Synopsis: Kalyan Jewellers delivered strong growth, higher profits, debt reduction and rapid showroom expansion in FY26, while Q1FY27 demand also remained healthy. However, the stock has continued to fall as investors focus on FOCO-led margin pressure, rising inventory, large funding needs, execution risks and whether exceptional growth can continue.
India’s jewellery market is gradually shifting from small local stores to organised brands as customers look for trust, purity, transparent pricing and a wider choice of designs. This has created a large opportunity for jewellery retailers that can expand across regions without losing their local appeal.
Kalyan Jewellers appears to be benefiting from this shift. Revenue and profits have risen sharply, the company is opening showrooms, Candere has turned profitable and conventional debt is falling. Even its latest quarterly update showed strong sales growth. Yet the stock is down around 40 percent from its all time high it made in January 2025, creating a strange gap between business performance and market performance.
What Does Kalyan Jewellers Do?
Kalyan Jewellers sells gold, studded and other jewellery across different price points. Its products cover weddings, festivals, special occasions and daily wear. The company follows a hyperlocal strategy, which means its inventory and designs are adjusted to regional preferences instead of offering the same product mix everywhere. It also uses the My Kalyan network for local customer outreach and operates in India, the Middle East, the United States and the United Kingdom.
A major part of its expansion now comes through the FOCO model, which stands for Franchise Owned, Company Operated. The franchise partner funds the store and much of the inventory, while Kalyan manages operations, staff, branding and customer experience. This allows the company to enter more cities without investing the same amount of capital required for a company-owned showroom.
By March 2026, Kalyan had 342 showrooms in India, of which 222 were FOCO stores. It also had 124 Candere stores, 38 Middle East showrooms, two showrooms in the United States and one in the United Kingdom.
FY26 Was Hard To Fault
The financial year started strongly. In Q1FY26, consolidated revenue grew 31 percent to Rs. 7,268 crore, while EBITDA increased to Rs. 508 crore and profit after tax rose to Rs. 264 crore. India revenue stood at Rs. 6,142 crore, while India PAT was Rs. 256 crore. Management also said FOCO revenue had reached 43 percent of the business by June 2025.
Q2FY26 continued the trend. Consolidated revenue rose 30 percent to Rs. 7,856 crore, EBITDA increased to Rs. 497 crore and PAT doubled to Rs. 261 crore. India revenue was Rs. 6,843 crore and India PAT was Rs. 262 crore. Candere generated Rs. 93 crore of revenue but still reported a Rs. 9 crore loss during the quarter.
Q3FY26 became the strongest quarter until then. Consolidated revenue increased 42 percent to Rs. 10,343 crore, while PAT rose 90 percent to Rs. 416 crore. India revenue reached Rs. 9,048 crore and India PAT was Rs. 401 crore. Candere also turned profitable, reporting Rs. 3 crore of profit compared with a loss in the previous year.
Q4FY26 was even stronger on a year-on-year basis. Consolidated revenue rose 66 percent to Rs. 10,275 crore and PAT increased 118 percent to Rs. 410 crore. For the full year, revenue grew 43 percent to Rs. 35,740 crore, while PAT increased 89 percent to Rs. 1,350 crore. Around Rs. 350 crore of free cash was used for debt reduction and approximately Rs. 150 crore was paid as dividends.
The balance sheet also improved. Kalyan reduced India non-GML debt from around Rs. 1,300 crore to nearly Rs. 300 crore over three years and wants to eliminate it during FY27. ROCE improved to 28.8 percent in FY26 from 19.8 percent in FY25, while ROE increased to 24.3 percent from 15.9 percent.
Q1FY27 Shows Momentum Has Continued
The latest business update did not show an obvious slowdown. Consolidated revenue grew around 38 percent in Q1FY27, while India revenue increased by more than 38 percent. Same-store sales growth was around 28 percent despite the full 28-day Adhik Maas period falling in the quarter, when wedding purchases usually pause in parts of the country.
