The quarter witnessed impressive year-on-year expansion, with net profit jumping 435.39% from a loss of ₹17.45 crores in Q2 FY25, whilst revenue climbed 44.69% to ₹1,704.60 crores. Operating margins improved to 6.20%, up from 5.59% in the previous quarter, underscoring the company's ability to scale profitably in a competitive jewellery retail landscape.
The quarter's performance marks a significant turnaround from the corresponding period last year when the company posted a loss, highlighting the effectiveness of management's operational strategies and favourable market conditions. With the festive season driving strong jewellery demand, Thangamayil has capitalised on consumer sentiment whilst maintaining disciplined cost management.
Quarterly Performance Trajectory: Consistent Growth Momentum
| Quarter | Revenue (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 1,704.60 | +9.60% | 58.51 | +28.00% | 3.43% |
| Jun'25 | 1,555.32 | +12.66% | 45.71 | +45.58% | 2.94% |
| Mar'25 | 1,380.50 | +21.99% | 31.40 | -34.84% | 2.27% |
| Dec'24 | 1,131.64 | -3.94% | 48.19 | +376.20% | 4.26% |
| Sep'24 | 1,178.10 | -3.46% | -17.45 | -130.86% | -1.48% |
| Jun'24 | 1,220.33 | +24.38% | 56.56 | +100.28% | 4.63% |
| Mar'24 | 981.16 | — | 28.24 | — | 2.88% |
Financial Performance: Margin Expansion Drives Profitability
Thangamayil's Q2 FY26 financial performance reflects strong operational execution across multiple parameters. Net sales reached ₹1,704.60 crores, marking a sequential increase of 9.60% from Q1 FY26's ₹1,555.32 crores. More impressively, the year-on-year comparison reveals 44.69% growth, demonstrating the company's market share gains and robust consumer demand for jewellery products.
Operating profit (PBDIT) excluding other income stood at ₹105.65 crores in Q2 FY26, representing a substantial improvement from ₹86.97 crores in the previous quarter. The operating margin expanded to 6.20% from 5.59%, indicating improved pricing power and operational efficiency. This margin expansion is particularly noteworthy given the competitive nature of the jewellery retail sector.
Net profit after tax reached ₹58.51 crores, translating to a PAT margin of 3.43%. This represents a 49-basis-point improvement over Q1 FY26's 2.94% margin. The profit growth was driven by both revenue expansion and margin improvement, with the company maintaining a disciplined approach to cost management. Employee costs rose proportionately to ₹34.71 crores, whilst interest expenses increased to ₹16.20 crores, reflecting the company's expansion financing requirements.
Operational Excellence: Capital Efficiency and Growth Balance
Thangamayil's operational metrics reveal a company efficiently deploying capital whilst pursuing aggressive growth. The company's average return on equity (ROE) of 19.44% significantly outpaces industry standards, demonstrating superior capital efficiency and profitability. This high ROE indicates management's ability to generate substantial returns for shareholders from their invested capital, a critical strength in the capital-intensive jewellery retail business.
Return on capital employed (ROCE) averaged 17.48% over the assessment period, reflecting effective utilisation of both equity and debt capital. The company's five-year sales compound annual growth rate (CAGR) of 31.63% and EBIT growth of 25.60% underscore sustained expansion momentum. This growth trajectory has been achieved whilst maintaining reasonable leverage, with average net debt to equity at 0.50 times.
The balance sheet reveals expansion-related investments, with fixed assets increasing to ₹155.35 crores in FY25 from ₹124.25 crores in FY24. Current assets surged to ₹2,321.28 crores, reflecting higher inventory levels to support growing sales. Shareholder funds expanded significantly to ₹1,102.35 crores from ₹493.18 crores, bolstered by retained earnings and a bonus issue that increased equity capital to ₹31.08 crores.
Key Strength: Industry-Leading Returns
Thangamayil's ROE of 19.44% and ROCE of 17.48% position it amongst the most efficient capital allocators in the jewellery retail sector. This efficiency enables the company to fund expansion whilst maintaining healthy profitability, creating a virtuous cycle of growth and returns. The company's ability to generate such returns whilst scaling operations demonstrates robust business fundamentals and effective management execution.
Working Capital Dynamics: Growth Investment Pressures Cash Flow
The company's cash flow profile reflects the working capital intensity inherent in jewellery retail expansion. In FY25, operating cash flow turned negative at ₹423.99 crores, driven by a ₹595.00 crore increase in working capital requirements. This significant working capital absorption relates to inventory build-up to support the 28.30% sales growth achieved during the year.
