GML. Okay? For your second question as to how we will increase the GML, it is all meaning what we believe is that, first of all, we are trying to bring in one or two new banks who can give us GML instead of our non-GML. Again, when we start repaying, we will surely get into negotiation with banks to increase the GML limit instead of the non-GML. It is a process. For a conservative approach, better we don't budget for any increase in GML as an amount except for what INR 50-75 crore, because that's the way we should do, is what I feel. That reduction of course you can plan in such a way or we can budget in such a way that it comes to 15% of the gross amount in India and all that will be non-GML. You know, let me ask the question this way, right? If you look at the last three years, right, gold metal loan has been around INR 1,000, INR 1,100 crores, right? Once you repay the debt, right, your overall borrowing limit remains the same. Effectively, you know, if you want, you can increase the gold metal loan. Given that, you know, GML is a natural hedge and it's also very cost-effective, right, because, you know, the borrowing cost on GMLs are really very attractive. I mean, you know, from a strategy perspective of, you know, modeling, but purely from a strategist perspective, you know, if, do you intend to increase that, this amount if you have the opportunity, you know, just because if you're repaying debt? Yeah. It's a separate set of discussion with banks on that behalf. Okay? Wherein as we speak the things in our control, full control is repayment of non-GML loans. Okay? To increase the limit in GML, it is again a discussion with the banks which we will have to do, which we will surely do, but we don't want to commit anything for this financial year because it's not in our full control because banks also see that this much percent of loans should be gold loan, this much not gold loan. There are banks in our consortium where they don't have a gold metal loan, what do you call, product itself. We are trying to bring in one or two new banks who have a gold loan, what do you call, vertical with them, et cetera. The interest saving will be higher than the reduction of 15% loan because even if we reduce 15% loan, the interest saving will be proportionately much higher because we are going to reduce the non-GML quotient and not the GML quotient. Sure. Sure. Got it. A second question just on the cash flow, right? With, you know, with the incremental cash flow you would generate in Middle East because, you know, in Middle East you have the intention to do, you know, the franchisee stores as well. First, you know, from whatever profits that is being generated, you know, what's the strategy there? Do you want to deploy stores, you know, open more company-owned stores in retail or will that part be, you know, brought back into India? The second thing is, you know, in terms of sale of non-core assets, while on aircraft, you know, you said that, you know, most probably it will happen in 18. The second leg of non-core asset is sale of land. You know, if you can provide any color, any, you know, any guidance in terms of when can we start expecting cash flows coming in from land sale, that would be really helpful. Thank you. Yeah. Middle East, as you know, our plan was to, in the last financial year itself, we wanted to try franchise, okay? We don't want to block our expansion there. Like in India also, for example, we have opened, for example, 11 showrooms. All 11 showrooms in the Q4 we wanted to open as franchise only. At the end what happened, 9 was franchise and 2 was owned. Both those 2 we actually converted to franchise. We will convert to franchise very soon because there was delay from there for getting their GST and things like that. We jumped in and made it our own store, and we will make it a franchise store in the future very soon. Same in the Middle East. Our intention in the Middle East is to expand only by franchise. That is our intention. Conversion we want to do in such a way that when we open three showrooms, okay, one will be converted. Three franchise if we open, one will be own store conversion and two will be new. That is what we want to do, because otherwise franchisee will not be able to make money, because the base revenue will not satisfy to take care of the operating cost there, the fixed operating cost, meaning the corporate overheads. Okay. We will do that way in Middle East bring back the cash to India and that's our intention in Middle East. Cash flow from aircraft, we should expect, what? 5-6 months for the full cash to come in, and that proceeds will also be used for repaying the non-GML debt. No, my second question was on the land that I understand, you know, aircraft cash will come in by 1/8/2024. Any clarity in terms of, you know, when the second leg of? I'm sorry to interrupt. Sir, I would request you to kindly rejoin the queue for the follow-up. Sure. Yeah, one second. This was his earlier question I will just answer. Where in debt reduction plan, no. When we repay this INR 300 crore-INR 400 crore debt, we will start to negotiate with the banks to release certain collaterals and then we will divest that also and bring it back to the system. It's