Ladies and gentlemen, good morning and welcome to the Kalyan Jewellers India Limited General Update Conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal the operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manoj Menon from ICICI Securities. Please go ahead, sir. Hi everyone. It's a wonderful good morning, good afternoon, good evening, depending on the part of the world you're joining this call from. At I-Sec, we are hosting the general business update call of Kalyan Jewellers today. So we have the entire management of the team. So just requesting Abraham from the management to introduce the management participants, post which we'll open the floor for Q&A. Thank you. Hi, good morning everyone. Today we have on the call Mr. Ramesh Kalyanaraman, Promoter and Executive Director. Mr. Sanjay Raghuraman, Chief Executive Officer. Mr. V. Swaminathan, Chief Financial Officer. Mr. Sanjay Mehrotra, Head of Strategy and Corporate Affairs. And me, Head of Treasury and Investor Relations. Yeah, I'll leave the floor open for the call. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Manoj Menon from ICICI Securities. Please go ahead. Hi team. In a few days back, you know, I mean, Ramesh actually, so we saw you on CNBC. There was a lot of questions asked, I think, by the Mangalam team. I think beyond what was there in the quarterly release about, let's say, are you planning to buy more aircrafts? You know, or let's say, is there any issues regarding auditors or some stuff like that? I think what would be helpful in a forum like this would be to clarify anything which will come your way and what's your stance on some of these aspects. Thank you. Yeah, thank you. Thank you, Manoj. So again, again, back to aircraft after a long time. So at Kalyan, we do not have any plans to buy any aircraft, okay? So in fact, you are all aware that we had initiated steps to sell two business jets during FY 2023. We received the funds by the end of FY 2024. And as we speak, by September, there are no aircraft in the books except for a helicopter, which we have not told that we will sell, and there are no plans to sell the helicopter. And regarding what you spoke about the auditors, there is absolutely no basis for this. We are in regular touch with our auditors, and as we speak, the auditor is conducting the audit for the third quarter. In any case, you would get the audited financial statement for December quarter in the coming weeks. Let me re-emphasize at this juncture that we have always strived to maintain a very high standard in our bookkeeping, quality of auditors, diversity and depth of our board of directors, disclosures, internal control processes, and overall corporate governance. Did I answer you, Manoj? Yes, yes, Ramesh. Thank you. Thank you. We take the next question from the line of Gaurav Jogani from JM Financial. Please go ahead. Hi, Ramesh and team. Hi. My question, you know, is again with regards to certain rumors that are floating around. So one is regarding, you know, there has been some IT raids that have been conducted by the department, and then there is some overvaluation of inventories. And, you know, also the fact that, you know, the other questions that Manoj has already asked. So, you know, plus there are, this is a franchisee thing wherein, you know, you have changed the franchisee agreement retrospectively, and then there are many franchisees that are leaving. So probably if you can clarify all of these? Yeah, so first of all, you told about three or four things. I can confirm that there are, there have been no raids at any of our premises. As you mentioned, it was just a rumor. And then you were talking about what inventory, right? So inventory levels, as mentioned in our financial statement, go through multiple levels of audit, which all of us know. In fact, I would like to draw attention to free cash flow generated over the last couple of years. As you are all aware, we have repaid around INR 450 crore debt over the last 18 months, in addition to around INR 170 crore of dividend which we paid last payout. And we are well on target to achieve the FY target to reduce debt. So I don't think there's a, meaning, that's all I can tell you about the inventory and stuff, okay? And then you are asking about the franchisee terms. This also we have mentioned in our previous interactions. We have, of course, made changes to the franchisee agreement during the current financial year, but this is only for the new showrooms which are coming up in the financial year, and it will not impact any of the agreements that we have signed in the past under the previous model. Did I answer everything? Yeah, just one last thing here, you know, in terms of the franchisee agreement, the new ones at least, are you, what kind of traction are you seeing post introducing this, the new terms? Is it favorable to the franchisee? Are they agreeing for it? Or there is any resentment from them? Hey, we are, of course, you know that we opened 50 showrooms this financial year. We are again going to open 30 more in the financial year, which was there in the update, and which is the new model. Next year's expansion plan is also there in the update which we did in the last week. Okay, next year, 75 plus Kalyan showrooms, okay? Everything is in the new model. We have started signing for the next year, and it is very favorable for the next financial year. Sure. Thanks, and that's all from me. