Khazanchi Jewellers Ltd Management Discussions

Annexure-A

Economic Overview

In comparison to the global economic landscape in 2025, India stands out as a global bright spot, projected to grow 7.0% thanks to dynamic domestic demand, infrastructure investment, and continuing economic reforms. While global inflation is moderating to 4.3%, the process is slower than hoped, and advanced economies face slight upward revisions to inflation expectations. In this climate of uncertainty, gold has become increasingly sought-after as a safe haven, with global demand and valuations reaching record highs.

According to the Press Information Bureau (PIB), in India, robust and broad-based growth momentum continues in FY25, with real GDP rising 6.5%, positioning the country among the fastest-growing major economies. Manufacturing, construction, and public administration all contributed significantly, while strong high-frequency indicators underscored resilient economic activity. Inflationmoderated to 5.4%, supported by targeted governmental measures and effective Reserve Bank policies, and a drop in food inflation further strengthened consumer confidence. Fiscal discipline continued, with the deficit reduced to 5.8% of GDP and tax revenues posting double-digit growth. Capital expenditure hit record levels, powering infrastructure development and job creation. Despite challenging global conditions, Indias external sector remained stable, buoyed by steady merchandise and IT service exports and healthy foreign exchange reserves.

Indian Jewellery Industry

Indias gold jewellery sector, though historically resilient, underwent notable shifts in Q2 2025. Jewellery consumption rose 24% QoQ to 88.8 tonnes, reflectingfirm consumer demand despite volatility in gold prices. In value terms, the market grew 17% YoY and a sharp 43% QoQ, underscoring sustained interest in gold jewellery as both an adornment and an investment, as reported by IBEF.

According to the World Gold Council, Indias gold demand in 2025 is projected to remain robust, ranging between 700-800 tonnes despite a 31 per cent increase value-wise in 2024. The sector continues to be shaped by evolving consumer preferences amid record-high gold prices. There is a clear tilt towards lighter-weight jewellery, 18k gold, and gold-plated alternatives—especially among younger, urban buyers. While the mass-market segment displayed caution, affluent buyers remained active, and the average per-piece weight stayed largely stable. A growing preference for hallmarked jewellery and transparent pricing also reflects the rising consumer emphasis on trust, certification, and value clarity.

Indias Gems & Jewellery market, which stood at US$ 78.50 billion in FY21, is projected to expand significantly to US$ billion by 2031, driven by rising disposable income, increasing urbanisation, and a greater penetration of organised retail and digital platforms.

Khazanchi Jewellers has navigated these market dynamics effectively, complementing its strength in high-value bridal portfolio of collectionswithadiversified modern, affordable, and lightweight designs. With deep insights into Southern Indias evolving tastes, where wearable elegance and daily-use gold jewellery are increasingly favoured, the company has reinforced its market presence through an agile omni-channel strategy. Its ability to evolve with consumer preferences without compromising on quality or trust has solidifiedits reputation as a preferred destination for both traditional and contemporary gold buyers.

Source: IBEF

Government Initiatives

The Indian gems and jewellery sector continued to benefit from progressive regulatory reforms during FY25–26, focused on improving ease of doing business, formalisation, and global trade alignment.

To promote exports, the government also unveiled a new Export Promotion Mission and increased allocations to skilling initiatives through National Centres of Excellence. Updates to the Foreign Trade Policy and DGFT alignment with budgetary duty changes improved clarity on import/export procedures.

Complementing these changes, mandatory BIS hallmarking, digital payment adoption, and enhanced transaction reporting norms continued to foster transparency and consumer trust across the value chain. These initiatives collectively support Indias goal of becoming a global leader in ethically sourced, high-quality jewellery exports.

DutyCutsonPreciousMetalstoBoostJewellery Sector

In the Union Budget 2025–26, Finance Minister Nirmala Sitharaman announced further rationalisation of duties in Gems and Jewellery sector to enhance affordability and boost domestic demand for precious metal Jewellery.

