Thangamayil Jewellery has delivered one of the most unusual Q2 FY27 performances in the jewellery sector. Sales increased almost 40%, but net profit barely moved. The company sold significantly more jewellery, yet the additional business produced surprisingly little growth in earnings.

Revenue from operations reached ₹2,380.87 crore, compared with ₹1,704.60 crore in the same quarter last year. This represents annual growth of approximately 39.7%, reflecting a substantial increase in the value of jewellery sold.

However, net profit increased just 1.6% to ₹59.45 crore from ₹58.51 crore. The difference between revenue growth and profit growth immediately raises an important question about the company’s operating costs and margins.

The sequential comparison was even weaker. Revenue declined 10.6% from ₹2,662.45 crore in the June quarter, while net profit fell 30.1% from ₹85.09 crore. This suggests that profitability faced considerable pressure during the September quarter.

The biggest clue comes from operating earnings. EBITDA increased approximately 8% to ₹114 crore, compared with nearly ₹106 crore last year. Although operating profit improved, it grew much more slowly than revenue.

EBITDA margin declined from approximately 6.2% to 4.8%. In simple terms, Thangamayil earned around ₹4.80 in operating profit from every ₹100 of sales, compared with ₹6.20 last year.

This margin decline explains why strong sales growth failed to produce a similar increase in net profit. Higher revenue does not necessarily mean higher earnings when the cost of generating those sales rises substantially.

The pressure was visible in the company’s material costs. Net material costs represented approximately 90.5% of revenue, compared with 88.9% last year, reducing the amount available to cover other business expenses.

Gold prices are an important part of this story. Jewellery retailers operate in a market where changes in gold prices can significantly affect selling values, inventory costs and customer purchasing behaviour.

Higher gold prices can increase reported revenue even without an equivalent increase in jewellery volumes. This is why investors need to examine margins and actual business activity rather than focusing only on the value of sales.

Thangamayil also reported realised inventory gains of ₹28.54 crore during the September quarter. These gains represented approximately 12.9% of quarterly gross profit, making inventory performance an important contributor to reported profitability.

Inventory gains can support earnings when precious metal prices move favourably. However, they may not repeat consistently, which means the underlying profitability of jewellery sales remains important.

The company also highlighted strong growth from existing stores. Same store sales increased 35.93% during the first half of FY27, compared with 10.31% in the corresponding period last year.

This is an encouraging operational development because same store sales measure growth from outlets that were already operating. It indicates that the business was not relying entirely on opening new stores to increase revenue.

Expansion continued alongside this growth. Thangamayil opened four new outlets in Chennai during the first half and indicated plans to open another four outlets by March 2027.

The company has traditionally maintained a strong presence in Tamil Nadu. Expanding its store network can create opportunities to reach more customers, although new outlets also require investment in inventory, employees and operating infrastructure.

Employee expenses increased approximately 37% to ₹47.56 crore during the quarter. Advertising and publicity expenses also rose around 40% to ₹30.13 crore, reflecting higher spending across the business.

Finance costs increased 37.2% to ₹22.23 crore from ₹16.20 crore last year. These expenses matter because jewellery retailers often need substantial funding to maintain gold inventory across their stores.

The company’s first half performance provides a more encouraging perspective. Revenue increased approximately 55% to ₹5,043 crore, while net profit rose nearly 39% to ₹144.55 crore, showing that the six month performance remained stronger than the September quarter alone.

Thangamayil also reported hedging coverage of approximately 95% for gold and 49% for silver at the end of September. Hedging helps manage exposure to precious metal price movements, although it cannot eliminate every business risk.

The stock market reacted sharply to the results. Thangamayil Jewellery shares fell as much as 7.26% during trading on November 4, suggesting that investors were concerned about the weak profit growth and shrinking operating margins.

The next few quarters will reveal whether Thangamayil can convert its strong sales momentum into better earnings. Existing store growth and expansion remain encouraging, but higher costs and weaker margins have created an important challenge. The key question is whether profitability can recover without sacrificing the company’s growth momentum.