The quarter's standout feature was the company's ability to scale revenue to ₹7,856.03 crores—an all-time high—whilst maintaining profitability metrics that outpaced the prior year by a substantial margin. This growth trajectory reflects robust consumer demand in the jewellery sector, particularly during the festive season, and Kalyan's expanding store network across India and the Middle East.
Despite the impressive operational performance, investor sentiment remains cautious. The stock has underperformed both the Sensex and its sector peers over the past year, declining 27.26% compared to the Sensex's 4.62% gain and the Gems, Jewellery and Watches sector's 20.28% advance. The disconnect between fundamental performance and market valuation has become the defining narrative for this mid-cap jewellery retailer.
Quarterly Performance Trajectory: Consistent Momentum
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | YoY Growth | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 7,856.03 | +8.08% | 260.51 | +99.46% | 3.32% |
| Jun'25 | 7,268.48 | +17.58% | 264.08 | +48.55% | 3.63% |
| Mar'25 | 6,181.53 | -15.07% | 187.61 | +36.34% | 3.04% |
| Dec'24 | 7,278.09 | +19.99% | 218.82 | — | 3.00% |
| Sep'24 | 6,065.48 | +9.73% | 130.61 | — | 2.15% |
| Jun'24 | 5,527.82 | +22.16% | 177.77 | — | 3.21% |
| Mar'24 | 4,525.01 | — | 137.60 | — | 3.04% |
The quarterly progression reveals a company firing on multiple cylinders. Over the past seven quarters, Kalyan Jewellers has demonstrated consistent revenue expansion, with only one quarter (Mar'25) registering sequential decline—a seasonal pattern typical in the jewellery sector. The year-on-year profit growth in Q2 FY26 stands out as particularly impressive, nearly doubling from the base established in Sep'24.
Financial Performance: Margin Compression Amidst Volume Growth
In Q2 FY26, Kalyan Jewellers reported net sales of ₹7,856.03 crores, marking an 8.08% sequential increase from Q1's ₹7,268.48 crores and a robust 29.52% year-on-year expansion. This growth trajectory underscores the company's successful store expansion strategy and improving same-store sales growth across its network.
However, the margin profile presents a more nuanced picture. Operating profit (excluding other income) stood at ₹497.00 crores in Q2 FY26, translating to a margin of 6.33%—a sequential contraction of 66 basis points from Q1's 6.99%. This compression reflects rising employee costs (₹217.93 crores, up from ₹209.56 crores) and operational expenses associated with the company's aggressive expansion plans. The PAT margin similarly declined to 3.32% from 3.63% in the previous quarter, though it remained significantly higher than the 2.15% recorded in Sep'24.
The quality of earnings remains solid, with other income contributing ₹51.41 crores—up from ₹46.27 crores in Q1—whilst interest costs declined to ₹94.94 crores from ₹103.61 crores, reflecting improved working capital management. The operating profit to interest coverage ratio reached an impressive 5.23 times, the highest in recent quarters, indicating strengthening debt servicing capability.
Margin Dynamics: Growth Over Profitability
Kalyan Jewellers' margin compression in Q2 FY26 reflects a strategic trade-off—prioritising revenue growth and market share expansion over immediate profitability optimisation. The company's focus on new store additions and geographical expansion inevitably pressures near-term margins, but this investment phase could yield substantial returns as stores mature and operational leverage improves.
Operational Efficiency: Strong Growth, Moderate Returns
Kalyan Jewellers' operational metrics present a company in expansion mode, though with return ratios that remain modest relative to valuation multiples. The company's Return on Equity (ROE) stands at 9.78% on average, improving to 14.88% in the latest period—a positive trajectory but still below the 15-20% threshold typically associated with premium valuations. Return on Capital Employed (ROCE) similarly registers at 11.16% on average, reaching 13.54% in the most recent measurement.
These return metrics, whilst improving, underscore a fundamental challenge: Kalyan operates in a capital-intensive business requiring substantial working capital for inventory (gold, diamonds, and precious stones) and fixed capital for store infrastructure. The company's sales-to-capital-employed ratio of 1.78x indicates moderate asset efficiency, suggesting that every rupee of capital deployed generates ₹1.78 in sales—respectable but not exceptional.