These measures aim to reduce input costs for jewellery manufacturers and promote value-added manufacturing within India. The duty cuts are expected to improve price competitiveness for retailers, support premiumisation in segments like platinum and lab-grown diamond jewellery, and aid market expansion into urban and semi-urban regions.

Together, these structural changes reflect the governments continued commitment to strengthening Indias position as a global hub for precious metal jewellery production and exports.

Company Overview

At Khazanchi Jewellers Limited, we take pride in our rich legacy of over 50 years in the jewelry industry. Founded in 1971 in Chennai, we have established ourselves as a prominent player in both wholesale and retail markets. Our extensive collection spans gold, diamonds, precious stones, and elegant fancy jewelry, catering to diverse customer preferences.

In an industry known for its emphasis on quality and craftsmanship, we stand out with our commitment to excellence and innovation. Our recent milestone of being listed on the BSE SME in 2023 underscores our growth and resilience in a competitive market. As we move forward, we remain dedicated to delivering exceptional jewelry that enhances lifes special moments and upholds the highest standards of the industry.

Recognised as an IIBX Qualified Jeweller A Mark of Trust and Excellence"

The Company is being recognised as a Qualified Jeweller on the India International Bullion Exchange (IIBX) – a distinction held by only about approximately 150 jewellers nationwide. This prestigious status underscores the companys unwavering commitment to the highest regulatory and ethical standards.

As a Qualified Jeweller, the company enjoys the privilege of directly importing gold through IndiasfirstInternational

Bullion Exchange, enhancing trust, transparency, and operational excellence its value chain.

Operational Overview

The Company with its innovative creation of products -widely accepted in both B2B and B2C Segments its operation sales volumes The Company strengthened its digital capabilities with the launch of its Jewellery Purchase Plan App, aimed at providing a seamless and secure customer experience. Operationally, sales volumes surged to 2,359 kgs, reflectinga 68% YoY growth. The Company also participated in the Gem & Jewellery India International Fair (B2B Expo 2025), securing an order book of _55–60 crore. Preparations are underway for the launch of a new 10,000 sq. ft. flagship showroom in Sowcarpet, Chennai, expected to enhance B2C margins and broaden market presence.

Digital Innovation

In FY25, Khazanchi Jewellers strengthened its digital presence with the launch of the Jewellery Purchase Plan App, offering customers a secure and convenient platform to plan, track, and manage their jewellery purchases. The app offers features like daily gold rate tracking, flexible online payments, personalized query support, and special discounts after 11 months of fixed monthly installments delivering a seamless and secure jewellery savings experience.

In FY25, Khazanchi Jewellers Limited reported total revenue of

_1,771.93 crore. Of this, bullion sales accounted for the largest share at _850.53 crore (48%), followed by wholesale revenue of

_ 833.81 crore (47%), and retail revenue of _88.59 crore (5%).

Key Financial Ratios	31-March-2025	31-March-2024	Change	Reason change
EBITDA Margin (%)	3.66	5.09	-142 Bps	-
Operating Profit Margin(%)	3.64	5.05	-141 Bps	-
Net Profit Margin (%)	2.53	3.33	-79.11 Bps	-
Trade Receivable Turnover Ratio (In Days)	4.58	5.62	-18.48%	-
Inventory Turnover ratio (In Days)	47.19	73.11	-35.45%	increased inventory levels due to ex- cess procurement, leading to slower inventory movement Increasedueto significantrise in
Interest service coverage ratio (In Times)	17.32	8.64	100.43%	EBIT, driven by higher revenue gen- eration.
Current ratio (x)	4.78	4.97	-3.54%
Debt- Equity Ratio (x)	0.28	0.10	183.52%	Increase due to rise in non-current borrowings
Return on Equity ratio (%)	19.41	14.55	33.39%	Increase due to stronger topline per- formance.
Net Capital Turnover Ratio in Days	51.08	73.41	-30.41%	Reduction reflects higher invest - ment in working capital, resulting in less efficient utilization of capital to generate revenue.