To fund this expansion, Thangamayil raised ₹636.00 crores through financing activities, which included equity infusion and debt funding. The company's debt-to-EBITDA ratio of 3.24 times remains manageable, whilst interest coverage (EBIT to interest) at 5.03 times provides adequate cushion. Management's strategy appears focused on capturing market share through aggressive expansion, accepting near-term cash flow pressure for long-term positioning gains.
The closing cash position of ₹88.00 crores in FY25, up from ₹13.00 crores in FY24, provides operational flexibility. However, investors should monitor working capital efficiency metrics closely, as sustained negative operating cash flow could constrain future growth if not addressed through improved inventory turnover or receivables management.
Industry Context: Capitalising on Jewellery Retail Tailwinds
The Indian jewellery retail sector has witnessed robust growth driven by rising disposable incomes, increasing preference for organised retail, and cultural affinity for gold. Thangamayil, with its strong presence in Madurai and Tamil Nadu, benefits from the region's deep-rooted jewellery consumption traditions. The company's 44.69% year-on-year revenue growth in Q2 FY26 significantly outpaces the broader sector, indicating market share gains.
The organised jewellery retail segment continues to gain ground against unorganised players, driven by consumer preference for hallmarked products, transparent pricing, and brand trust. Thangamayil's established brand equity in its core markets positions it favourably to capture this shift. The company's ability to maintain margins whilst growing rapidly suggests strong pricing power and customer loyalty.
Competitive dynamics remain intense, with both regional and national players vying for market share. However, Thangamayil's focused regional strategy, combined with product innovation in diamond and platinum jewellery segments, provides differentiation. The company's 31.63% five-year sales CAGR demonstrates its ability to consistently outperform market growth rates.
Peer Comparison: Premium Valuation Backed by Superior Returns
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Debt/Equity |
|---|---|---|---|---|---|
| Thangamayil Jewellery | 62.76 | 6.14 | 19.44 | 0.57 | 0.50 |
| Kalyan Jewellers | 65.72 | 10.96 | 9.78 | 0.29 | 0.82 |
| Bluestone Jewellery | NA (Loss Making) | 33.68 | 0.00 | — | 2.40 |
| P N Gadgil Jewellers | 34.89 | 5.66 | 0.00 | — | 0.26 |
| Ethos Ltd | 84.07 | 7.92 | 9.72 | — | 0.07 |
| PC Jeweller | 13.09 | 1.23 | 2.16 | — | 0.34 |
Thangamayil's peer comparison reveals a company trading at premium valuations justified by superior operational metrics. At a P/E ratio of 62.76 times, the stock commands a valuation broadly in line with larger peer Kalyan Jewellers (65.72x) but significantly above P N Gadgil (34.89x). However, the valuation premium appears warranted given Thangamayil's exceptional ROE of 19.44%, nearly double that of Kalyan Jewellers and substantially above other listed peers.
The price-to-book ratio of 6.14 times positions Thangamayil favourably against peers, particularly when considering its superior return profile. Kalyan Jewellers trades at 10.96 times book value despite generating less than half Thangamayil's ROE. This suggests the market recognises Thangamayil's capital efficiency but hasn't fully priced in the valuation premium that such returns typically command.
Leverage metrics reveal conservative financial management, with debt-to-equity of 0.50 times comparing favourably to Kalyan's 0.82 times and significantly better than Bluestone's 2.40 times. This financial prudence, combined with the company's dividend yield of 0.57%, provides downside protection whilst maintaining growth optionality.
Valuation Analysis: Fair Value with Growth Premium
At the current market price of ₹2,603.30, Thangamayil trades at a P/E ratio of 62.76 times trailing twelve-month earnings. This valuation appears fair when contextualised against the company's 31.63% five-year sales CAGR and 19.44% ROE. The stock's price-to-book ratio of 6.14 times, whilst elevated in absolute terms, remains reasonable for a high-ROE business generating nearly 20% returns on equity capital.
The company's enterprise value metrics provide additional perspective: EV/EBITDA of 33.29 times and EV/EBIT of 37.57 times reflect the market's recognition of Thangamayil's growth trajectory and profitability profile. These multiples, whilst premium, align with the company's demonstrated ability to scale operations whilst expanding margins. The EV/Sales ratio of 1.39 times suggests the market values the revenue stream at a premium, reflecting confidence in margin sustainability.
Historical valuation trends show the stock recently upgraded from "Expensive" to "Fair" valuation in August 2025, following a period of price consolidation. The current "Fair" rating suggests the stock is reasonably valued at current levels, neither presenting a deep value opportunity nor appearing significantly overvalued. With the stock at its 52-week high of ₹2,603.30, up 70.55% from its 52-week low of ₹1,526.45, momentum remains strong.
