RBZ Jewellers Q1 FY26: Is the Revenue Dip a Red Herring? What Signals a Golden Rebound?

RBZ Jewellers, a prominent player in India’s organized gold jewellery manufacturing and retail space, recently unveiled its Q1 FY26 investor presentation. On the surface, the numbers from the latest quarter might seem a bit dull, with a noticeable dip in revenue. But as keen-eyed investors, we know better than to judge a book by its cover, especially in a sector as cyclical as jewellery. Let’s dig deeper into what these results truly signal for the company’s future earnings.

Navigating the Order Books: A Glimpse into Q2 FY26

While the Q1 FY26 numbers reflect the past, what’s brewing for the next quarter? For a B2B focused player like RBZ, understanding the order pipeline is crucial.

The company highlighted a significant positive: strong advance order bookings in the Wholesale (B2B) segment following their participation in the IIJS exhibition in Mumbai in July-August 2025. This immediately provides a positive directional cue for Q2 FY26.

Why this matters for future earnings:

• Visibility: Strong advance orders provide revenue visibility for the upcoming quarter.
• Capacity Utilization: It signals that their manufacturing capacity will be put to good use, which is key for efficiency and margin maintenance.
• Seasonal Tailwinds: These bookings align perfectly with the anticipated festive and wedding season demand, which typically picks up in Q2 and Q3 for the jewellery sector.

While specific order volumes weren’t disclosed for Q1, the management’s commentary on the Q2 outlook, backed by these advance bookings, is a positive forward-looking indicator, suggesting a potential rebound after a soft Q1.

Sales Performance: A Seasonal Dip, Not a Structural Slip

At first glance, RBZ Jewellers’ Q1 FY26 operational revenue tells a story of decline:

An 8.3% year-on-year (YoY) drop and a sharp 44.9% quarter-on-quarter (QoQ) decrease might raise eyebrows. However, the explanation lies squarely in the highly seasonal nature of the jewellery business.

Key reasons for the revenue dip:

• Absence of Festive Demand: Q1 FY26 lacked major festivals and wedding-related demand, which are primary drivers for jewellery purchases.
• Pre-ponement of Demand: Crucially, Akshay Tritiya, a significant jewellery-buying occasion, fell in April 2025 (Q4 FY25), instead of May (Q1 FY26). This shifted a chunk of sales from the current Q1 into the preceding quarter. This kind of calendar effect can significantly skew quarterly comparisons but doesn’t necessarily indicate a deeper issue.

Looking back, RBZ has historically been a fast grower, boasting a 3-year revenue CAGR of 28% through FY25. The current quarter’s performance needs to be viewed as a temporary blip caused by seasonal timing rather than a fundamental slowdown.

Sales Outlook: Management expects consumer demand to improve in Q2 FY26, driven by festivals like Raksha Bandhan and Onam, followed by strong demand for the wedding season. This aligns with the positive B2B order bookings discussed earlier. For a domestic-focused player like RBZ, the broader Indian economic context of robust GDP growth projections (~6.5-7% for FY26) and easing inflation also provides a favorable backdrop for consumer spending.

Earnings Analysis: Resilience in Margins, Higher Costs Nibble at PAT

While revenue took a hit, the earnings picture reveals a mixed bag:

Key observations:

• EBITDA Resilience: Despite the revenue decline, EBITDA fell only 7.8% YoY, and surprisingly, EBITDA margins actually saw a slight improvement of 9 basis points (Bps) YoY. This is a strong indicator of operational efficiency and effective cost management, even in a softer demand quarter. It suggests the company isn’t bleeding profitability on a per-unit basis, which is commendable.
• PAT Under Pressure: The significant 22% YoY and 17.4% QoQ drop in Profit After Tax (PAT) is concerning. The PAT margin also contracted by 165 Bps YoY.
• The Culprits: Rising Costs: A deeper dive reveals where the profit went:
  • Finance Cost: Surged by a substantial 52.9% YoY (from 17 Mn to 26 Mn). This is a primary drag on PAT, and warrants a closer look at their borrowing strategy.
  • Depreciation: Increased by 60% YoY (from 5 Mn to 8 Mn). While smaller in absolute terms, such a jump suggests recent asset additions, likely related to their CapEx plans.
  • Other Income: Disappeared entirely in Q1 FY26, contributing to the PAT decline.

Historically, RBZ has been a super grower in terms of PAT, with a 3-year CAGR of 39% up to FY25. The current quarter’s PAT performance classifies it as a slow grower for this period, but it’s important to remember that this is a cyclical dip. The underlying operational efficiency (reflected in EBITDA margins) suggests that once revenue picks up, PAT should follow suit, provided finance costs are managed. For earnings growth to be considered “good,” it ideally should be driven by revenue and cost management, with minimal other income. The Q1 results show a temporary dip in earnings, but the strong revenue growth prospects for future quarters could justify this, especially if fixed costs have increased in anticipation of future growth.

