RBZ Jewellers Q2 FY26: Profitability Shines Despite Revenue Softness

Following the results announcement, RBZ Jewellers' stock has demonstrated notable strength, trading at ₹163.35 as of November 11, 2025, representing a gain of 3.81% on the day. The stock has delivered an impressive 12.19% return over the past month, substantially outperforming the Sensex's 1.66% gain during the same period, generating a positive alpha of 10.53 percentage points.

The quarter's performance reflects the inherent seasonality of the jewellery business, with Q2 traditionally being a softer period compared to the festive-heavy quarters. However, the company's ability to expand profitability margins even as revenues contracted demonstrates effective cost management and pricing power—critical attributes in a sector characterised by volatile gold prices and intense competition.

Financial Performance: Margin Expansion Amidst Revenue Contraction

RBZ Jewellers' Q2 FY26 financial performance presents a tale of two narratives. Net sales declined sharply to ₹75.58 crores, down 44.95% from Q1 FY26's ₹137.29 crores and 8.33% lower year-on-year from ₹82.45 crores in Q2 FY25. This sequential contraction reflects typical seasonal patterns in the jewellery sector, where Q2 (July-September) generally witnesses subdued demand compared to the festive and wedding-heavy quarters that follow.

Despite the revenue pressure, profitability metrics paint a more encouraging picture. Net profit stood at ₹7.12 crores in Q2 FY26, representing a PAT margin of 9.42%—a substantial expansion of 315 basis points from Q1 FY26's 6.24% and a notable improvement from the year-ago quarter's 11.01%. This margin expansion is particularly impressive given the challenging top-line environment, suggesting effective cost control and operational efficiency.

Operating profit (PBDIT excluding other income) reached ₹12.98 crores with an operating margin of 17.17%, significantly higher than Q1 FY26's 10.63%. This 654 basis point sequential improvement in operating margins demonstrates the company's ability to optimise its cost structure and maintain pricing discipline even during softer demand periods.

Interest costs remained relatively stable at ₹2.58 crores in Q2 FY26 compared to ₹2.45 crores in the previous quarter, reflecting the company's moderate leverage profile. The effective tax rate stood at 25.76%, slightly higher than Q1 FY26's 24.89% but well within the normalised range for Indian corporates.

Operational Excellence: Capital Efficiency Drives Returns

RBZ Jewellers' operational performance reveals a company that has successfully enhanced its capital efficiency over recent years. The company's Return on Equity (ROE) stands at an impressive 15.04% for the latest fiscal year, significantly higher than the average ROE of 13.42%. This superior capital efficiency indicates that the company is generating strong returns for shareholders relative to the equity capital deployed—a critical metric in capital-intensive businesses like jewellery retail.

The company's Return on Capital Employed (ROCE) of 15.09% on an average basis further underscores its ability to generate healthy returns on the total capital invested in the business. With a latest ROCE of 13.03%, the company continues to deliver returns well above the cost of capital, creating value for stakeholders.

From a balance sheet perspective, RBZ Jewellers maintains a conservative leverage profile with an average net debt-to-equity ratio of 0.34, indicating low financial risk. The company's shareholder funds have grown substantially to ₹245.04 crores as of March 2025 from ₹207.49 crores a year earlier, reflecting retained earnings and capital strengthening. Long-term debt has been reduced dramatically to ₹0.74 crores from ₹19.99 crores, demonstrating prudent financial management and deleveraging efforts.

Current assets stood at ₹316.41 crores as of March 2025, providing adequate liquidity to support working capital requirements. However, cash flow from operations turned negative at ₹14 crores in FY25, primarily driven by a ₹66 crore increase in working capital—a reflection of inventory build-up and receivables growth as the business expanded. This working capital intensity is typical for jewellery businesses but warrants monitoring to ensure it doesn't constrain future growth.

Industry Context: Navigating a Fragmented Competitive Landscape

The Indian gems and jewellery sector remains highly fragmented, with organised players gradually gaining market share from the unorganised segment. RBZ Jewellers operates in this evolving landscape, competing against both established branded chains and local jewellers. The sector has witnessed significant consolidation pressures, with larger players leveraging economies of scale, brand strength, and access to capital to expand their footprint.