Shareholding Pattern: Institutional Confidence Building
| Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 61.56% | 61.53% | 61.49% | +0.03% |
| FII | 4.61% | 4.49% | 4.41% | +0.12% |
| Mutual Funds | 14.31% | 13.87% | 13.73% | +0.44% |
| Other DII | 0.94% | 0.97% | 1.08% | -0.03% |
| Non-Institutional | 18.58% | 19.15% | 19.29% | -0.57% |
The shareholding pattern reveals growing institutional confidence in Thangamayil's growth story. Promoter holding remained stable at 61.56% in September 2025, with a marginal 3-basis-point increase from the previous quarter. The absence of promoter pledging (0.00%) provides comfort regarding financial stability and management's confidence in the business.
Mutual fund ownership increased notably to 14.31% from 13.87%, marking a 44-basis-point sequential rise. This steady accumulation by domestic institutional investors signals professional money managers' conviction in the company's prospects. Foreign institutional investors also increased their stake to 4.61% from 4.49%, adding 12 basis points during the quarter. With 12 mutual funds and 69 FIIs holding positions, the stock enjoys diversified institutional support.
The reduction in non-institutional holdings from 19.15% to 18.58% suggests a shift towards institutional ownership, typically viewed positively as it brings greater analytical scrutiny and long-term investment orientation. Total institutional holdings now stand at 19.86%, providing a solid base for price stability whilst leaving room for further institutional accumulation.
Stock Performance: Exceptional Long-Term Wealth Creation
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 28.36% | -0.94% | +29.30% |
| 1 Month | 23.53% | 3.41% | +20.12% |
| 3 Months | 36.33% | 4.19% | +32.14% |
| 6 Months | 29.98% | 4.32% | +25.66% |
| Year-to-Date | 36.76% | 7.47% | +29.29% |
| 1 Year | 17.36% | 5.34% | +12.02% |
| 2 Years | 118.21% | 30.47% | +87.74% |
| 3 Years | 437.08% | 38.04% | +399.04% |
| 5 Years | 1,176.44% | 108.58% | +1,067.86% |
Thangamayil's stock performance demonstrates exceptional wealth creation across all timeframes. The recent surge saw the stock gain 20.00% on the day of the earnings announcement, pushing the one-week return to 28.36%. This momentum has accelerated over the past three months, with the stock delivering 36.33% returns against the Sensex's 4.19%, generating 32.14 percentage points of alpha.
The long-term performance proves even more impressive: over three years, the stock has delivered a staggering 437.08% return, nearly 400 percentage points ahead of the Sensex. The five-year return of 1,176.44% translates to a compound annual growth rate exceeding 60%, placing it amongst the top wealth creators in the Indian equity market. This performance reflects both the company's operational excellence and the market's recognition of its growth potential.
Technical indicators support the bullish narrative, with the stock trading above all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day). The overall technical trend classification of "Mildly Bullish" suggests positive momentum, though some indicators show mixed signals. The stock's beta of 1.35 indicates higher volatility than the broader market, classifying it as a high-risk, high-return investment suitable for growth-oriented investors with appropriate risk tolerance.
"With a five-year return exceeding 1,100% and ROE of 19.44%, Thangamayil exemplifies the wealth-creation potential of efficiently managed regional jewellery retailers capturing market share in India's organised retail transition."
Investment Thesis: Quality Growth at Fair Valuation
Thangamayil's investment case rests on four pillars: strong financial trend (Positive), good quality fundamentals (Good), fair valuation (Fair), and mildly bullish technicals. The company's proprietary investment score of 74/100 places it firmly in "BUY" territory, reflecting a balanced assessment across fundamental and technical parameters.
The "Positive" financial trend designation stems from record quarterly metrics across revenue, profitability, and per-share earnings. The company achieved its highest-ever quarterly net sales of ₹1,704.60 crores, highest PBDIT of ₹105.65 crores, and highest quarterly PAT of ₹58.51 crores. Earnings per share reached ₹18.83, also a quarterly record. These achievements demonstrate sustained operational momentum.
Quality assessment reveals a "Good" grade supported by 31.63% five-year sales CAGR, 25.60% EBIT growth, and robust return ratios. The company maintains adequate interest coverage at 5.03 times and moderate leverage with debt-to-EBITDA of 3.24 times. Absence of promoter pledging and consistent dividend payments (₹12.50 per share latest) reinforce the quality credentials.