International revenue grew around 35 percent and the Middle East business grew approximately 30 percent despite geopolitical tensions affecting April footfalls. Candere revenue increased 112 percent. The company also opened 12 Kalyan stores and five Candere stores, taking the total network to 524 showrooms by June 2026.
Kalyan also launched its Shine with India gold recirculation campaign. Recycled gold contributed more than 46 percent of revenue during Q1FY27 and exceeded 55 percent in June, helping reduce the company’s dependence on imported gold.
The update therefore looked healthy. However, it only disclosed revenue growth, same-store sales, store additions and operating trends. It did not provide EBITDA, PAT, margins, debt or cash-flow numbers because the detailed financial results are still pending limited review and board approval.
So Why Is The Stock Still Falling?
The first concern is the trade-off within the FOCO model. FOCO allows Kalyan to expand faster with less capital because the franchise partner funds the store and inventory. However, management has acknowledged that franchise stores carry lower gross and EBITDA margins, and said margins could continue moderating for at least another year as expansion remains predominantly FOCO-led.
This structural pressure was partly offset in Q4FY26 by other factors. ICICI Securities noted that gross margin contracted by 89 basis points to 12.9 percent, mainly due to product-mix changes. However, procurement efficiencies, geographical mix, operating leverage and gains from platinum and silver helped EBITDA margin improve to 7.2 percent. Despite the quarterly improvement, the brokerage expects EBITDA margin to moderate from 7 percent in FY26 to 6.7 percent in FY27 and 6.6 percent in FY28.
The second concern is the quality of store growth. During the Q2 call, an analyst highlighted that reported COCO revenue growth had been slowing for several quarters and appeared to decline in Q2FY26. Management explained that this was mainly because larger owned stores had been converted to FOCO and said same-store sales remained strong. Even so, investors may still question whether mature company-owned stores are slowing while new franchise stores carry headline growth.
The third concern is inventory. Consolidated inventory rose from Rs. 9,681 crore in March 2025 to Rs. 14,175 crore in March 2026. Metal gold loans increased from Rs. 2,344 crore to Rs. 3,588 crore. Much of this can be explained by business growth and higher gold prices, but such a large inventory increase naturally makes investors more cautious about working capital and cash generation.
The fourth concern is the capital needed for future margin improvement. Kalyan’s procurement pilot involves paying suppliers earlier in return for better pricing. Management said rolling this across the full network could require Rs. 1,500 crore to Rs. 2,000 crore of additional capital. The company was still deciding whether this should be implemented together or in phases.
Its new regional jewellery format also requires around Rs. 300 crore of initial working capital for five company-owned stores before shifting to FOCO expansion. Although management expects attractive returns, the project creates another demand on capital and adds execution risk.
Finally, the market may be expecting growth to normalise after an exceptional FY26. Even ICICI Securities’ positive report forecasts FY27 revenue of Rs. 41,605 crore and EBITDA of Rs. 2,793 crore, implying revenue growth of around 16 percent and EBITDA growth of around 12 percent, much slower than FY26.
What Could Change The Story?
Kalyan has not shown signs of a broken business. Demand remains strong, debt is falling, Candere is profitable and FOCO expansion is improving returns on capital. The stock’s weakness appears to reflect a valuation reset and concerns about what happens after the exceptional FY26 base.
For investor confidence to improve, the company may need to show that Q1FY27 revenue growth is translating into stable profits, that FOCO margin pressure can be controlled, and that inventory and working capital remain manageable. Clarity on funding the procurement strategy and timely execution of the regional brand will also matter.
The contradiction is therefore only on the surface. Kalyan is doing many things right, but the market is no longer rewarding growth alone. It wants proof that this growth can remain profitable, capital-efficient and sustainable. Until that proof becomes clearer in the detailed FY27 results, the stock may continue to behave very differently from the business.
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