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Vihang Subramaniam from Zaaba Capital. Please go ahead. Yeah, hi. Thanks for taking my question. Just one question. If you could clarify on the promoter pledge, if you could just clarify at what price it has been done and what are the terms of the pledge, that's it from my side. Thank you. Yeah, so the pledge of shares reflecting against the promoter name, all of us know, and I'm just reconfirming that it was to acquire shares from Warburg Pincus, okay? And one thing which we can say is that before entering into promoter financing agreement, we of course have given enough attention to liquidity and pledge levels, and have controlled our exposure accordingly. And you know that as promoters, we have always prioritized the company interest ahead of everything, okay? And it would be very inappropriate for me to talk about it further because this call is not a promoter call, meaning it's for Kalyan, and let me please stop at this. Sure. Just actually one thing which I can tell you is the shares were brought from Warburg Pincus at the rate of 5:30. So that also I will tell you for your comfort. Could you just clarify if the pledge has been done to one party or multiple parties? Yeah, so there are multiple parties, multiple lenders for the transaction. Okay, sure. That's it from my side. Thank you. Yeah. Thank you. The next question comes from the line of Prem Prakash, an investor. Please go ahead. Yeah, hi Ramesh. Good morning. Hi. I am one of the retail investors, actually. So I mean, congratulations first for the fantastic business update that the company has given for the Q3. However, at the same time, on the day when this business update was given to the market, we are seeing a continuous fall in the market. The market has not taken it in a positive way. That's what we can see from the last six days. So is there something that the market is sensing that this increase in this revenue will not continue for the next quarter or the next year? Something, or is there any governance issue or something that the retail investor is not aware of? No. So as I gather from the questions on this call, I presume that there might have been some rumors floating around, which is all baseless. And that is the main intention of this update call also, okay? In the business front, nothing has changed because Q3 was great, and we have updated the numbers of Q3. The results will also come in the next few weeks, and nothing majorly can change over a week, right? So there can be possibly some rumors which have been floating around, and that was the main intention of this update call as well. Okay. Yeah, thanks, Ramesh. Thank you. Thank you. The next question comes from the line of Raj Vyas from TM Investment Technologies Private Limited. Please go ahead. Thank you for the opportunity. As you mentioned rightly, sir, that you made some changes to the franchisee agreement, and it is only applicable for the new showrooms that are coming up, I guess, for next year. So can you elaborate on the same? What are the changes with respect to the existing agreement? That is your old agreement, franchisee agreement, and the new agreement? And what are the difficulties or any challenges that you guys are facing? Thank you. So there is no challenge which is being faced, as I mentioned before, because this change of franchisee is not a surprise for anybody. It has been a planned execution. And the major change is that initially, the franchisee stores, we were investing for the CapEx fit out, and the franchisee partner was investing for the inventory. Now the new model is CapEx and inventory is being invested by them. That is the major change which we have done. Okay. Okay. That looks like good, right? Yeah, everything is perfectly aligned, and that's why we gave the next year expansion plan also, and everything is on track. Okay. Thank you very much. Yeah. Thank you. The next question comes from the line of Vikrant Kashyap from Asian Markets Securities. Please go ahead. Hi team. Good morning. Two things. Sorry for my bad voice. I have a throat problem. One, just one of the participants asked that, is there any termination of franchisee agreement if you can clarify on that? No, I'm not, it's not very clear, okay? Your voice