Are Sky Gold & Diamonds Ltd latest results good or bad?

Sky Gold & Diamonds Ltd's latest financial results for Q3 FY26 reflect a significant year-on-year increase in net profit and revenue, showcasing the company's aggressive growth trajectory in the jewellery sector. The net profit reached ₹80.54 crores, representing a 120.42% increase compared to the same quarter last year, while revenue grew by 77.13% year-on-year to ₹1,767.68 crores. The operating margin also improved to 6.92%, marking the highest level in seven quarters, indicating enhanced pricing power and operational efficiency. Despite these positive highlights, there are underlying concerns that merit attention. The company's working capital management appears to be under pressure, as evidenced by a notable rise in interest expenses, which surged by 59.56% year-on-year to ₹21.18 crores. This increase in interest costs, coupled with a deterioration in the debtors turnover ratio, raises questions about the sustainability of the rapid growth model. Additionally, the operating cash flow turned negative at ₹273 crores in FY25, driven by a significant increase in working capital requirements. Sky Gold's return on equity (ROE) stands at 17.87%, which, while healthy, is below its five-year average, suggesting some strain on capital efficiency amidst aggressive expansion. The company has seen an adjustment in its evaluation, reflecting the market's response to its recent performance and growth potential. In summary, while Sky Gold & Diamonds Ltd has demonstrated impressive growth in revenue and profit, the rising interest burden and challenges in working capital management highlight potential risks that investors should monitor closely. The company's ability to sustain its growth trajectory will depend on managing these financial pressures effectively.