Valuation remains "Fair" at current levels, with the stock neither cheap nor expensive. The premium P/E multiple of 62.76 times appears justified by superior ROE and growth rates. Technical indicators show "Mildly Bullish" trends, with the stock trading above all moving averages and maintaining positive momentum following the earnings announcement.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Exceptional ROE: Industry-leading 19.44% return on equity demonstrates superior capital efficiency and profitability generation capability
- Strong Growth Trajectory: Five-year sales CAGR of 31.63% and EBIT growth of 25.60% reflect sustained market share gains and operational scaling
- Margin Expansion: Operating margin improved to 6.20% in Q2 FY26 from 5.59% in Q1 FY26, showing pricing power and cost management effectiveness
- Zero Promoter Pledging: Absence of pledged shares signals strong promoter confidence and financial stability
- Institutional Support: Growing mutual fund and FII ownership (19.86% combined) provides price stability and professional oversight
- Consistent Dividend: Regular dividend payments with latest payout of ₹12.50 per share demonstrates shareholder-friendly capital allocation
- Regional Leadership: Strong brand equity in Tamil Nadu markets provides competitive moat and customer loyalty advantages
KEY CONCERNS ⚠
- Negative Operating Cash Flow: FY25 operating cash flow of ₹-423.99 crores raises concerns about working capital management and sustainability of growth investments
- High Working Capital Intensity: ₹595.00 crore increase in working capital during FY25 reflects inventory-heavy business model requiring constant funding
- Premium Valuation: P/E of 62.76 times leaves limited margin of safety; any earnings disappointment could trigger significant correction
- Concentrated Geographic Presence: Heavy reliance on Tamil Nadu markets exposes company to regional economic cycles and competitive pressures
- Rising Debt Levels: Interest expenses increased to ₹16.20 crores in Q2 FY26, reflecting growing debt burden to fund expansion
- High Volatility: Beta of 1.35 and 43.23% annual volatility make the stock unsuitable for conservative investors
- Competitive Intensity: Increasing competition from national chains and e-commerce platforms could pressure margins and market share
Outlook: Monitoring Points for Sustained Performance
POSITIVE CATALYSTS
- Festive Season Momentum: Sustained jewellery demand during upcoming wedding and festival seasons could drive further revenue growth
- Operating Leverage: Continued margin expansion as fixed costs get absorbed over growing revenue base
- Organised Retail Shift: Ongoing consumer preference shift from unorganised to organised jewellery retail benefits established players
- Geographic Expansion: Potential store additions in Tamil Nadu and neighbouring states could accelerate growth trajectory
- Product Mix Enhancement: Growing contribution from higher-margin diamond and platinum segments improves profitability profile
RED FLAGS TO WATCH
- Sustained Cash Flow Negativity: Continued negative operating cash flow beyond FY26 could constrain growth and increase financial risk
- Margin Compression: Any decline in operating margins below 5.50% would signal pricing pressure or cost management challenges
- Debt Escalation: Debt-to-EBITDA rising above 4.0 times would indicate overleveraging and financial stress
- Promoter Stake Reduction: Decline in promoter holding below 60% could signal confidence issues or funding pressures
- Working Capital Deterioration: Further significant increases in working capital days would strain cash generation capability
Looking ahead, investors should closely monitor quarterly cash flow statements to assess whether the company can transition from negative to positive operating cash flow as revenue scales. Working capital efficiency metrics, particularly inventory turnover and receivables days, will be critical indicators of operational health. Any improvement in cash generation would significantly de-risk the investment thesis and potentially justify further valuation re-rating.
The jewellery retail sector's structural tailwinds remain intact, with organised players like Thangamayil well-positioned to capture disproportionate growth. However, execution risk remains given the company's aggressive expansion plans and working capital requirements. Management's ability to balance growth investments with cash flow generation will determine whether the current valuation premium sustains or expands further.
The Verdict: Quality Growth Story with Execution Risks
Score: 74/100
For Fresh Investors: Thangamayil presents a compelling buy opportunity for growth-oriented investors with moderate risk tolerance. The company's exceptional ROE of 19.44%, sustained revenue growth trajectory, and expanding margins justify the current valuation. However, investors should adopt a staggered entry approach given the stock's recent 20% surge and premium P/E multiple. Consider building positions on any 5-8% corrections from current levels.
For Existing Holders: Continue holding with conviction. The company's operational momentum remains strong, with Q2 FY26 results validating the growth thesis. The 74/100 investment score and "BUY" rating support maintaining positions. However, monitor cash flow metrics closely – any sustained deterioration in working capital efficiency or operating cash flow should prompt portfolio rebalancing. Consider booking partial profits if the stock appreciates another 15-20% from current levels to manage concentration risk.
Fair Value Estimate: ₹2,750-2,850 (5-9% upside from current price of ₹2,603.30). This estimate assumes sustained margin expansion, gradual cash flow improvement, and maintenance of current growth rates. Risk-reward appears balanced at current levels, with the quality of business and growth prospects offsetting valuation concerns.
⚠️ 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.