is not very clear. Can you repeat the question again? Is there any termination of franchisee agreement that you had already signed, or maybe the showroom has been opened? Yeah, of course we have a few terminations of contracts where there can be some, what do you call, some breach of contract done by some franchisee partner and stuff. Not major, maybe three or four. Okay, and there is one more rumor floating in the mind. This has been intimated before, okay? Meaning when we have changed our franchisee, we have told before that there have been terminations in the franchisees. Oh, okay. There is one more rumor going around in the market. I won't name the agency, but the rumor is there is one agency which may have or likely to conduct an inquiry on Kalyan Jewellers, stating that the promoters or promoter group has bribed some fund managers to raise the price in the market. So that one I have heard people sources. Yeah, it's a very absurd allegation, okay? Yeah. We have always conducted our business and our interactions with all stakeholders, okay, are with very high level of integrity and transparency. So I can only leave this like this. I cannot answer further on this, and it's very absurd, no, when you hear itself. Thank you, Ramesh. That's all from my side. Yeah, yeah. Thank you. The next question comes from the line of Parin Nandu from Edelweiss Public Alternatives. Please go ahead. Yeah. Hi team. Thank you for doing this call. So a few questions, right? One is that on this franchisee agreement, right? So let's say if I'm a franchisee who joined in FY24, FY25, and FY26, for me, everything else remaining equal, how will my IRR change, right, for a franchisee who has joined in FY24, 25, and 26? If you can just, you know, help us understand whether there is any significant change in IRR to make it a little less attractive for franchisee to come and take the, you know, franchise of Kalyan, if you can just give some color on this part? Yeah. So as I mentioned before, the major change would be the investment, okay, wherein the ROSIs can be a bit more lower because initially they were investing only in the inventory, okay? Now they are investing for the CapEx as well as inventory. So the ROSIs can go down by approximately 2%. Sorry, can you give some approximately range as to will it go down from 18% to 16%, or what could that number be? Yeah, so the usual ROSIs are approximately 17. So now it can come down up to 15. Okay. And you know, when you think from a franchisee point of view, right, I mean, 17%-15% is a decent enough difference, right? So how is a franchisee thinking, right, whether that 15% still makes sense because there are not many opportunities that will give you 15%, or how should one, you know, if you as a business owner step into the shoes of another business owner which is a franchisee, what is it that is, you know, bringing him on table even at 15% IRR? So here again, the proof of the pudding is in eating, right? So as I mentioned, 50 showrooms this year is in the new model. And all the new showrooms for the next year is in this model. And we have almost signed up all the franchisees for the next financial year. And even now there is a huge waiting list for taking our franchise. And the major advantage for a Kalyan franchisee is the FOCO model, wherein they do actually nothing and they get 15% ROSI. And again, most of the people leverage also. So the return on equity is much higher than the ROSI. Right. I understand. So thank you for clarifying this. And so is there any change in the franchisee agreement between the franchisee that you have signed in FY25 and the ones which you intend to sign next year, or it's the same? So the last, the second half of the financial year is almost everything the new model, okay? That is the same model for the next financial year. Understood. No, let me be very clear that there is no prospective change, right? So only the new showrooms are being changed to this model. It's not changed in the back, meaning people who have taken the first showroom cannot come to this model now. I understand. I understand. So just from a slightly more longer term, right, if we leave some of the noises apart, which you have adequately kind of answered, you as again owners of this business had had a fantastic run, right, in the past few years since listing, you know, outperforming the jewelry sector, organized jewelry sector. So what is it that, you know, on the business side that, you know, keeps you awake at night or you worry about, right, some of the things which you think can derail this fantastic run that we have? If you can just, you know, from a longer term perspective, right, just share your thoughts on this. Again, I have done this in the previous calls when people ask, okay, wherein the only area which we focus now is on execution because we are into expansion