On the leverage front, Kalyan has substantially deleveraged its balance sheet. Long-term debt has been reduced to zero as of Mar'25, down from ₹84.84 crores in Mar'20. However, the company maintains significant working capital debt, with the debt-to-EBITDA ratio averaging 5.42x—relatively high but manageable given the inventory-intensive nature of the jewellery business. The net debt-to-equity ratio of 0.82x indicates moderate leverage, providing financial flexibility whilst maintaining a prudent capital structure.
Leverage Watch: Whilst Kalyan has eliminated long-term debt, its working capital requirements remain substantial. The company's ability to maintain EBIT-to-interest coverage above 5x provides comfort, but investors should monitor whether aggressive expansion strains this metric in coming quarters.
Competitive Positioning: Chasing the Leader
Within India's organised jewellery sector, Kalyan Jewellers occupies the second position by market capitalisation (₹52,196 crores), trailing significantly behind sector leader Titan Company. The competitive landscape reveals both the company's strengths and the challenges it faces in justifying its premium valuation.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Kalyan Jewellers | 66.09 | 11.02 | 9.78% | 0.82 | 0.29% |
| Titan Company | 81.03 | 2.61 | 23.33% | 0.49 | — |
| P N Gadgil Jewellers | 35.21 | 5.72 | 20.82% | 0.26 | — |
| Thangamayil Jewellery | 57.24 | 0.90 | 15.93% | 0.69 | 0.37% |
| PC Jeweller | 13.79 | 1.30 | 2.16% | 0.34 | — |
| Bluestone Jewellery | NA (Loss Making) | 0.55 | 0.00% | 2.40 | — |
The peer comparison reveals a stark reality: Kalyan trades at 66.09x trailing earnings—substantially higher than most peers except Titan—whilst delivering an ROE of just 9.78%, significantly below Titan's 23.33% and P N Gadgil's 20.82%. The company's price-to-book ratio of 11.02x stands out as exceptionally elevated, more than four times higher than Titan's 2.61x despite inferior return metrics.
This valuation premium appears predicated on Kalyan's growth trajectory rather than current profitability. The company has demonstrated a five-year sales CAGR of 29.84% and EBIT growth of 34.01%—amongst the highest in the sector. However, the PEG ratio of 2.48 suggests that even accounting for this growth, the stock may be overvalued relative to earnings expansion potential.
"Kalyan Jewellers commands a valuation premium that anticipates sustained hypergrowth, but the margin compression and modest return ratios raise questions about whether the company can deliver returns commensurate with investor expectations."
Valuation Analysis: Expensive by Multiple Metrics
Kalyan Jewellers' current valuation of ₹512.75 per share (as of November 07, 2025) reflects a market capitalisation of ₹52,196 crores, positioning the stock at a P/E multiple of 66x trailing earnings—a substantial premium that demands scrutiny. The company's valuation grade has fluctuated between "Expensive" and "Fair" over the past year, currently classified as "Expensive" since January 31, 2025.
At 11.02x price-to-book value, Kalyan trades at a significant premium to its book value of ₹46.57 per share, reflecting market expectations of future growth rather than current asset value. The EV/EBITDA multiple of 34.16x and EV/EBIT of 43.76x similarly indicate rich valuations, particularly when compared to the company's operational performance metrics.
The dividend yield of 0.29% provides minimal income support, with the company paying ₹1.50 per share (ex-dividend date: September 04, 2025) representing a payout ratio of 21.64%. Whilst the company has increased its dividend from previous levels, the yield remains inconsequential for income-oriented investors.
The stock's 52-week range of ₹399.20 to ₹794.60 illustrates significant volatility, with the current price 35.47% below the peak reached earlier in the year. This correction reflects broader market reassessment of growth stock valuations and sector-specific concerns about margin sustainability.
