Sky Gold advance-gold mix lifted Q2 gross margin to 9.6%

Sky Gold said its advance-gold model represented 16% of Q2 FY27 business and added 110 basis points to gross margin, contributing to a 9.6% consolidated gross margin. Under the model, customers supply the gold, allowing Sky Gold to earn manufacturing charges without funding that metal inventory or its related receivables.

How does Sky Gold’s advance-gold model work?

Sky Gold’s advance-gold model works by having customers procure and provide the gold while Sky Gold performs the manufacturing work and bills for that work. The mechanism removes the need for Sky Gold to hold the customer-supplied metal as inventory or manage receivables connected to that gold.

The model addresses gold’s role as the principal working-capital requirement in jewellery manufacturing. Management said nearly 16% of Q2 FY27 volume came from advance gold, also called advanced metal during the call, and required no capital of Sky Gold’s own for the supplied gold.

Advance gold is one part of Sky Gold’s capital-efficiency strategy, alongside exports, which management said have shorter receivable cycles than domestic business. Management said advance gold and exports together accounted for more than 35% of volume in Q2 FY27.

How much did advance gold add to Sky Gold’s Q2 FY27 margin?

Advance gold added 110 basis points to Sky Gold’s Q2 FY27 gross margin, according to management, because the company billed making charges rather than financing the gold value in each transaction. Advance gold was 16% of Q2 FY27 business, above management’s earlier FY27 target of 15%.

Sky Gold’s Q2 FY27 gross margin was 9.6%, an increase of 133 basis points from Q2 FY26 and 27 basis points from Q1 FY27. Management attributed the change to a higher advance-gold mix and an increased mix of studded jewellery, including natural and lab-grown diamond jewellery, which accounted for about 2.6% of Q2 FY27 revenue.

Sky Gold reported Q2 FY27 consolidated revenue of Rs 2,391 crore, up 61% year on year and 18.8% from Q1. Gross profit increased 87% to Rs 229 crore, while earnings before interest, tax, depreciation and amortisation, or EBITDA, rose 90% to Rs 189.8 crore and represented 7.9% of revenue.

Reported profit after tax, or PAT, was Rs 129 crore, up 93% year on year, after a Rs 7.35 crore exceptional charge for a fraud incident at subsidiary Star Mangalsutra. Management said Rs 3.35 crore of the Rs 10.70 crore involved had been recovered, with the remaining amount fully provided during the quarter.

Why did Sky Gold’s working-capital cycle improve?

Sky Gold’s working-capital cycle improved because advance gold does not require it to fund customer-provided metal, while exports have shorter payment terms, according to management. Net working-capital days declined to 55 at September 2026 despite a rise in inventory days as the company expanded its studded-jewellery mix.

Inventory days increased to 39 at September 2026 from 37 at March 2026. Management said the increase reflected greater investment in higher-margin studded jewellery, which needs relatively more working capital than gold manufacturing, while cash generated from the gold business supports this product-mix shift.

Receivable days were 33 at September 2026, down from 39 a year earlier but above 26 at March 2026. Management attributed the increase from March to festive dispatches billed in the final weeks of the quarter for Navratri and Diwali, which it said were expected to be collected in October and November.

What supported Sky Gold’s cash flow and debt position?

Sky Gold generated Rs 136 crore of operating cash flow in H1 FY27, compared with an outflow of Rs 100.9 crore in H1 FY26. Management said this equalled 58% of H1 FY27 PAT of Rs 234 crore, compared with its earlier stated objective of converting 20% to 25% of PAT into operating cash flow.

H1 FY27 revenue rose 68% to Rs 4,403 crore and EBITDA was Rs 346 crore. Management linked the cash-flow reversal to process and control work undertaken over the preceding 18 to 24 months, including systems for monitoring inventory, gold loss, employee productivity and customer receivables.

Net debt was Rs 531 crore at September 2026, down from Rs 550 crore at March 2026. Management said interest cost was 0.89% of H1 FY27 sales, compared with 0.96% in H1 FY26, and reported Rs 11.70 crore of interest income for the half year.

Trade payables rose to Rs 437 crore at September 2026 from Rs 92 crore at March 2026. Management said diamond and studded inputs accounted for Rs 225 crore of payables because 90 to 120 days of supplier credit is market practice, while around two days of bullion credit had an impact of Rs 100 crore.

What is Sky Gold’s plan for advance gold and exports?

Sky Gold said it plans to increase the contribution of advance gold, exports and higher-margin value-added products including studded and diamond jewellery. Management did not provide new forward guidance, citing Securities and Exchange Board of India restrictions, but noted that advance gold had already exceeded its earlier 15% FY27 mix target in Q2 FY27.

Exports are the other stated pillar of the plan because of their shorter receivable cycles. Sky Gold reported Rs 811 crore of export revenue in H1 FY27, compared with more than Rs 35 crore in FY23, and said exports had reached about 18% of business.

Sky Gold said Q2 FY27 export revenue was Rs 435 crore, which management described as roughly Rs 1,600 crore on an annualised basis. This annualised figure is a management calculation based on the quarter rather than a reported full-year result.

Management also discussed an announced Rs 1,800 crore capital raise but said it could not disclose the purpose or use of proceeds under regulatory restrictions. It previously cited FY2030 targets of Rs 18,000 crore in revenue, Rs 945 crore in PAT and a net debt-free balance sheet, while subsequently stating that it no longer provides forward guidance.

Conclusion

Sky Gold’s Q2 FY27 results show that advance gold has become material to its operating model: the customer-supplied-gold business represented 16% of activity, added 110 basis points to gross margin and reduced the need to finance gold inventory. Alongside exports and longer supplier credit, the mix supported 55 net working-capital days and Rs 136 crore of H1 FY27 operating cash flow.

The next measure to watch is whether Sky Gold can maintain or increase advance gold beyond its earlier 15% FY27 target while expanding studded jewellery, which represented 2.6% of Q2 FY27 revenue but requires more working capital. Management has also identified export growth as a priority, while the intended use of the announced Rs 1,800 crore capital raise remains undisclosed.