a long-term process. Don't budget anything for this year. It's a process, meaning it will take 2-3 years for us to do all this, but we will start this year. Sure. Very helpful. Thank you. Yeah. Thank you. The next question is from the line of Bhavin Shah from Sameeksha Capital Private Limited. Please go ahead. Yeah. Thank you. Could you explain the differences in terms for gold metal loans that you get in India versus Middle East? India, we get the gold metal loan at about 3.75%. In the Middle East, it's slightly higher than that. It must be in the region of about 5%. What about collateral? Collateral, it functions in a similar way. You have to keep margin and, rest everything works in a similar way. No, I thought in India you had to provide, some other collateral real estate or something, you know, which limited how much... You are asking for the other... Okay. Here in India, initially when we had taken the line of credit from these banks, the line of credit required 35% real estate collateral or some other collateral. That requirement is not there. For gold metal loan specifically if you ask, whatever you have to keep, the margin that you have to keep, it is similar across India and Middle East. In Middle East, you are saying you don't have any additional collateral that you give? Our India structure is even older than that. You mentioned that you were committed to some, I think you said, I forgot what you said, 40%- 50% of profit used for paying debt and dividend. I think what investors will look for is a committed policy on payout, whether it's dividend or buyback. Would you want to spell that out? If not, why not? Yeah. We'll surely give you clarity on that. The board is yet to come out with a dividend policy as such, but we will surely update you very shortly on that. Okay. Thank you. Thank you. A reminder to all the participants, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We have the next question from the line of Aejas Lakhani from Unifi Capital. Please go ahead. Yeah. Hi, Ramesh. Congratulations on the numbers. Hi. Thank you. Congratulations on a phenomenal, 2023, and wishing you the best for 2024. If you could just spell out, you know, the franchisee model again. Because my understanding, and I could be wrong, was that the CapEx was likely to be borne by the franchisee and, you know, from the gross margin, you know. Yes. A certain percentage was shared by the franchisee, certain percentage was borne, you know, came to you from the gross margin. You had a certain OpEx line and you were, you know, expected to earn 4%-5% on a PBT. Is that understanding correct? Could you just spell out, that, you know, if it's a 2,500 sq ft, You know, showroom, how will the unit economics work? Yeah. Your understanding is perfectly okay. Wherein there are 2 models. One model is that CapEx, meaning fit-out plus inventory, will be invested by the franchise partner. Okay? There will be a margin, share between franchise partner and Kalyan Jewellers. We take care of the operations, meaning the staff, et cetera, and we will end up in a situation where we make 5% PBT. Okay? That is the first model. Second model is that they invest only in inventory, and the fit-out is done by us. If we do the fit-out, we take 1% of the revenue also as a, as a, what do you call, maintenance charge, like AMC. PBT, of course, instead of 5 it will become 6. EBITDA will of course, yeah, instead of 5 it will become 6. When you come to the depreciation will come, no? That will be almost the same, and there'll be no impact in the PBT. You'll continue to net 4.5%-5% under both of the models. Exactly. Okay. Tell me something, you know, on a, say, on a 2,500 sq ft showroom, the CapEx cost will be, you know, much smaller, right? Why would the franchisees be willing to give up that 1% incremental for, I don't know, let's say INR 3 crore CapEx for a 2,500 sq ft showroom, because roughly you do INR 5 crore for the larger 4,000 sq ft? Almost the showrooms which we opened are in the range of 3,500 sq ft, and the CapEx will be in the range of INR 3.5 crores. Okay. Okay. So- The inventories there will be roughly INR 20-22 crores? I'll tell you, in the model which we are doing now, the lease agreement today is done by Kalyan Jewellers with the landlord, and they are investing for the CapEx there. Okay? We don't want to actually do the lease in their name, because if there is any kind of misunderstanding with the franchisee owner, we don't want the property also to go because of the misunderstanding with the franchisee partners. Okay? For them, there are two ways. One is that they want to invest in metal instead of a fit-out, which gives them actually more comfort. Number two is that the lease is in our name, and when they have to do the fit-out in their, what do you call, from their pocket, that also they wish to actually not do like that. When we invest, we calculate AMC incorporating the actual CapEx and cost of capital. Okay, everything is rooted through you. Even if a franchisee. Mr. Lakhani Yeah. has requested Sure. to kindly rejoin the queue. Sure. Thank you, sir. Thank you. Okay. