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What helps Pune-based jewellers PN Gadgil & Sons stay profitable

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Shiv Joshi
Shiv Joshi
An editor with over 20 years of experience across industry verticals and content formats from tabloids to magazines, he is the Deputy Group Managing Editor at Images Group.

Pune-based jewellery retail chain PNG & Sons continues to stay profitable at store level even after 200 years. Here’s how…

As the chief operating officer and chief financial officer of PN Gadgil & Sons (PNGS), thirty-four-year-old Aditya Modak shoulders the hefty responsibility of protecting a 200-year-old family legacy.

PNGS is one of the three entities that emerged out of the demerger of the 1832-established PNG & Co. in 2012. Helmed by Govind Gadgil & Dr. Renu Gadgil, PNGS became a limited company in November 2017.

Even though it separated from its parent, PNGS still has a centuries-old reputation to maintain, not only as a trusted jeweller but as a sustainable and profitable business. “Even today, the company is profitable not just at a group level but even at a store level, and that’s something ingrained in us over generations,” said Modak.

And it is the young entrepreneur’s job to ensure it continues to do so.

“The business has been there for six generations…they must have done something right for the last 200 years. And I should not be the one to spoil the game,” said the young scion who joined the business in 2015.

So far, he seems to have been doing a decent job. In financial year (FY) 2023, PNGS clocked a turnover of Rs10,000 crore, from 30 stores and a gold bullion business, which contributes a little over 40% of its business.

In the quarter ended December 2023, the company reported a turnover of Rs 6,665 crore, gross profit of Rs 331 crore, and profit after tax (PAT) of Rs 138 crore.

The retailer’s gross profit (GP) margins are the best among brands that deal predominantly (read 90%) in gold. “The industry standard is 10% and our GP is more than that,” he said.

Here’s what has helped the retailer maintain its sheen over the years…

Deliberate expansion

At the core of the success of PNGS, which specialises in Maharashtrian style gold jewellery, is its focus on profitably. And this begins with its strategy to expand slowly and thoughtfully.

To maintain this, the company doesn’t rush into opening stores and opens every store with careful consideration. “There are various factors we consider when opening a store—the proximity to target audience, location, amenities near the store,” Modak shared. That’s why even after 12 years of being a separate entity, PNGS has only 30 company-owned and operated stores.

“We haven’t shut a single store we have started. We might shift the location, but never shut. That is our ethos because people give us their hard-earned money and we have to maintain that trust,” explained Modak.

The brand is only looking to open two to five stores in the current financial year.

Also, rentals being a major expense, PNGS has a formula it follows when opening new stores with regards to sizes. Typically, the brand’s outlets in tier 1 cities range from 6,000 sq. ft. to 12,000 sq. ft., in tier 2 the sizes range from 2500 sq. ft. to 4,000 sq. ft. and in tier 3 they are 1000 sq. ft. to 2,500 sq. ft.

Strong regional focus

PNGS is concentrated on its regional target audience. Out of its 30 stores, 28 are in Maharashtra with six in Pune, one in Gujarat at Vadodara and one in Karnataka at Kalaburgi since both these cities outside of Maharashtra have a strong Marathi population.

In the current financial year too, the company is looking at expanding into new cities in Maharashtra itself and perhaps a store in neighbouring states that have a 30% to 50% Maharashtrian population or a strong Maharashtrian cultural influence.

ROI oriented investments

The retailer is return on investment (ROI) conscious and doesn’t invest in anything where it is not just justified.

“In whatever we do, we are very thrifty in a way. Let’s say if you are spending Rs100, then at least 80% of that expenditure should provide measurable results,” he explained. This philosophy drives all decisions for the brand, including expansion, marketing and category expansions.

For instance, the brand spends only 1.5% of its turnover on marketing.

PNGS believes that an investment should either give good returns or genuinely enhance customer trust. This is one of the reasons why it does not believe in investing in technologies such as augmented reality (AR). “AR/VR are good to see but don’t give customers an idea of how a piece of jewellery feels on their body—for instance, heavy, or light,” said Modak.

“And because the product and prices are pretty standardised when it comes to gold jewellery, ultimately, it is the experience game. That’s why we have invested in a robust customer relationship management (CRM) solution at all our stores and the Karatmeter, which helps the customer understand their gold and what we are selling,” he explained.

Future plans

In FY 2025, PNGS is looking at a 12% increase in revenues over FY2024, which it expects to close at Rs8000 crore with about Rs3500 coming from B2B bullion sales, a significant drop in its revenue from FY2023. “The 20% drop in overall revenue is on account of impacted bullion sales. The jewellery business has grown 8% Y-O-Y,” said Modak.

In the current fiscal, the jeweller is also looking at increasing the share of its diamond business, which is getting a good response considering the changing consumer aspirations and preferences.

Furthermore, the company will maintain its focus on offline stores and does not plan to take any steps in improving the contribution of online to its business, which currently stands at 1.5%. This is because it feels that jewellery will continue to remain a largely touch and feel-driven business and it aims to focus on improving the in-store experience.

Gargi by PNGS

Aditya Modak at Gargi by PNGS
Aditya Modak at Gargi by PNGS

In December 2021, Aditya Modak launched his own brand of fashion jewellery under the name of Gargi by PNGS. “While the promoters are the same, and we use the PN Gadgil & Sons (PNGS) goodwill and brand name, the two companies are separate entities,” explained Modak, the brand’s co-founder.

Gargi by PNGS sells fashion jewellery predominantly made of silver in the range of Rs500 to Rs10,000, with almost 80% being under R3500. It has recently ventured into 14K diamond jewellery under Rs50,000.

While leading the sales team at PNGS, young Modak realised that the younger customers walking into PNGS were looking for trendy jewellery to consume rather than invest in, which prompted him to launch the affordable jewellery brand.

Gargi by PNGS got listed on BSE SME in 2022 at Rs 30 and today trades at ~Rs525.

In December 2023, the company clocked a turnover of Rs 35 crore, a gross profit of Rs 15 crore and PAT of Rs 6 crore.

Gargi is built on the same financial prudence of PNGS and is focused on growing profitably. And therefore, keeps only 10% of its budget for marketing.

However, it follows a very different business model than PNGS.

The brand has 20 shop-in-shops (SIS) at Shoppers Stop, 20 SIS in PNGS stores and five own stores. It also sells on its e-commerce portal and on Amazon.

A lion’s share of its revenues come from PNGS SIS followed by e-commerce and Shoppers Stop.

“In FY2025, we’re looking at doubling our Shoppers Stop presence to eventually reduce the dependence on PNGS and become a national brand,” said Modak.

The entrepreneur who is also a chartered Accountant also informed that the company is taking the franchising route to scale up to slowly go away from operational involvement and focus on the product.

“While eventually we want to become a global brand, till 2028 we would be looking at India expansion only unless a lucrative overseas collaboration shows up,” he said.

Speaking about the financial target for the fiscal he said that the brand is on the right path to achieving Rs 100 crore revenue in this coming year, adding that the brand was profitable from the very first store.

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