Working Capital: A Healthy Glimpse, but Inventories Need Monitoring

Working capital management is vital for a business dealing with precious metals. Let’s look at the key elements from the historical balance sheet (Q1 FY26 specific numbers are not given, so we analyze up to FY25 trends):

Key observations:

• Inventory Levels: Inventories have almost doubled from FY23 to FY25 (1,492 Mn to 2,923 Mn). Given that operational revenue also grew significantly from 2,879 Mn (FY23) to 5,301 Mn (FY25), this increase might be in line with growth and preparation for anticipated demand. However, it’s a metric to watch closely to ensure it doesn’t indicate overstocking, especially with current Q1’s soft demand.
• Trade Receivables: In a positive sign, Trade Receivables have decreased from 220 Mn in FY23 to 173 Mn in FY25, even as sales grew. This indicates efficient collection policies and strong management of credit, which is excellent for cash flow.
• Cash Position: Cash and Cash Equivalents saw a sharp decline in FY25 to 8 Mn. This might be due to utilization of funds post-IPO or for working capital needs.
• Current Borrowings: Current borrowings spiked in FY25 to 861 Mn after a decrease in FY24. This increase directly correlates with the rising finance costs observed in Q1 FY26, suggesting the company is relying more on short-term debt for working capital or operational needs. This needs to be carefully managed to prevent further pressure on PAT.

Overall, the working capital position appears managed, with receivables showing efficiency. However, the rise in inventories and current borrowings merits continued attention.

Capital Expenditure (CapEx) & Financing: Building for the Future

RBZ Jewellers has clear growth-oriented CapEx plans.

Future CapEx Plans:

• Retail Expansion: The company plans to open 4 new showrooms across Gujarat over the next two financial years, with two slated to launch by Q1 FY27. This is a significant move to expand their retail footprint and directly tap into higher-margin retail sales. This CapEx is clearly for growth.
• Manufacturing Capacity Utilization & Expansion: RBZ aims for maximum utilization of its existing 2-ton annual manufacturing capacity by FY26, with plans to expand further based on future demand. This indicates efficient deployment of existing assets before committing to major new facilities, which is a prudent approach.

Funding: While the exact funding mechanism for future CapEx isn’t detailed, the company’s balance sheet reflects a significant improvement post-IPO in FY24, with Net D/E reducing from 0.95x in FY23 to 0.34x in FY25. This de-leveraged position provides a healthier capital structure to fund future growth initiatives, either through internal accruals or moderate external financing without undue stress. The increase in finance costs in Q1 FY26 (linked to current borrowings) is a point to monitor, but the overall debt picture looks healthier.

The CapEx is squarely aimed at future revenue and earnings growth, particularly the retail expansion which typically carries better margins. The gestation period for new retail showrooms is relatively shorter, implying a quicker ramp-up of new revenue streams.

Key Takeaways for Investors 💡

RBZ Jewellers’ Q1 FY26 results present a classic case of cyclicality vs. structural growth. The immediate numbers might appear soft, largely due to:

1. Seasonal Factors: The absence of major festivals and the pre-ponement of Akshay Tritiya demand skewed the Q1 performance. This is not indicative of a fundamental weakness.
2. Increased Costs: Higher finance costs and depreciation weighed on PAT, even as core operational efficiency (EBITDA margins) remained robust.

What to watch for moving forward:

• Q2 FY26 Performance: The strong advance B2B order bookings and the upcoming festive/wedding season should lead to a significant rebound in revenue. This will be the true test of whether the Q1 dip was purely seasonal.
• Cost Management: Keep an eye on finance costs. While the company’s overall debt profile is better post-IPO, the increase in current borrowings and associated interest expenses need to be managed effectively.
• Strategic Expansion Progress: Track the execution of their retail showroom expansion plans. These are crucial growth drivers for the mid-to-long term.
• Inventory Levels: Ensure inventory growth remains proportional to sales growth and doesn’t indicate overstocking.

Given RBZ Jewellers’ historical growth trajectory (a fast/super grower), robust operational efficiency even in a lean quarter, and clear growth strategies aligned with India’s strong domestic consumption theme, the Q1 FY26 results seem to be a temporary, seasonally-driven blip rather than a red flag. The focus should remain on observing the positive changes in order flow and the execution of their expansion plans, which are poised to drive future earnings. Patience and a long-term view will be key for investors here.

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