Senco Gold delivered strong revenue growth in Q2 FY27, but its latest results contain an important contradiction. Consolidated revenue increased 34% and net profit rose nearly 78%, while EBITDA declined and operating margins contracted. A substantial derivative gain also played an important role in the reported profit.

Consolidated revenue from operations reached ₹2,058.73 crore, compared with ₹1,536.12 crore in Q2 FY26. This represented year on year growth of approximately 34%, reflecting a significant increase in the value of jewellery sales.

However, revenue declined 32.6% quarter on quarter from ₹3,056.03 crore in Q1 FY27. The sequential comparison highlights the impact of different seasonal demand patterns across the jewellery business.

Consolidated EBITDA declined approximately 15.1% year on year to ₹90.18 crore. This was lower than the previous year’s ₹106 crore despite the substantial increase in revenue.

The EBITDA margin contracted to approximately 4.4% from 6.9% a year earlier. This decline of around 250 basis points indicates that higher sales did not translate into stronger operating profitability.

Reported consolidated profit after tax increased to ₹86.67 crore from ₹48.78 crore. This represented growth of approximately 77.7% year on year, creating a sharp contrast with the decline in EBITDA.

Profit before tax reached ₹120.58 crore, compared with ₹59.07 crore in Q2 FY26. The increase was supported by a much higher contribution from other income during the quarter.

Other income increased to ₹122.12 crore from ₹17.75 crore a year earlier. A major contributor was a net derivative gain of ₹103.09 crore, compared with just ₹2 crore in the corresponding quarter.

This derivative gain is main to understanding the reported earnings. It should not automatically be treated as unrelated windfall profit because derivatives can offset changes in the value or cost of the underlying gold exposure.

The comparison with Q1 FY27 is particularly important. Senco recorded a derivative loss of ₹87.85 crore in the June quarter, meaning the combined net derivative gain for the first half was only ₹15.25 crore.

Consequently, looking at the September quarter alone can give an incomplete picture of the company’s derivative performance. The first half provides a broader view of the gains and losses recorded across both quarters.

Finance costs increased to ₹69.43 crore from ₹46.16 crore in Q2 FY26. This represented growth of approximately 50.4%, faster than revenue growth, making borrowing costs an important factor to monitor.

Employee expenses also increased to ₹55.23 crore from ₹41.89 crore. These rising costs, together with higher finance expenses, contributed to the pressure on the company’s operating performance.

For H1 FY27, consolidated revenue increased 52.1% to ₹5,114.76 crore from ₹3,362.39 crore. However, first half net profit increased by a much slower 22.4% to ₹187.81 crore.

The difference between first half revenue and profit growth highlights the importance of margins, financing costs and derivative movements. Strong sales growth alone does not guarantee a similar increase in recurring earnings.

Cash generation was another important concern. Senco reported an operating cash outflow of ₹430.78 crore during H1 FY27, compared with an outflow of ₹333.91 crore in the previous first half.

Working capital absorbed substantial cash during the period. Inventory and trade receivables increased, while the reduction in gold metal loans also contributed to the reported operating cash outflow.

Inventory stood at ₹5,487.85 crore at the end of September, compared with ₹5,296.09 crore at the end of March. Trade receivables also increased to ₹394.30 crore from ₹224.72 crore.

The company’s funding mix changed during the first half. Cash borrowings increased to approximately ₹2,178.31 crore, while gold metal loans declined to ₹434.37 crore.

Combining cash borrowings and gold metal loans, total funding through these two categories increased to approximately ₹2,612.68 crore from ₹2,345.96 crore at the end of March. Therefore, the reduction in gold loans did not mean that overall borrowing through these sources had declined.

The jewellery business continues to benefit from festive demand, customer preferences and the expansion of its retail operations. However, revenue growth should be assessed alongside physical sales trends, inventory movement and the company’s ability to convert sales into cash.

Senco Gold’s Q2 FY27 results therefore present a mixed picture. Strong revenue growth and higher reported profit are encouraging, but falling EBITDA, a large quarterly derivative gain, rising finance costs and negative operating cash flow make earnings quality and working capital important areas to watch.