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Yes, sir. Just congratulations on this good set of numbers. On the pre-tax ROIC, we've seen an improvement to 13%. Would you be willing to share some target, 2 to 3-year target on, you know, where you see the pre-tax ROIC? I don't want to give you a target, but one thing what we should understand is that the return on capital is going to be anyway going up because we are going with the FOCO model of expansion, wherein the investment is small and the returns are higher. Directionally, you should see lot of improvement, and also you will see lot of reduction in capital employed because the divestment of certain non-core assets, et cetera, and rewarding investors, et cetera. That should be the way we should look at. I don't want to give you a target, but you can easily... meaning you should understand the way forward for the next two, three years, the returns are going to be anyway better. Right. Right. We saw a good improvement this year, Hope you can do that. Second, my second question was on the south side. You mentioned about converting some of them to the franchisee model. Would you be willing to put a number to how many stores you're looking to convert in the south to franchisee? We don't want to because we have not tried a pilot. Okay? Post the pilot, then only we will set up a target for how much stores we should convert from South and Non-South to South own store to franchise. Okay? Inquiry is very strong, we are capping ourself to the pilot to be completed and then we will give you, or we will internally put a target of how much to convert, et cetera. The pilot would be co-completed, in the first half or first quarter? Ideally, we should start the pilot, conservatively by the H1. All right. Yeah. Right. Thank you, sir. That's all. Thank you. Thank you, ma'am. The next question is from the line of Rajiv V. from DAM Capital. Please go ahead. Yeah. Good afternoon, sir. Thanks for the opportunity. This additional CapEx you did because of the change in franchisee, the second route which you chosen, is there a clause in which you sell it back later, let's say as the store starts delivering little better number? No. I could not understand it. Okay. Instead of AMC, the 1% AMC, you basically recover, you know, recover the entire 3 crores or some consideration and lighten up the balance sheet. Yeah, that we have not considered it right now, but yeah, we can consider it later. As of now, nothing. It is safe to assume that all the remaining, 52 or the remaining part of the 52 are also on the similar, kind of, arrangement. Yes. Yeah. The signed LOI 52 is all this model. Sure. That's all. Thanks a lot. Yeah. Thank you. The next question is from the line of Hiten Boricha from Sequent Investments. Please go ahead. Yeah. Good evening, sir. Sir, I have only one question left. Can you quantify the amount you told we will be selling some non-core assets this year for debt reduction? Can you quantify the amount of how much is going to come from non-core? After this selling, do we have any other non-core asset which will be monetized later? INR 134 crore is the first round of non-core asset divestment, which will completely go for debt reduction. Now, there is only one chopper there, which is a INR 30 crore, what do you call, book value. Mm-hmm. Otherwise, all the non-core asset is a task wherein you will have to repay the debt and then negotiate with the bank, take it out, and then resell, et cetera, which meaning It's not as easy as what we are doing for the aircraft and chopper. Mm-hmm. This INR 134 crore, the deal has been done. That is our first round, and we will do it very shortly. Real estate, et cetera, we will start the process this year. Chopper also, I don't want to comment as of now because first let us complete these 2 aircraft and then comment on the third one. Sir, what would be the total value of all the non-core assets, if you can give some ballpark number? Around INR 500+ crores. Okay. Okay. Okay. Understood, sir. This INR 500 crore will be going to monetize later this year or maybe next year. Yeah. Yes. INR 500 + crore aircraft, okay, to be clear. Okay. Okay. Take it. Okay. Thank you. Thank you. Thank you. The next question is from the line of Pankaj from Affluent Assets. Please go ahead. Thanks for taking my question. Am I audible? Yes, sir. Please proceed. Okay. Yes, sir. Well, congrats, sir, for delivering such a great numbers. Thank you. for the whole year. Thank you. Just wanted to understand. Now that the FOCO model, you have complete handle over the FOCO model and you have which you started with non-South market and want to expand the same model to both Middle East and South. Going forward, maybe this year, 2024 or beyond, what are the levers of margin expansion from? Where do we take this margin from? You can, you can pitch any, I mean, EBITDA margins or PBT margins. From EBITDA margins, I mean from 7.98% to what level can we go? Secondly, I mean, same for the return ratios. Where do we see return ratios of maybe FY 2024 or so? Do we see it from mid-teens to closer to higher teens or lower twenties? Yeah. Here again, I will tell you, we should surely come out of this EBITDA margin and go to PBT margin because then only both of us will go in the same direction. Because when you go for FOCO model, you know that