New Delhi: Kalyan Jewellers is aggressively pursuing debt reduction while expanding its footprint through an asset-light franchise model, according to Ramesh Kalyanaraman, Executive Director of the company. By March 2025, the company aims to reduce its debt by Rs 300 crore, bringing the outstanding non-GML debt in India down to Rs 600 crore, Kalyanaraman said.
The company has several land collaterals mortgaged to banks, which it now plans to liquidate to free up financial resources. These are non-store assets, acquired before Kalyan Jewellers became a listed entity in 2021.
“The plan for the next three to five years is to work on both numerator and denominator for ROCE improvement – reducing our debt while continuing to expand,” Kalyanaraman stated. “Once our debt reduction phase is completed by 2027, we will look at new avenues to utilize the excess cash flow, potentially including company-owned stores (COCO) or a other options like buyback or higher dividend playout etc, subject to board approvals.”
Kalyan Jewellers has shifted its expansion strategy to a franchise-operated company-owned (FOCO) model, where the franchisee invests, and the company retains full operational control. Since launching its franchise operations in June 2021, the company has been scaling up its store network at a rapid pace, with all new showrooms planned under the FOCO model in the upcoming financial year.
“Franchise expansion is an asset-light model that aligns with our debt reduction strategy,” said Kalyanaraman. “It allows us to grow faster without burdening the balance sheet. By the end of the next financial year, our revenue mix should be evenly split between franchise and company-owned stores.”
Currently, 40 per cent of Kalyan Jewellers’ revenue comes from franchise operations, with 60 per cent from company-owned stores. The company expects this to reach a 50-50 ratio by the next fiscal year.
The company reported same-store sales growth (SSSG) of 12 per cent in Q1 FY25, which rose to 23 per cent in both Q2 and Q3. Overall, revenue growth for the first nine months stood at 35 per cent in India.
On the margin front, he highlighted that franchise stores offer better return on capital employed (ROCE) and pre-tax margins (PBT). While EBITDA margins are higher for company-owned stores (8 per cent versus 5 per cent for franchisees), the PBT margins favor franchise stores (5 per cent vs. slightly below 5 per cent for company-owned stores).
“With our increasing franchise presence, PBT margins will continue to improve, and EBITDA margins will stabilize,” Kalyanaraman explained. He also emphasized that one-time losses due to customs duty changes had impacted past margins but are not a recurring factor.
Kalyan Jewellers is also pushing its international expansion, with plans to open 10 showrooms in the next financial year across the Middle East, UK, and US. Looking beyond 2027, the company’s strategy remains flexible.
“Once the debt reduction phase is over, we will explore new ways to deploy our cash flow, be it company-owned stores, further international expansion, or even a buyback. The board will decide the best course of action,” Kalyanaraman concluded.