Shareholding Pattern: Institutional Confidence Building
The shareholding structure of Kalyan Jewellers has witnessed notable shifts over the past year, with institutional investors displaying mixed signals about the company's prospects. Promoter holding stands at 24.89% as of Sep'25, having increased substantially from 19.30% in Sep'24 following a 5.57% sequential jump in Mar'25—a strong vote of confidence from the founding family.
| Quarter | Promoter | FII | Mutual Funds | Insurance | Other DII |
|---|---|---|---|---|---|
| Sep'25 | 24.89% (—) | 14.12% (▼ 2.71%) | 13.55% (▲ 1.74%) | 0.22% (▼ 0.24%) | 0.79% (▼ 0.28%) |
| Jun'25 | 24.89% (—) | 16.83% (▼ 0.06%) | 11.81% (▲ 1.32%) | 0.46% (▲ 0.06%) | 1.07% (—) |
| Mar'25 | 24.89% (▲ 5.57%) | 16.89% (▲ 0.52%) | 10.49% (▼ 1.26%) | 0.40% (▼ 0.38%) | 1.07% (▲ 0.03%) |
| Dec'24 | 19.32% (▲ 0.02%) | 16.37% (▲ 0.62%) | 11.75% (▲ 0.01%) | 0.78% (▼ 0.09%) | 1.04% (▼ 0.09%) |
| Sep'24 | 19.30% | 15.75% | 11.74% | 0.87% | 1.13% |
Foreign Institutional Investors (FIIs) have reduced their stake to 14.12% in Sep'25 from 16.83% in Jun'25, marking a significant 2.71% sequential decline. This reduction suggests some profit-booking by international investors, possibly reflecting concerns about valuation or broader emerging market allocation decisions. However, FII holding remains substantial, with 474 foreign institutional investors maintaining positions.
Conversely, Mutual Fund holdings have increased steadily, rising to 13.55% in Sep'25 from 11.81% in Jun'25—a positive 1.74% sequential increase. This trend indicates growing domestic institutional confidence, with 29 mutual fund schemes now holding stakes. The divergence between FII selling and MF buying suggests differing perspectives on the company's near-term prospects.
Insurance company holdings have declined to just 0.22% from 0.46% in the previous quarter, whilst other DII holdings similarly decreased to 0.79% from 1.07%. The overall institutional holding of 28.69% remains healthy, though the recent FII exodus warrants monitoring.
Stock Performance: Significant Underperformance Persists
Kalyan Jewellers' stock performance over the past year presents a stark contrast to its operational momentum, with the shares declining 27.26% compared to the Sensex's 4.62% gain—a negative alpha of 31.88 percentage points. This underperformance has been particularly pronounced in recent months, with the stock falling 13.20% over three months whilst the Sensex advanced 3.22%.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +0.56% | -0.86% | +1.42% |
| 1 Month | +5.11% | +1.57% | +3.54% |
| 3 Months | -13.20% | +3.22% | -16.42% |
| 6 Months | -1.89% | +3.06% | -4.95% |
| YTD | -33.12% | +6.50% | -39.62% |
| 1 Year | -27.26% | +4.62% | -31.88% |
| 2 Years | +52.20% | +28.14% | +24.06% |
| 3 Years | +386.94% | +36.01% | +350.93% |
The year-to-date performance has been particularly disappointing, with shares plunging 33.12% compared to the Sensex's 6.50% gain. This 39.62 percentage point underperformance reflects a fundamental re-rating of the stock as investors have reassessed growth expectations and margin sustainability concerns.
However, the longer-term picture remains compelling. Over three years, Kalyan has delivered extraordinary returns of 386.94%, vastly outperforming the Sensex's 36.01% gain by 350.93 percentage points. This historical outperformance underscores the company's transformation from a regional player to a national jewellery retailer, though it also raises questions about whether future returns can match this exceptional track record.
The stock's risk profile remains elevated, with a beta of 1.20 indicating 20% higher volatility than the broader market. The volatility of 45.67% (compared to Sensex's 12.39%) classifies Kalyan as a high-risk investment, with the risk-adjusted return of -0.60 over one year reflecting poor performance relative to the volatility endured.
Notably, Kalyan has significantly underperformed its sector, with the Gems, Jewellery and Watches sector advancing 20.28% over one year—a 47.54 percentage point outperformance relative to Kalyan. This sector-relative weakness suggests company-specific concerns rather than broad industry headwinds.
Investment Thesis: Quality Growth at Expensive Valuations
Kalyan Jewellers' investment case rests on four pillars that collectively paint a picture of a good-quality company facing valuation headwinds. The proprietary Mojo score of 55/100 places the stock firmly in "HOLD" territory, reflecting the tension between operational excellence and market pricing.
The quality assessment grades Kalyan as "Good," reflecting its healthy long-term growth trajectory (29.84% sales CAGR over five years), improving return metrics, and strong institutional participation at 28.69%. The company has successfully transitioned from a regional Kerala-based jeweller to a pan-India brand with presence in 23 states and the Middle East, demonstrating execution capability and brand strength.
