TBZ Q3 FY26: Jewellery Retailer Delivers Stunning 170% Profit Surge on Festive Demand

Despite the stellar quarterly performance, TBZ shares have faced headwinds over the past year, declining 19.07% whilst the broader Sensex gained 6.63%, resulting in a negative alpha of 25.70%. The stock closed at ₹168.10 on January 20, 2026, up 2.16% on the day, trading well below its 52-week high of ₹232.75 but showing signs of stabilisation after touching a low of ₹155.35.

The third-quarter performance marks a significant inflection point for TBZ, which has been steadily improving its operational efficiency and market positioning in India's organised jewellery sector. The company's ability to capitalise on the festive season—traditionally the strongest period for jewellery retailers—whilst simultaneously expanding margins demonstrates effective cost management and pricing power in a competitive market.

Financial Performance: Festive Quarter Delivers Exceptional Results

TBZ's Q3 FY26 revenue stood at ₹1,061.43 crores, representing a robust 14.40% year-on-year growth and a sequential increase of 54.32% from Q2 FY26. This quarter-on-quarter surge reflects the seasonal nature of jewellery demand, with Diwali and wedding season driving strong consumer purchases. More impressively, the company achieved this revenue growth whilst significantly improving profitability metrics across the board.

Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) surged to ₹131.16 crores in Q3 FY26, more than doubling from ₹60.13 crores in the corresponding quarter last year. The operating margin expansion to 12.36% from 6.48% year-on-year represents a remarkable 588 basis points improvement, indicating superior operational leverage and cost discipline. This margin performance is particularly noteworthy given the competitive intensity in the organised jewellery retail space.

The profit after tax margin reached 7.60% in Q3 FY26, up from 3.22% in the year-ago quarter, reflecting improved operational efficiency and better absorption of fixed costs. Interest costs increased to ₹18.51 crores from ₹13.21 crores year-on-year, reflecting higher working capital requirements to support inventory for the festive season. However, the operating profit to interest coverage ratio improved significantly to 7.09 times in Q3 FY26, the highest level achieved by the company, demonstrating strong debt servicing capability.

Operational Excellence: Capital Efficiency Reaches New Heights

TBZ's return on capital employed (ROCE) has shown remarkable improvement, reaching 13.01% in the latest period—the highest level in the company's recent history. This represents a significant enhancement from the historical average of 9.39%, signalling improved capital productivity and better asset utilisation. The company's ability to generate superior returns on invested capital is particularly impressive given the capital-intensive nature of jewellery retail, which requires substantial inventory investments.

Return on equity (ROE) similarly improved to 13.42% from a historical average of 9.60%, indicating better profitability for shareholders. Whilst these returns remain below industry leaders, the positive trajectory suggests TBZ is successfully executing its operational improvement strategy. The company has maintained zero promoter pledging, providing comfort on governance and financial stability.

The balance sheet shows shareholder funds of ₹657.21 crores as of March 2025, with long-term debt maintained at minimal levels of ₹1.84 crores. However, the company operates with significant working capital intensity, with current assets of ₹1,585.29 crores against current liabilities of ₹1,021.34 crores. This structure is typical for jewellery retailers, where inventory represents the largest asset category. The debt-to-EBITDA ratio of 4.77 times and net debt-to-equity of 1.05 indicate moderate leverage levels that require monitoring.

Industry Context: Organised Jewellery Retail Gaining Market Share

The organised jewellery retail sector in India has been experiencing structural tailwinds, with consumers increasingly favouring branded players offering certified products, transparent pricing, and buyback guarantees. TBZ, as one of the pioneers in promoting lightweight precious jewellery and offering lifetime buyback on gold and diamond jewellery, is well-positioned to capitalise on this shift from unorganised to organised retail.

The festive season of October-December traditionally accounts for a disproportionate share of annual jewellery sales, driven by Diwali celebrations and the peak wedding season. TBZ's 54.32% sequential revenue growth in Q3 FY26 reflects this seasonality, though the year-on-year growth of 14.40% indicates the company is gaining market share even within the festive period.

The company's focus on lightweight precious jewellery addresses a key consumer preference for affordable luxury, enabling customers to purchase branded jewellery without excessive capital outlay. This strategy has proven particularly effective in tier-2 and tier-3 cities, where organised retail penetration is still developing but consumer aspirations are rising rapidly.

Peer Comparison: Valuation Discount Reflects Scale Differences

Within the gems, jewellery, and watches sector, TBZ trades at a significant valuation discount to peers, reflecting its smaller scale and lower return ratios. The company's price-to-earnings ratio of 12.01 times compares favourably against the industry average of 62 times, whilst its price-to-book value of 1.61 times is substantially below peers like Khazanchi Jewellers (6.91x) and Shringar House (3.63x).