mode. We are going to open 80 showrooms in the financial year, wherein 50 have been already opened by September, okay? Next year also we are going to open 170 showrooms spread across Candere and Kalyan. Execution is our primary focus. There is no new strategy which has to be in place. There is no new R&D which has to be done for Kalyan Jewellers. It is predominantly focused on execution, for which we are aligned. Our whole team is working only to make this execution in tune with our execution plan. Otherwise, business is the same. Everything remains the same. There is nothing major which can change over a week. That's it from my side, team. Thanks a lot and all the very best. Yeah, thank you. Thank you. The next question comes from the line of Abhishek Sengupta from AB Capital. Please go ahead. Hello. Am I audible? Yeah, yeah. Very clear. Yes, yes. I just wanted to ask that we have been growing very nicely for the last few years. I just wanted to ask in the long term, like for next three, four years, will the same type of sales growth continue going forward, like maybe for the next three years? So again, I will tell you that, right, like what you said, the last two, two and a half years, the SSGs have been very strong. It has been in the double digits, and the store expansion plan is also on track. The new franchisee model is really working for the brand. The expansion for the brand is really happening. Market share gain is really happening. Huge shift from unorganized to organized is in place, so there is nothing major which can change in the near future. That is the only thing which I can tell you, and again, there are a number of markets where we can go and expand. Even with this store count, we are only 50% to the industry leader, and there are markets where we can go and enter. I cannot tell further on the three or four-year number, but this is what I have to tell for you to actually observe. Okay. Right. Thank you. The next question comes from the line of Vikrant Kashyap from Asian Market Securities. Please go ahead. Hey, Ramesh. So beyond the franchisee closures, have we offered that the franchisee agreement that we have closed, have we offered to other franchisees or the store has been closed on the locations? What has been done? You are talking about the franchisee closure, right? Closure, yeah. Yeah. Okay. So there is a, all of us know that there is a lock-in of four years, okay? And if we close the franchisee, it will be only if there is some breach. And even if we do, it will be converted to own store rather than closing the premises. Because the premises is also in the name of Kalyan Jewellers. The lease is in the name of Kalyan Jewellers. And that is why the lease has been in the name of Kalyan Jewellers, because the relationship can vary, but we cannot leave the premises because it's a Kalyan brand. Okay. And in the international market, you have also given update that you are going to open new stores. So are they company-owned stores or you have planned for franchisee stores? So all the new showrooms for the next financial year, as updated recently, will be FOCO model franchise in India. So the franchisee agreement will be similar in the international markets too? International markets, there are small tweaks, but there is no major change in the international model per se. Okay. So we are offering similar margins to the franchisee partners? Margins? No, similar margins we are offering to the franchisee partners that we are doing in the Indian markets. Yeah. So margins can vary because international markets, the gross margins can vary, but the methodology is the same. Okay. Okay. Got it. Thank you. Thank you. The next question comes from the line of Prafull Rai from Partners. Please go ahead. Yeah. Hi, Prafull. I just wanted more clarity on what would be the impact of these manufactured diamonds on our business. I'm also hearing that the price of natural diamond is on a steady decline. Will there be inventory markdown because of this, and how do you see our future basis of changing industry trends? No, again, as mentioned before, the lab-grown diamonds predominantly is in the solitaire product. And as a brand, Kalyan Jewellers, we have not focused too much on solitaire even before. And hence, we don't see an impact on our studded ratio. And even if you look at the last week update which we did, the revenue growth was approximately 41% in India. And we have also said that the revenue growth is across our products, gold, studded, etc. Okay. Thank you. Thank you. Yeah. