Bluestone’s Remarkable Turnaround in FY26

Bluestone has achieved a significant transformation that is rare for consumer companies to accomplish within a single year. The company saw its standalone revenue grow from Rs 1,770 crore in FY25 to Rs 2,441 crore in FY26, marking an impressive increase of 37.9%. The EBITDA soared by 420% to reach Rs 394.5 crore. The most notable shift was the company’s transition from a Cash PAT loss of Rs 82.9 crore to a Cash PAT profit of Rs 228.4 crore. Over the last quarter, Bluestone launched 65 new stores, reaching over 340 outlets in 134 cities, and enjoyed a same-store sales increase of 34%. This transformation appears to signify a pivotal moment for a company that previously focused on proving that omnichannel jewellery retail could succeed in India, making FY26 a notable inflection point.

However, a table in the investor presentation submitted to the BSE on April 23 reveals a more nuanced story. Bluestone recorded an inventory gain of Rs 150 crore in FY26, reflecting the increase in the value of its gold inventory as gold prices surged by approximately 25–30% throughout the year. According to Indian accounting standards, this gain directly affects the P&L as a reduction in the cost of goods sold, which artificially boosts EBITDA. When excluding this gain and adjusting for IND AS 116 lease accounting, the Pre-IND AS EBITDA, excluding inventory gains, drops to Rs 180.6 crore, resulting in a margin of 7.4%. Although this represents a significant improvement from FY25’s margin of 1.0%, it remains quite distinct from the 16.2% EBITDA margin highlighted in the presentation.

Moreover, the rapid increase in the company’s inventory poses additional concerns. Inventory rose by 60.5%, escalating from Rs 1,652.5 crore to Rs 2,651.7 crore, while revenue advanced at a relatively slower rate of 38%. This disparity adversely affected efficiency, with inventory turnover falling from 1.34X to 1.13X. To accumulate this stock, the company invested Rs 999 crore, keeping its operating cash flow in the negative at Rs 175.3 crore, despite reporting a nominal profit.

The management attributes this rise to new stores, product categories, and broader entry-level pricing options, which sounds logical. Nevertheless, the substantial gap between inventory growth (60%) and revenue growth (38%) calls for a clearer rationale.

Additionally, ESOP expenses surged to Rs 92.7 crore in FY26, an increase of 80.8% from the previous year. These costs are significant as they diminish shareholder value when employees choose to exercise their stock options. The company’s rationale suggests that these costs are elevated due to stock options granted prior to the IPO, and they are anticipated to drop sharply from Rs 92.7 crore in FY26 to merely Rs 4.8 crore by FY30. This suggests future profits may appear more favourable even without substantial operational enhancements.

Currently, in FY26, the ESOP expense constitutes a real financial consideration affecting the company’s profits. Despite this, some key metrics remain robust. The gross margin improved by 4.7 percentage points to 42.6%, primarily due to increased sales of studded jewellery, which commands higher margins as customers value design over mere metal weight. The repeat revenue ratio soared to 54.5% in FY26, up from 44.6% in FY25. In a sector where consumers are typically expected to purchase infrequently, over half of the revenue from returning customers indicates that the daily-wear concept is gaining traction. Average order value also rose by 39% to Rs 6,631.

Bluestone showcases distinct advantages, operating on a large scale, producing in-house, leveraging its tech platform, and enjoying a solid base of repeat buyers. However, concerns persist. The inventory is expanding quicker than sales, operational cash flow is negative, and the EBITDA is partially influenced by fluctuating gold prices. The potential remains substantial, as the demand for daily-wear jewellery is increasing at an annual rate of 15–18%. Bluestone is also venturing into new areas like men’s and children’s jewellery, which could foster additional growth.

The primary risk continues to be fluctuations in gold prices. A decline in gold prices could potentially devalue the company’s Rs 2,651.7 crore inventory, reduce order sizes, and adversely affect profits.

This encapsulates the true narrative of Bluestone. The scenario is not solely about the 420% growth in EBITDA or the benefits arising from inventory. Presently, the company is operating at around 7% margins whilst undergoing expansion. Its ability to achieve stable double-digit margins will hinge on gold prices, inventory management efficiency, and competition from players like CaratLane in the same market.