SWOT Analysis – FY25

Strengths

Wide Product Range: The Company continues to offer an extensive collection of jewellery across multiple customer segments, ranging from entry-level to premium. The companys FY25 product portfolio includes traditional, contemporary, and designer variants, ensuring appeal across generations and markets. Strong in-house design innovation and 5 lakh+ design library reinforces their commitment to aesthetic excellence.

Digital Innovation: The Company launched the "Jewellery Purchase Plan App" to provide customers with a seamless, secure way to plan and manage their jewellery purchases. The app enables structured savings, real-time tracking, and timely updates, enhancing engagement and catering to digitally savvy buyers. This digital initiative aims to strengthen customer loyalty, encourage repeat business, and create a steady revenue flow aligned with major life events.

Experienced Leadership: The Promoters and top management bring decades of domain knowledge in jewellery manufacturing, retail strategy, and supply chain management. Their proactive involvement has guided the company through retail expansion, digital transition, and geographic diversification.

Commitment to Quality: The company maintains strict

BIS hallmarking compliance, ensures quality control across production cycles, and leverages a trusted vendor network. This dedication has strengthened its brand perception and customer satisfaction levels.

Customer Relationships: The company has built longstanding relationships with both retail buyers and institutional clients. Its customer-first service philosophy, loyalty-driven sales approach, and festive-specific collections support repeat business and referrals.

Strategic Location: The companys operational showroom in

Chennai and the upcoming 10,000 sq. ft. flagship showroom in Sowcarpet significantly enhance visibility, walk-in traffic, and brand engagement, all while offering a secure, accessible premium retail experience.

Weakness

Stiff Competition: The jewellery market continues to be dominated by organized players, pan-India brands, and regional powerhouses. This intensifies pricing and design competition.

Market Dynamics: Evolving customer preferences toward minimalist and tech-enabled jewellery purchases require frequent product adaptation and faster time-to-market cycles.

Regulatory Compliance: Rising compliance norms around hallmarking, GST, and import restrictions have increased administrative and operational complexity.

Customer Expectations: Growing demand for bespoke jewellery and omni-channel shopping requires consistent investment in personalization, digital integration, and customer support infrastructure.

Opportunities

Market Expansion: With revenue contribution from non-Tamil Nadu states rising to over 29% in FY25, Khazanchi is well-placed to expand its footprint into Tier II and III cities where demand is rising.

E-commerce Growth: The Jewellery Purchase Plan App and potential e-commerce initiatives offer avenues to serve digitally active consumers and increase brand awareness.

Product Diversification:FY25 saw growing consumer interest in niche offerings like platinum and blush gold. The companys continued introduction of trend-led pieces can attract younger audiences and urban buyers.

Threats

Seasonal Sales Variability: As observed in FY25, sales volumes peaked during major festivals and the wedding season. Such seasonality, if not managed through adequate inventory planning and marketing alignment, may affect revenue consistency.

Physical Asset Risks: Despite robust security protocols and insurance coverage, the risk of inventory loss due to theft, mishandling, or unforeseen incidents remains a concern. Any uninsured or underinsured event could materially impact financial performance.

Competitive Intensity: The jewellery market continues to be highly competitive, with organized players expanding aggressively and digital-first platforms gaining traction.

Sustaining market share amid evolving customer preferences and pricing pressures requires continuous innovation and customer engagement.

Discretionary Spending Sensitivity: Jewellery being a discretionary spend, demand patterns are closely tied to economic conditions. FY25s positive macro environment supported growth, but any downturn or inflationary pressure could temper future consumption.

Risk Management

Khazanchi Jewellers Limited operates in a dynamic and competitive environment, where multiple internal and external factors can influence business performance. The Company follows a structured risk management framework designed to identify, assess, and mitigate potential threats while leveraging opportunities for growth. Risks are monitored regularly by the senior management, with oversight from the Board, to ensure business resilience and continuity.