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. Once again, a reminder, ladies and gentlemen, if you have a question, please press star and one. The next question comes from the line of Pradeep from Springs. Please go ahead. I want to ask you, like to reduce the stockfall because the PE is so high. Why can't the promoter decide to buy back some shares, you know? Or maybe the cleanup on the margins because you see the margin cut or the INR 60 crore one-time loss which you are expecting this quarter. Maybe promoter can bear it. Maybe if you send such a message in the market, you get sentimental change, right? Either you buy back to reduce the PE, or you basically say the promoter wants to bear the, or maybe somehow it's illegally, right? You can bear the INR 60 crore one-time loss, or maybe you can add this in the next quarter. I don't know. So can you do that? You are asking about company buyback, right? Yeah, the company buyback. Because you see the problem, basically, it says the PE is very high. The only way to reduce the PE is the buyback. Right. Yeah, yeah. So as a company. And secondly, basically, the major concern basically is the one-time loss incurred because of the duty cut, which is continuing on this quarter as well. So my question was basically, is this continuing on the Q4 as well? If it's going to reduce only till this quarter only, have you made basically such a mitigation or something that so that basically the margin will not be less as it was in Q2? Or are you planning to just promoters maybe just basically planning to get 60 crores somehow through them, you know, to avoid basically coming on the balance sheet, you know? Maybe just because the market sentiments are basically because of that only, because they are expecting this one-time loss will continue for a few more quarters. Because I don't know if the inventory has been completely settled now, the past inventory before the rate cuts. Can you answer that? So because the question is long, I would just recheck the question. One is you are talking about a company, are we planning for a buyback or can we plan, right? So as of now. This rate is a PE. Yeah. Yeah, yeah. So as of now, we are using the free cash flow generated to reduce our debt, okay? And release the real estate collaterals which is making the balance sheet very heavy. So post the debt repayment, if we do not find appropriate avenues to invest the free cash flow, we could surely evaluate a cash buyback. And if you are mentioning about the promoter buyback, of course, you know that we are on a silent period now, and we just did a buyback from Warburg Pincus a couple of months before. So what happens to this one-time loss or the inventory because of the inventory you have previously before the gold duty cut? You stated previously in one period that it is the maximum 120 CR, and that 70 CR has been adjusted in Q2, and remaining 60 CR will be adjusted in Q3. Correct. Will it continue like Q4 as well? No, we clearly told no, the inventory loss, one-time loss will be partially in Q2 and then remaining in Q3. So it is all done by now. There is no more what you call inventory loss which can come in Q4. Have you not basically raised the margin on like basically your diamond-traded products to mitigate all this one-time loss? The one-time loss is not. We will not be able to, as you know, that we are in a retail business. 40%-50% of customers are coming back to the same brand. Because we had a one-time loss, we will not be able to increase our gross margin, and again, it might not be very favorable for the customer. And customers are all lifetime customers, and we will not be able to frequently change things because of some macroeconomic reason. So, and it is what the revenue is also growing, strong market share growth. So we cannot disturb anything, and this is one-time, and all investors also understand that it's a one-time. Okay, so the back inventory has been completely, like, whatever the inventory was there, gold inventory is completely basically fulfilled by yours, or is still pending like? No, I did not get you there. Can you repeat? The inventory was there. So you see the loss is there because it's the inventory loss. Whatever you purchased before the duty cut, the inventory was there. That's why you're getting loss. Basically, the inventory loss, duty cut is majorly for the gold loan portion because we will not be able to hedge it. The duty cut, meaning duty. So it's not an impact for the whole inventory. It's for inventory which is majorly into the gold loan portion, GML. Is that completely like fulfilled for this quarter or it's still pending like? Yeah, it's still pending. Q2, Q2 plus Q3, the one-time loss will be fully covered. Q2, the number you already know, and remaining will come in Q3. Is it promoter can tell the media something that basically, see, you're ready to bear maybe in terms of loan or something like that? It's legally allowed, right? It's not you're doing manipulating some balance sheet. But you know, you have to forge the sentiment to the market saying that basically, see, promoters are willing to pay INR 60 crores from their side somehow because the market is