FOCO model comes with a lesser gross margin and lesser EBITDA. Okay. Own store, even though your EBITDA margins will slowly go up, that cannot negate or that cannot even go near the revenue growth which is going to come from the franchise. There will be surely an EBITDA margin pressure and gross margin pressure for Kalyan Jewellers. Okay. Because we are opting a FOCO model. When you ask me PBT margin, there should be surely a growth in the PBT margin as a%. Now we are at 4.7%, 4.8%. We should be closer to 5% by the end of the financial year. Way forward it should again go up because operating leverage will also start coming in. That should be the way we should look at it, is what my limited request is. What about the return ratios? Where do you see the return ratios? ROCE, I don't want to give a target, but you will see significant improvement, because we have already crossed a 17% pre-tax ROCE now. Medium-term target is to take it well past 20%. For FY 2024 you mean to say? No, medium-term. meaning in a couple of years. Okay. One more clarification. I'm sorry. Just a clarification. Yeah. In the last question you mentioned the value of non-core assets which would be disposed as INR 500 odd crores. Is this the book value of the core asset or the market value? Excuse me, the land. Market value. Meaning, INR 500 crores is market value and, plus the aircraft. Aircraft, you know, the market value will be usually lesser than the book value. Meaning that's what we see, that's what we saw now. Mm-hmm. The other thing is, meaning the book value will be lesser and the market value will be higher. In case of The crore which I mentioned is what the banks have valued at. That would be the book value, right? It would not be the market value. Whenever you have valued it. Book value is the purchase value. Banks value at the market value. Valuation they do. The banks do valuation on the market price. Crore. Sir. The then valuation. It would not be revalued on daily basis, right? Every year. Yearly basis. Every year. Okay. Okay. Thank you. Thanks a lot, sir. Yeah. Thank you. The next question is from the line of Harshal Sethia from DAM Advisors. Please go ahead. Hi, sir. Sir, what is our target of reduction of debt for the current year? Right. It's 15% on a gross level. That's what our target is. 15% of the gross debt in India we want to reduce. Maybe INR 300 crore-INR 400 crore. Okay. Okay. Thank you. Thank you. The next question is from the line of Soham Samanta from Centrum Broking. Please go ahead. Yeah. Hello, sir. Hi. Sir, what is your full year grammage growth for 2023? Volume growth now you mean? We don't. Yeah, yeah. We do not track it actually because, you know, customer comes with a particular budget. The SSG for full year? SSG for the whole year? Yeah, yeah. It's around, what? Upside of 5%. Upside up. The studded ratio is similar to Q4? Standard ratio? Yeah, yeah. You are talking about Q4, right? No, I'm talking about for full year standard ratio. Full year standard ratio is around, what? 25%. I'll just check the number once more. Okay. Last one from my side, that is there any further one-off? No, nothing. No further one-off because, aircraft there is no further, write-off at all because we have valued in the lower- There is no one-off, right? No, no, no. No write-off. Oh. Thank you. Yeah. Thank you. The next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead. Just one clarification in terms of store opening in India. Yes. 52 stores that you mentioned would only be in India, right? And the Middle East and the Candere will be over and above that. Yes. 52 mentioned is only non-South India. Okay? Over and above that, South India, Candere and Middle East. Sorry to interrupt. Mr. Jogani, we are not able to hear you clearly. There is a lot of disturbance in your background and as well your audio is not clear, sir. As the current participant has left the queue, we move on to the next question, which is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Right, sir. In terms of the aircraft, the two aircraft, you said, I was just confirming that you have another INR 300 crore worth of aircraft to be sold? No, no, no. Now we have only one more aircraft remaining in the book, which is INR 30 crore. 30, not 300. Okay. In the chopper. Yeah. 30. Right. Right. You mentioned the 17% ROCE. That would be, that's calculated excluding this land of INR 500 crore and total aircraft value of INR 300 crore, is that right? Our number was 13%. No, that is excluding the gold metal loan. Okay. Okay. If you include gold metal loan, then it will be about 14%. Right. Okay. Got it. Thank you so much, sir. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Ramesh Kalyanaraman for closing comments. Over to you, sir. Yes, thank you very much. Again, if you have any more queries, our team is always available because I understand that there are more people who wanted to ask questions, and due to the limitation of time, we are forced to end the call. You are always welcome, and Abraham and Sanjay are always available. Of course, if you want me, I can also join in. Okay. Thank you very much. Thank you, sir. On behalf of Kalyan Jewellers India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.