However, the valuation grade of "Expensive" represents the primary constraint on the investment case. At 66x trailing earnings, the stock prices in substantial future growth that may prove difficult to deliver, particularly given the margin compression witnessed in recent quarters. The PEG ratio of 2.48 suggests limited upside potential unless the company can meaningfully accelerate earnings growth or expand margins.
The financial trend remains "Positive," with Q2 FY26 representing the highest quarterly net sales and operating profit to interest coverage reaching record levels. Yet the technical trend has turned "Mildly Bearish," with the stock trading below all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), indicating weak near-term momentum.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Exceptional Growth Track Record: Five-year sales CAGR of 29.84% and EBIT growth of 34.01% demonstrate consistent execution and market share gains
- Improving Debt Metrics: Operating profit to interest coverage at 5.23x (highest level), indicating strengthening financial flexibility
- Store Expansion Momentum: Aggressive network expansion across India and Middle East providing platform for sustained growth
- Promoter Confidence: Promoter stake increase to 24.89% from 19.30% signals strong insider conviction
- Rising Mutual Fund Interest: MF holdings increased to 13.55% from 11.81%, indicating growing domestic institutional support
- Dividend Initiation: Highest-ever dividend of ₹1.50 per share with payout ratio of 21.64% demonstrates commitment to shareholder returns
- Market Position: Second-largest organised jewellery retailer by market cap, well-positioned to capture industry consolidation
⚠ KEY CONCERNS
- Valuation Premium Unsustainable: P/E of 66x and P/BV of 11x appear excessive given ROE of just 9.78% and margin compression trends
- Margin Pressure Intensifying: Operating margin declined 66 bps QoQ to 6.33%, raising questions about profitability sustainability during expansion
- Severe Stock Underperformance: Down 27.26% over one year vs Sensex +4.62%, underperforming sector by 47.54 percentage points
- FII Exodus: Foreign institutional holding declined 2.71% in Sep'25 quarter, suggesting international investors taking profits
- High Volatility Profile: Beta of 1.20 and volatility of 45.67% make this unsuitable for risk-averse investors
- Weak Technical Setup: Trading below all major moving averages with mildly bearish trend since October 2025
- Working Capital Intensity: Debt-to-EBITDA of 5.42x reflects substantial working capital requirements that could constrain financial flexibility
Outlook: What to Watch
POSITIVE CATALYSTS
- ▲ Margin Recovery: Any sequential improvement in operating margins back towards 7% levels would signal operating leverage benefits
- ▲ Same-Store Sales Growth: Acceleration in SSSG above 15% would validate the store expansion strategy
- ▲ Market Share Gains: Evidence of taking share from unorganised players or regional competitors
- ▲ Valuation Correction: Any meaningful stock price decline towards ₹400-450 would improve risk-reward substantially
RED FLAGS
- ▼ Further Margin Compression: Operating margins below 6% would raise serious concerns about business model sustainability
- ▼ Slowing Revenue Growth: QoQ growth below 5% or YoY growth below 20% would challenge growth premium
- ▼ Continued FII Selling: Further reduction in foreign institutional holding below 12% would signal waning international confidence
- ▼ Working Capital Deterioration: Debt-to-EBITDA rising above 6x would constrain expansion plans and financial flexibility
The Verdict: Quality Growth Constrained by Valuation
Score: 55/100
For Fresh Investors: Avoid initiating positions at current levels. The 66x P/E multiple and 11x P/BV ratio price in perfection that may prove elusive given margin compression trends and modest return ratios. Wait for a meaningful correction towards ₹400-450 (30-35% downside) to consider entry, or evidence of sustained margin expansion above 7%.
For Existing Holders: Continue holding if your average cost is below ₹350-400, as the long-term growth story remains intact. However, consider partial profit-booking if sitting on substantial gains, particularly given the stock's 35% decline from 52-week highs and weak technical setup. The company's operational momentum justifies patience, but the valuation premium leaves limited margin for disappointment.
Fair Value Estimate: ₹420-450 per share (18-22% downside from current levels), implying a more reasonable P/E of 52-55x that better reflects the company's growth-quality trade-off.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Investments in equity markets are subject to market risks, and investors may lose some or all of their invested capital.