TBZ's ROE of 9.60% lags significantly behind sector leaders like Shanti Gold (32.22%) and Shringar House (26.58%), explaining part of the valuation discount. However, the improving trend in return ratios—with latest ROCE at 13.01%—suggests the gap may narrow over time if operational improvements sustain. The company's debt-to-equity ratio of 1.05 is moderate compared to peers, though higher than best-in-class operators with minimal leverage.

The market capitalisation of ₹1,123 crores positions TBZ as a small-cap player in the organised jewellery space, ranking sixth amongst the peer group. This size differential limits institutional interest and contributes to lower trading liquidity, though it also presents potential for re-rating if the company can demonstrate sustained profitability improvement and scale expansion.

Valuation Analysis: Attractive Entry Point Despite Recent Underperformance

At the current market price of ₹168.10, TBZ trades at a price-to-earnings ratio of 12.01 times trailing twelve-month earnings, representing a significant 81% discount to the industry P/E of 62 times. The enterprise value-to-EBITDA multiple of 8.67 times and EV-to-capital employed ratio of 1.30 times suggest the stock is trading below intrinsic value, particularly given the improving return on capital profile.

The PEG ratio of 0.25 indicates the stock is undervalued relative to its five-year earnings growth rate of 23.30%, with conventional wisdom suggesting PEG ratios below 1.0 represent attractive valuations. The company's book value per share stands at ₹98.49, implying the current price-to-book ratio of 1.61 times provides a reasonable margin of safety for long-term investors.

The valuation grade has been classified as "Very Attractive" since November 2023, indicating the stock has been trading below fair value for an extended period. The dividend yield of 1.31% provides some income support, though the payout ratio of 21.95% suggests scope for dividend growth as profitability improves. The 52-week price range of ₹155.35 to ₹232.75 indicates significant volatility, with the current price 27.78% below the recent high.

Stock Performance: Technical Weakness Amid Fundamental Improvement

TBZ shares have delivered disappointing returns over the past year, declining 19.07% compared to the Sensex's 6.63% gain, resulting in negative alpha of 25.70%. This underperformance has been particularly acute over the six-month period, with the stock down 16.08% whilst the benchmark remained flat. The disconnect between improving fundamentals and declining stock price presents a potential opportunity for value-oriented investors willing to tolerate near-term volatility.

The longer-term picture remains encouraging, with three-year returns of 122.65% significantly outpacing the Sensex's 35.56% gain, generating positive alpha of 87.09%. The five-year return of 112.52% demonstrates the stock's ability to deliver substantial wealth creation over extended holding periods, despite periodic bouts of volatility. The current technical trend is classified as "Bearish" as of January 12, 2026, with the stock trading below all major moving averages from 5-day to 200-day.

The stock's beta of 1.35 indicates higher volatility than the broader market, with risk-adjusted returns currently negative at -0.42 over the one-year period. The 44.88% annualised volatility places TBZ in the "High Risk Low Return" category on a one-year basis, though this classification may reverse if the recent operational momentum sustains. Delivery volumes have surged 365.34% over the past month, suggesting increased investor conviction despite the bearish technical setup.

Investment Thesis: Quality Improvement Meets Attractive Valuation

The investment case for TBZ rests on three pillars: improving operational metrics, attractive valuation, and structural tailwinds in organised jewellery retail. The company's quality grade has been upgraded to "Average" from "Below Average" prior to August 2024, reflecting sustained improvement in financial performance. The financial trend is classified as "Positive" based on Q3 FY26 results, with multiple metrics reaching all-time highs including ROCE, operating margin, and earnings per share.

The primary concern remains the bearish technical trend, which has persisted despite improving fundamentals. The stock's underperformance relative to both the Sensex and the gems and jewellery sector (which returned 18.93% over the past year) suggests investor scepticism about sustainability of margin improvements. The moderate leverage levels and working capital intensity also require monitoring, particularly if gold prices experience significant volatility.

Key Strengths & Risk Factors

Outlook: Monitoring Points for Sustainability

The critical question for TBZ investors is whether the exceptional Q3 FY26 performance represents a sustainable inflection point or a festive-season anomaly. The company's ability to maintain operating margins above 10% in non-festive quarters and improve full-year ROCE towards 15% would validate the operational improvement thesis. Conversely, a sharp margin contraction in Q4 FY26 would suggest the recent performance was primarily driven by seasonal factors rather than structural improvements.

Investors should closely monitor the company's cash flow from operations, which turned negative at ₹26 crores in FY2025 due to working capital build-up. A return to positive operating cash flow in FY2026 would indicate the business model is generating sustainable cash rather than merely accounting profits. Similarly, the trend in same-store sales growth and average transaction values would provide insight into underlying demand strength beyond store expansion.