crash. How can the promoters? The Kalyan Jewellers stock has crashed more than INR 600 crores. So INR 60 crores maybe or INR 6,000 crores. So get a minimum amount, right? It's a 0.001 maybe, right? Which promoter can bear, right? Just for market sentiment, nothing else. It will just. No, I don't know. I don't know how you are telling all this. According to me, there is no avenue where INR 50-60 crore can be done by the promoter, okay? This has happened to all the players. All the retail players have the same issue. All the other players also have the same issue. It is a one-time loss, and everyone knows about it. So has your OPM grown from Q2 to Q3 now or is it still the same? Pardon? Your operating margin has been grown from Q2 to Q3 or it's still the same? For Q3, you mean? Yes. Q3 results which is coming out. No, no, no. Q3. Q3 result is not yet out, so I will not be able to. Yeah, I understand. I found I found out. In the next few weeks, you will be able to understand about it. So when is the Q3 results coming up? We are yet to announce, but yes, in a few weeks. In a few weeks. But has the OPM been increased so far, like in your so have you increased in your likelihood? I will not be able to tell that number because you understand that this update call was not for that, and please cooperate. You can please come on after a couple of weeks when we announce our result. I will surely clarify. No, no, no. I'm not asking about the Kalyan results. I'm asking about the margins you have been giving away to the store or taking from the store. Has the same in Q2 and Q3 or they are changed? Margins are very stable. The store level gross margins are very stable. For the same thing, they are not changed. You are not adjusted to recover any losses? No, we are not. You are not adjusted to recover any one-time loss, okay? No, no, no. And so the buyback, which I asked you, is there any plan for that? As I told you, we have already laid out our strategy for the next one and a half, two years. We will use the free cash generator to reduce our debt and release the real estate collaterals which is making our balance sheet look very heavy. Post the debt repayment, if we don't find appropriate avenues to invest the free cash flow, then we would surely evaluate a cash buyback. Has the promoter pledged any shares in the last one to two months? Pledged, you mean? Pledged your shares of collateral. Yeah, you know, no, we pledged three, four months before when we bought the stock. The last quarter, I understand that whatever result was there, but last one to two months, has anything changed? No, no. No. All right. No, thank you. Thank you. Thank you. The next question comes from the line of Pawan from Fident Asset Management. Please go ahead. Hi, Pawan here. Are you seeing any increase in competition either at store rent levels because there are more people looking to open stores in the similar locations that you would be looking, or in the making charges that you can charge to customers because the competition is reducing, or at the karigar, the fee that you pay to them for manufacturing charges? Any places that you are seeing? In terms of not at the country level, if not at the country level, are you seeing any particular pockets like Maharashtra or West Bengal, like in the eastern area, any such thing? So competition, you know that it has always been there. And we are a brand, we are very hyper-local. So we compete with the local players, region players, and also national players. It is not a new thing which has come up for us. And if you look at competition, you have seen the numbers for the past many quarters. Revenue has been growing. There is no impact on the gross margin at the store level. So that leaves the message for you. Got it. One more thing in reference to the earlier discussion on diamond inventory. How do you like is that what part of the inventory would be coming from diamonds alone? Is this material if you can't disclose it? And how do you hedge that if you see a steady decline in prices? First of all, let me tell you that the declining prices are on solitaire. And as a brand, we don't stock too much solitaire, and we don't focus on it. And diamonds, we cannot hedge, okay? And one-fourth of the inventory, approximately one-fourth of the inventory will be studded. Okay. Thank you so much. Thank you. The next question comes from the line of Manish Poddar from Invesco Asset Management. Please go ahead. Yeah. Hi, Ramesh. Thanks for doing the call. Hi, hi. So just two bits. One is, is there any, let's say, any resentment or any change, let's say, of whatever has been happening in the last one week? Any feedback, anything from, let's say, vendors or, let's say, your franchisee partners? If you can call out if there is any, I'll be helpful. How are they even related to stock market? Stock market volatility