Why Is Kalyan Jewellers Share Price Falling After 16% Rally: Can Q2 Growth Justify Its Valuation?

Revenue increased 31.4% year on year and EBITDA, profit before interest, tax, depreciation and amortisation, grew 29.7%. EBITDA excludes the land-sale gain. Reported net profit rose faster, by 63.9%, partly because selling non-core land produced a ₹73.5 crore gain before tax.

That sale cannot be treated like a recurring jewellery transaction. Equally, subtracting the entire ₹73.5 crore from after-tax profit would mix two different measures and produce a misleading adjusted profit.

For illustration, assuming 25.17% tax on the gain would leave roughly ₹55 crore after tax. Removing that alone would put profit near ₹372 crore, with about one-third of the reported year-on-year profit increase attributable to the sale; the filing does not separately establish the transaction's actual tax effect.

There was another benefit inside operating earnings: approximately ₹52 crore from a customs-duty increase. In the earnings call, management put adjusted EBITDA at about ₹593 crore and adjusted net profit at ₹333 crore after its adjustments for bullion, customs duty and exceptional items.

That adjusted profit is about 28% above last year's reported ₹260.5 crore, a more restrained comparison than the headline 64%. It is a management-adjusted measure compared with a reported base, rather than a fully restated, like-for-like profit series.

Margins explain the remaining caution. Recycled gold increased to 42% of the India mix from 29%, while silver and platinum positions moved from a ₹21.2 crore gain to an ₹8.3 crore loss; the duty benefit partly cushioned these pressures. Higher franchise participation also changes the margin mix.

The sequential improvement in both margins is encouraging, but does not establish that the pressure has ended. Investors need to see profitability hold up without another duty-related boost.

Financing costs also rose about 14.5% to ₹108.7 crore at the consolidated level. This is another reason that a debt-reduction milestone in India should not be read as an immediate fall in every group expense.

What Is Driving Kalyan Jewellers Sales Growth?

Existing stores and network expansion are both contributing. India same-store sales grew about 20%, meaning sales increased at comparable stores rather than only through newly opened outlets; this still measures rupee sales, not gold sold by weight.

On a basis excluding bullion, India revenue grew about 27%, compared with 31.6% growth in statutory standalone revenue. These figures describe different revenue bases and should not be used interchangeably.

Higher gold prices can lift the bill even when a customer buys the same weight. They can also stretch a wedding budget, encourage old-gold exchange and increase the money required to finance inventory, so sales growth alone cannot establish stronger physical demand.

Kalyan's mix offers another clue. India studded-jewellery revenue grew about 27%, but its share stayed close to 31%, suggesting broad growth rather than a large shift towards studded products. The accessible disclosures do not provide a complete price-and-volume breakdown, so attributing the entire increase to either gold prices or volumes would overstate the evidence.

India remains the main driver, with standalone revenue of about ₹9,007 crore. Middle East revenue increased to roughly ₹960 crore from ₹860 crore, but profit declined to approximately ₹12 crore from ₹15 crore, showing why sales and earnings need separate attention.

Can the Franchise Model Make Store Expansion More Profitable?

The franchise model can reduce the capital Kalyan needs for expansion, but additional outlets must still become productive. At September-end, the group had 546 showrooms: 365 Kalyan stores in India, 42 internationally, 138 Candere stores and one ATM regional-brand outlet.

Within India, 246 Kalyan stores and 73 Candere outlets followed the franchise-owned, company-operated model, or FOCO. The international network included one FOCO store in the UK.

In simple terms, the partner funds inventory and much of the store investment, while Kalyan runs operations through its employees. The company specifies regional exceptions for capital expenditure, so the arrangements should not be described as identical everywhere.

This can support faster expansion with less company-funded investment. However, lower capital requirements can coexist with a lower profit margin because the partner also needs to earn a return; the useful test is profit and cash generated relative to Kalyan's investment.

FY27 plans include 84 Kalyan India openings, six international stores and 50 Candere outlets. Execution risks include delays, weak store productivity and maintaining service standards across a larger network.

The balance sheet also needs careful reading. Standalone non-gold-metal-loan debt reached zero, but consolidated net debt including gold metal loans remained about ₹2,873 crore before leases; the whole group is not debt-free. Half-year operating cash flow of roughly ₹1,075 crore exceeded reported profit, although working-capital movements contributed to that cash generation.

Is Kalyan Jewellers Valuation Justified After the Rally?

At ₹698.65, Kalyan's approximately 103.28 crore shares imply a market value of ₹72,153 crore. Reported profit for the 12 months ended September was ₹1,601.6 crore, giving a trailing price-to-earnings ratio of approximately 45.1 times: investors were paying about ₹45 for each ₹1 of past annual profit.

Using the same earnings denominator, the multiple rises from 39.4 times at ₹611 to 45.8 times at ₹710.90. This constant-earnings illustration shows how much expectations expanded during the rally; it is not a historical series of the multiples displayed on those dates.

Brokerage optimism explains part of the change in expectations. ICICI Securities raised its target from ₹700 to ₹800, while increasing FY27 and FY28 EPS estimates by 0.6% and 3.1%; the larger target revision should not be confused with an equivalent jump in forecast profit.

Its EPS forecasts of ₹17.4 and ₹23 imply forward multiples of about 40.2 and 30.4 times at ₹698.65. These are one brokerage's estimates, not consensus forecasts or promised outcomes.

Including net borrowings and lease liabilities, enterprise value is approximately 28 times the company's trailing EBITDA. This broader valuation measure includes financing obligations as well as equity value, but still uses reported operating earnings containing duty benefits.

A comparison with Titan needs matching dates and earnings periods. Using November 12 closing valuations and reported consolidated trailing profits gives the following comparison.