Kalyan Jewellers Eyes Capital-Light Growth with Franchise Expansion in India and Overseas

Kalyan Jewellers is significantly increasing its focus on the Franchise-Owned Company-Operated (FOCO) model for expanding its showroom network, both within India and in international markets like the Middle East and the United States. This strategy is designed to be capital-light, meaning it requires less upfront investment from the company itself, thereby improving financial returns and reducing the company's debt levels.

As of September 30, 2025, Kalyan Jewellers operates 174 FOCO showrooms in India and has agreements (LOIs) for 89 more to open in the fiscal year 2026. Its online brand, Candere, will also grow primarily through this franchise model, with 54 such outlets already operational. The company is committed to strengthening its balance sheet, planning to allocate 40-50% of its profits towards debt repayment and shareholder returns. Since April 2023, Kalyan Jewellers has paid back Rs 6,461 crore in working capital loans and distributed over 20% of its profits as dividends for fiscal year 2025.

The jeweller demonstrated robust financial performance in the second quarter of fiscal year 2026, achieving approximately 31% revenue growth, fueled by a 16% increase in same-store sales and a strong influx of new customers who contributed over 38% of total sales. Franchised showrooms accounted for nearly 49% of the quarterly revenue, with profitability boosted by better procurement practices and operational efficiencies.

Impact: This strategic shift towards a capital-light model is expected to accelerate Kalyan Jewellers' expansion pace, potentially leading to higher revenue growth and improved profitability. By reducing reliance on its own capital, the company can deploy resources more efficiently, manage debt more effectively, and provide better returns to its shareholders. This approach is generally viewed positively by investors as it signals a more sustainable and profitable growth trajectory.

Impact Rating: 7/10

Difficult Terms: - Franchise-Owned Company-Operated (FOCO) Showrooms: A business model where a franchisee owns the showroom but the company manages its operations. This allows for expansion without the company bearing the full cost of ownership. - Capital-Light Growth: A strategy focused on expanding the business with minimal capital investment from the company itself, often relying on partners or external funding. - Balance Sheet Leverage: The extent to which a company uses borrowed money to finance its assets. High leverage means more debt. - Letter of Intents (LOIs): A document outlining a preliminary agreement between parties, indicating their intention to enter into a formal contract. - Working Capital Loans: Short-term loans used to finance the day-to-day operations of a business. - Same-Store Sales Growth: The percentage increase in revenue from stores that have been open for a year or more, indicating organic growth and performance of existing outlets. - Operating Leverage: The degree to which a company's operating costs are fixed. High operating leverage means a small increase in sales can lead to a large increase in profit.