is always there. So I don't think a vendor or a franchisee partner is even bothered about a stock market volatility. And nothing has changed over the last week. Everything is on track, and everything is going in the direction which we want, except for the stock price. Okay. And that's very comforting. And just one more thing, you all mentioned about, let's say, franchisee closures. Is this marginal or this is par for course, or this is anything material? Come back. In the earlier comments, you mentioned that there have been some franchisee closures. Is this par for the course, or is this material what I'm trying to understand? No, no, no. So majorly out of the 100-odd franchisee which we have, there have been closures of around three or four, okay? And predominantly, it is because of some breach of contract terms which they would have done. And you know that we have a lock-in of four years. So it cannot be voluntary. We cannot do a voluntary they cannot volunteer for a what you call closure. If there has been some breach, then we would have surely we would have terminated the contract, okay? One franchise who has a couple of showrooms, that is the termination that I refer to. Got it. Got it. No worries. No, this is useful. Thank you so much for doing the call, Manish. Yeah. Thank you. The next question comes from the line of Sanjay Singh from 10X Capital. Please go ahead. Yeah, hi. Thank you for taking my question. Just wanted to understand how many FOCO franchisees you have as on date? As on date or as on September? I mean, whatever, as of last, whatever you have reported. We have around 120-odd franchisee stores, FOCO. Okay. And rest are COCO or rest are COCO? Everything is FOCO. We don't have any other model except for company-owned, and then otherwise, if it is franchisee, it's FOCO. So FOCO and COCO. 110 FOCO models, and rest are company-owned. Yeah. Right? Yeah, yeah, yeah. Okay. And so when the franchisee in the FOCO stores, is the gold hedged by the franchisee? How does it work? Because he owns the inventory, so technically, you cannot hedge it. So how does it work? Yeah, so we do not get into that, okay? The only thing what we do is that they do a cash flow hedge. So whatever inventory is sold, then they buy it back. So that's what we force to because we have two bank accounts wherein that cash can be used only to replenish the inventory. Okay. So is there any agreement with the franchisee that if gold prices fall, because these franchisees are not more of financial partners per se because they're not involved in the business, they are effectively giving finance. And for them, anything which gives the highest return is where they would go. So is there an agreement with franchisees where, in case the gold price falls, it is on Kalyan's prerogative that they would have to kind of compensate the franchisees? No, no, no. How can we compensate for the gold price? The inventory is owned by them. Okay. The only thing what we have done is we have put in a system wherein to ensure that the volume of gold at the showroom is maintained at the initial level which we have fixed for them. Okay, okay. Even though when we tell you INR 20 crore inventory, internally, it is not INR 20 crore inventory. It is XYZ kilograms of gold and XYZ units of studded. Okay? That level has to be maintained. That system we have put in place. Yeah, but what I'm trying to say is these are financial partners. If in case for some reason, I mean, last year or last few years or last many years, for 20 years now, gold has been in the upswing. And if you look at the previous 20 years, 1980s to 2000, gold price had halved. So in case we see some kind of issue with gold prices, then I mean, the franchisee is a financial partner. He would say, "No, I need my returns." So in that sense, in some sense, Kalyan is also exposed to the even if the franchisee holds the inventory, right? I mean, if I look at the. Returns are in two levels, okay? One is the inventory, for example, if they have invested INR 20 crore, say after 7 years, 10 years, that inventory of INR 20 crore might have been INR 25 crore or might be INR 18 crore, okay? Whatever the case is, according to you. The major area where they focus is the return of the so-called 15%-17% is on the day-to-day business, okay, where cash is generated. That is where they look at their return rather than the gold price, okay? The returns from making charges is where they focus on. That is their actual return by cash. The other thing is only either increase in their inventory investment or decrease in their investment, right? There is no cash flow impact on that. That's why we have put a system in place, as I told you. Typically, when you open a franchisee store, what is the sales which you get from one store on an average, INR 20-30 crore? It depends upon inventory. So the inventory can vary