Commodity Price Volatility

Gold, silver, and precious stones account for the bulk of our raw material costs. Any sharp movement in global prices—driven by macroeconomic shifts, currency fluctuations, or geopolitical tensions—can impact procurement costs, margins, and customer affordability.

Mitigation: The Company employs a prudent hedging policy, including procurement through IIBX and structured metal loan arrangements, to minimise exposure to adverse price movements while ensuring steady supply.

Regulatory and Compliance Risk

The gems and jewellery sector are subject to evolving regulations relating to BIS hallmarking, GST, customs duties, anti-money laundering norms, and import/export policies. Non-compliance may result in penalties or reputational harm.

Mitigation: A dedicated compliance team ensures adherence to statutory requirements, regularly monitors policy updates, and maintains strong internal audit processes.

Competitive Intensity

The Indian jewellery market remains highly competitive, with organised national chains, regional players, and digital-first brands vying for market share.

Mitigation: The Company differentiates itself through its strong product range, trusted customer brand legacy, diversified relationships, and omni-channel presence. Continuous product innovation, quality assurance, and personalised service are core to retaining and expanding market share.

Seasonal and Demand Fluctuations

Sales are often concentrated around the wedding season and key festivals, leading to seasonal revenue variations. Macroeconomic slowdowns or reduced discretionary spending can dampen demand.

Mitigation: The Company is diversifying its product portfolio to include lighter, daily-wear and 18k designs, while strengthening digital channels to ensure year-round engagement and sales.

Operational and Security Risks

The high value and portable nature of inventory make the business vulnerable to theft, damage, or loss. Operational disruptions, including supply chain delays, can also impact performance.

Mitigation: Robust security systems, insurance coverage, vendor diversification, and strict inventory controls including real-time tracking and BIS hallmark verification are in place to safeguard assets.

Talent Dependency and Succession

The Companys operations are driven by experienced leadership and skilled artisans. Unexpected attrition or inability to attract qualified talent could impact growth and innovation.

Mitigation: The Company invests in employee training, competitive remuneration, and leadership development programmes to strengthen human capital and ensure smooth succession planning.

Technology and Cybersecurity Risks

With growing reliance on digital platforms, customer data protection and uninterrupted system performance are critical. Cybersecurity threats or system downtime can affect operations and trust.

Mitigation: The Company employs secure payment gateways, data encryption, multi-layer access controls, and regular IT audits to protect digital infrastructure.

Liquidity and Working Capital Management

The jewellery sector is capital-intensive,withsignificantfunds tied up in inventory. Any tightening of liquidity or credit lines could constrain operations.

Mitigation: The Company has strong banking relationships, prudent inventory rotation, customer advance schemes, and disciplined capital allocation ensure healthy liquidity levels.

Internal Control Systems and their Adequacy

Khazanchi Jewellers Limited has established robust internal systems aligned with the nature and complexity of its operations across the retail, wholesale, and bullion segments. The Company follows a structured and traceable business process, covering raw material procurement, manufacturing and designing, product placement, and final sales. This integrated operational flow consistency across all stages of the value chain.

The Company places strong emphasis on product authenticity and quality assurance. Key control measures such as 100% BIS

hallmarking for gold jewellery and in-store gold purity testing are firmly embedded within the retail framework to uphold customer trust and regulatory compliance.

In addition, the Company has implemented internal procedures and governance mechanisms aimed at risk mitigation and operational include multi-levelefficiency.product quality checks and periodic reviews of its internal systems. The Company continues to refine its processes to ensure reliability, accountability, and alignment with its long-term growth objectives.

Human Resources

Material developments in Human resources/ Industrial relations front, Including number of people employed are 40

Cautionary Statement

This document contains forward-looking statements reflecting the Companys intentions, expectations, or forecasts for future performance. These statements are based on reasonable assumptions and available data as of FY25. However, actual outcomes may differ materially due to a variety of internal and external factors including, but not limited to, economic shifts, policy changes, competition, and market dynamics.

The company disclaims any obligation to update these forward-looking statements, except as required by applicable law.

ensures transparency and