The company's positioning as a micro-cap player with a market capitalisation of ₹637 crores places it in a niche segment where agility and regional focus can be competitive advantages. However, this also exposes the company to higher volatility and limited access to capital markets compared to larger peers.

Demand dynamics in the jewellery sector are closely tied to gold prices, wedding seasons, and festival periods. The inherent seasonality—with Q3 (Diwali, Dhanteras) and Q4 (wedding season) typically being the strongest quarters—explains much of the sequential revenue volatility witnessed in Q2 FY26. Understanding this cyclical pattern is crucial for investors evaluating the company's performance.

Peer Comparison: Valuation and Performance Benchmarking

Analysing RBZ Jewellers against its peer group in the gems and jewellery sector provides valuable context for its relative positioning. The company trades at a Price-to-Earnings (TTM) ratio of 17.26x, which is below the peer average of approximately 21x, suggesting a relative valuation discount. This lower multiple could reflect the company's smaller scale, lower institutional following, or market concerns about growth sustainability.

From a profitability perspective, RBZ Jewellers' ROE of 13.42% positions it in the middle of the pack—superior to T B Z (7.75%) and Asian Star Co. (5.31%) but trailing PNGS Gargi FJ (16.66%) and Radhika Jeweltec (16.15%). This indicates reasonable but not exceptional capital efficiency relative to peers.

The company's Price-to-Book Value ratio of 2.60x is notably higher than most peers, with only Radhika Jeweltec commanding a higher multiple at 3.22x. This premium valuation relative to book value suggests the market is pricing in growth expectations or intangible factors such as brand value, despite the company's relatively modest ROE.

On the leverage front, RBZ Jewellers maintains a conservative debt-to-equity ratio of 0.34, lower than T B Z (1.06) and Manoj Vaibhav (0.51), indicating a more prudent capital structure that provides financial flexibility for future growth initiatives.

Valuation Analysis: Trading at Reasonable Multiples

RBZ Jewellers' current valuation presents a mixed picture. At a P/E ratio of 17.26x, the stock trades at a significant discount to the industry average P/E of 61x, suggesting the market is not according the company the same premium as larger, more established peers. This valuation gap could be attributed to concerns about scale, liquidity, corporate governance, or growth visibility.

The Price-to-Book Value of 2.60x implies the market is valuing the company at 2.6 times its net asset value. While this represents a premium to book value, it is justified by the company's ROE of 15.04%, which significantly exceeds the implied cost of equity. A simple valuation framework suggests that companies with ROEs above 15% can justify P/BV multiples in the 2-3x range, placing RBZ Jewellers within a reasonable valuation band.

The company's EV/EBITDA multiple of 11.39x and EV/Sales of 1.38x indicate moderate valuation levels. These multiples are neither stretched nor deeply discounted, reflecting a market that is cautiously optimistic about the company's prospects but not willing to pay a significant premium given execution risks and scale constraints.

The PEG ratio of 0.22x is particularly noteworthy. A PEG ratio below 1.0 typically suggests that a stock is undervalued relative to its growth rate. With a 5-year sales growth CAGR of 28.10% and EBIT growth of 34.30%, the company's growth trajectory appears robust, potentially making the current valuation attractive for growth-oriented investors willing to accept the associated risks of a micro-cap stock.

However, it is crucial to note that the company currently carries a "DOES NOT QUALIFY" valuation grade, which changed from "Risky" in early February 2024. This assessment reflects concerns about liquidity, corporate governance standards, or other qualitative factors that prevent the stock from receiving a favourable valuation rating despite reasonable quantitative metrics.

Shareholding Pattern: Stable Promoter Base, Declining Institutional Interest

The shareholding structure of RBZ Jewellers reveals a company with strong promoter commitment but limited institutional participation. Promoter holding has remained rock-solid at 75.00% across the last five quarters (September 2024 through September 2025), indicating unwavering confidence from the founding family and management team. This stable promoter base provides governance continuity and alignment of interests with minority shareholders.