from INR 20-30 crore. For making our life easier, if it is a INR 20-crore store, we will target a two-and-a-half stock turn. But that's the target for the revenue. So INR 50-crore revenue for a INR 20-crore inventory. Okay. When you open a store, the first sales is INR 20 crores in your books? Yeah. The initial revenue will be INR 20 crore in our book, and we will keep a target inventory turn of around two-and-a-half X, a three-year average, the first three-year average. Okay, okay. Thank you very much. That's it. Thank you. Thank you. The next question comes from the line of Gaurav Jogani from JM Financial. Please go ahead. So just one last clarification about the rumor only. There was also one rumor stating that there was a FIR against the promoters. So. I'm not able to hear you properly. Sorry, is it better now? Yeah, yeah. Clear. Yeah. So I'm saying there is one more rumor that is floating around regarding there is some FIR done against the promoters. So I wanted a clarification on that one too. I can confirm that we have not received any FIR against the company or the promoter. Anyway, if there was something, then we should surely update in the stock exchange, right? So that itself makes it clear that we have not received any FIR against the company or promoters. Yes, we are in receipt of a summons which has a reference to an FIR number. This pertains to litigation with the franchisee partner where the dues were settled and the contract was terminated due to breach of contract terms. According to the legal advice we received, this is purely commercial and civil in nature and does not warrant an FIR. We have already taken legal action on it. But to your question, we have not received any FIR against the company or the promoters. Sure. Thank you. Thank you. The next question comes from the line of Rajiv from Nuvama Wealth Management Limited. Please go ahead. Yeah, hi, Ramesh. Thanks for the. Hi, hi. So how long were these terminated franchisees in the system? How? How long were they associated with us? This core franchisee whom I was referring to was only for what, six months or something. Yeah. Okay. Secondly, the SSG, just for clarification, the SSG report, this is largely on secondary sales, right? Or it is on secondary sales, right? Not on primary sales. Only secondary. Only secondary. Okay. And the primaries are largely in tandem with the secondaries or because of, let's say, the momentum you've seen, you're trying to push a little more primaries now? No, no. So we follow a replenishment model wherein when the inventory is sold, we refill. Sure, sure. And thirdly, in terms of the agreement, there used to be, if I'm remembering this right, there used to be a minimum guarantee in terms of the yields the franchisee makes, right? Has there been any tweak on that front? No minimum guarantee for franchisee. We have not given any minimum guarantee. For Candere, yes, we had what you call given certain minimum guarantee for Candere because we also know that Candere as a brand, we have to open the stores and then with a so-called number of stores only we will be able to start our campaigns. For which we have a minimum guarantee in place for Candere. For Kalyan Jewellers, we give only one guarantee, which is the gross margin. Gross margins, we tell them that there is a gross margin guarantee. We don't have a return guarantee. We don't have a revenue guarantee. So my question was that they get 60% of the. Yeah, yeah, yeah. That is there. So 60% of the gross margin is guaranteed. If it falls below 12%, do you guarantee 12%? Yeah, of course. Yeah. That's the guarantee which we give. Okay. Thanks so much. That's helpful. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. Once again, ladies and gentlemen, if you wish to ask a question, please press star and one. A reminder, ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Sanjay Singh from 10X Capital. Please go ahead. Yeah, hi. Sorry, I just had another question. For your inventory, is it gold on loan or I mean, do you hedge it by gold on loan? How much percentage do you hedge and how do you hedge it? Abraham, you want to take it? Yeah, hi. We use gold metal loan also to hedge our inventory. All our gold inventory is completely hedged. Gold metal loan constitutes about close to 40% of our overall gold inventory. The rest would be how do you hedge it? Through MCX or through, I mean, through exchanges? Yeah, through exchanges. Through multiple exchanges, yes. Okay. Thank you very much. That's it. Thank you. Thank you. As there are no further questions, I now hand the conference over to the management for its closing comments. Hi, all. Thank you very much for joining the call. It was a very last-minute call. Thank you very much, and we'll meet you again in a couple of weeks. Thank you very much. Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.