However, the institutional shareholding pattern raises concerns. Foreign Institutional Investor (FII) holdings have declined consistently from 1.02% in September 2024 to just 0.24% in September 2025—a reduction of 76 basis points. This gradual exit by foreign investors suggests waning confidence or reallocation towards larger, more liquid opportunities.

Mutual fund holdings remain at 0.00% throughout the period, indicating that no domestic mutual fund schemes have taken positions in the stock. This absence of institutional validation is a red flag, as mutual funds typically conduct rigorous due diligence before investing. The lack of interest from this investor class may reflect concerns about liquidity, governance, growth visibility, or simply the stock's small market capitalisation falling below typical mutual fund investment thresholds.

Other Domestic Institutional Investor (DII) holdings have also declined sharply from 1.58% in March 2025 to 0.08% in September 2025, representing a 150 basis point reduction. This institutional exodus across both foreign and domestic categories is concerning and suggests that sophisticated investors are reducing their exposure to the stock.

On a positive note, non-institutional holdings (retail and HNI investors) have increased from 22.26% in September 2024 to 24.69% in September 2025, indicating growing retail interest. However, this shift towards a more retail-heavy shareholder base can increase stock volatility and reduce price discovery efficiency.

Stock Performance: Strong Recent Momentum Masks Longer-Term Underperformance

RBZ Jewellers' stock price performance presents a stark contrast between recent momentum and longer-term underperformance. The stock currently trades at ₹163.35, having delivered impressive short-term returns but struggling significantly over extended periods.

Over the past six months, the stock has surged 23.75%, massively outperforming the Sensex's 5.56% gain and generating an alpha of 18.19 percentage points. This recent outperformance has been driven by improving quarterly results, margin expansion, and renewed retail investor interest. The stock's technical trend has turned "Mildly Bullish" as of November 4, 2025, after spending several months in bearish territory.

However, zooming out to longer timeframes reveals significant underperformance. Year-to-date, the stock has declined 15.76% compared to the Sensex's 7.34% gain, resulting in a negative alpha of 23.10 percentage points. Over the past year, the stock has fallen 19.61% versus the Sensex's 5.50% gain, underperforming by 25.11 percentage points.

Perhaps most concerning is the stock's underperformance relative to its sector. Over the past year, RBZ Jewellers has declined 19.61% while the broader Gems, Jewellery and Watches sector has delivered positive returns of 18.84%—a massive underperformance of 38.45 percentage points. This suggests company-specific challenges rather than sector-wide headwinds.

From a technical perspective, the stock trades above all key moving averages—5-day (₹154.67), 20-day (₹146.87), 50-day (₹141.73), 100-day (₹140.72), and 200-day (₹147.27)—indicating short-term bullish momentum. However, the stock remains 35.29% below its 52-week high of ₹252.45, suggesting significant resistance overhead.

Investment Thesis: Growth Potential Tempered by Execution Risks

The investment case for RBZ Jewellers rests on several key pillars, each with associated risks that investors must carefully weigh. The company's overall Mojo score of 68/100 places it in the "HOLD" category, reflecting a balanced assessment of opportunities and concerns.

The company's quality grade has improved to "Average" from "Below Average," reflecting sustained improvements in financial performance over recent quarters. The 5-year sales CAGR of 28.10% and EBIT growth of 34.30% demonstrate the company's ability to scale operations and improve profitability over time.

However, the "Does Not Qualify" valuation rating—despite reasonable quantitative metrics—suggests underlying concerns about corporate governance, disclosure standards, or other qualitative factors that sophisticated investors consider important. This rating has been in place since early 2024, indicating persistent issues that have not been adequately addressed.

Outlook: Key Monitoring Points for Investors

As RBZ Jewellers navigates the upcoming festive and wedding seasons, several factors will be critical in determining whether the company can sustain its recent momentum and address the concerns that have led to institutional investor exits.

The upcoming quarters will be crucial in determining whether the company's recent operational improvements represent a sustainable turnaround or merely cyclical strength. Investors should closely monitor Q3 FY26 results—historically the strongest quarter for jewellery retailers—to assess whether the company can convert seasonal demand into sustained growth whilst maintaining the margin improvements achieved in Q2.