alka diamond industries ltd Management discussions

The Gems and Jewellery sector plays a significant role in the Indian economy, contributing around 6-7 per cent of the countrys GDP. One of the fastest growing sectors, it is extremely export oriented and labor intensive. Based on its potential for growth and value addition, the Government of India has declared the Gems and Jewellery sector as a focus area for export t promotion. The Government has recently under taken various measures to promote investments and to upgrade technology and skills to promote ‘Brand India in the international market. India is deemed to be the hub of the global jewellery market because f its low costs and availability of high-skilled labour. India is the worlds largest cutting and polishing centre for diamonds, with the cutting and polishing industry being well supported by government policies. Moreover, India exports 95 per cent of the worlds diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC). Indias Gems and Jewellery sector has been contributing in a big way to the countrys foreign exchange earnings (FEEs).The Government of India has viewed the sector as a thrust area for export promotion. The Indian government presently allows 100 per cent Foreign Direct Investment (FDI) in the sector through the automatic route

OPPORTUNITIES, RISK & CONCERNS AND THREATS

Opportunities

The Indian middle class is expected to rise from 16 per cent of population to 46 per cent of population by 2023. As in the case of China, this emerging and burgeoning middle class in India will be dominated by the young and upwardly mobile population, with a substantial amount of disposable income to spend. Ensured of financial security, a major portion of their disposable income is likely to be spent on purchase of conspicuous products, including jewellery. Luxury retailing including diamond jewellery is gaining importance in India. Indian consumer is ready to splurge on luxury items and is increasingly doing so. A globally connected youth market in metropolitan cities is revolutionizing jewellery consumption in India with demand for fashion jewellery on the rise. Indian diamond industry players are taking diamonds to the mainstream, allowing people of most economic levels to purchase diamond jewellery.

Furthermore, the introduction of certified diamonds has increased trust and made diamond valuations more transparent. Jewellery manufacturers are innovating and producing fashionable and still affordable diamond jewellery targeted at the middle class where demand for such products is strong and growing by leaps and bounds. Transition from traditional retail to organised retail is taking place with sale of branded jewellery on upswing. The convenience of shopping with multiplicity of choice under one roof, innovative and trendy designs, affordable price points are some of the factors appreciated by the new generation. This change in pattern, marked by a shift away from gold, is likely to continue, driving the diamond jewellery

Risk & Concerns and Threats:

The Company has comprehensive risk management system where the senior management team sets the overall tone and risk culture of the organisation through defined and communicated corporate values and a risk management model which promotes out-of-the box thinking for converting potential risk to potential business opportunities. The Company regularly scans the macro economy and industry for risks which it believes would affect its performance and prospects. The Company ensures that all such foreseeable risks are analysed in detail and appropriate measures are taken to mitigate these or limit their effect to minimal. Some of the foreseeable risks as envisaged and their management as envisaged by the Company are:

Synthetic Diamonds

There has been an influx of Synthetic Diamonds in all the major markets. In the recent past few cases of undisclosed mixing of synthetic diamonds with natural diamonds have been reported. With improvement in technologies year over year, it is getting increasingly difficult to differentiate between the natural and artificial diamonds. The situation is evolving into a major challenge as Consumer confidence has taken a serious blow. Various initiatives are being undertaken by major diamond producers, trade bodies and retailers to increase the awareness about synthetic diamonds and its proper disclosure to boost the consumer confidence. The Gems and Jewellery Export Promotion Council has set up a Natural Diamond Monitoring Committee (NDMC) consisting of representatives from various trade bodies to address this issue. Proper disclosure of synthetic diamonds has been encouraged at all the levels in the value chain. Use of technically advanced equipment for the detection of undisclosed synthetic diamonds has also been increased.

Exchange Rate Risks

The industry is exposed to inherent risk of exchange rate fluctuations. The year 15-16 witnessed continuous weakening of rupee amidst some wild fluctuations. Rupee has depreciated over 11 per cent during last year. After breaching level of 68 per US$, rupee stabilized around level of 65 toward the year end. The import centric nature of the trade, acts as a natural hedge for the company. The Company has a sound foreign exchange policy and experienced personnel constantly monitor the exchange rate movements. This ensures that the exchange rate fluctuations have no adverse impact on the margins of the Company.

Internal control System and their adequacy

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. The Company monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls3 Your Company has put in place adequate internal financial controls with reference to the financial statements, some of which are outlined below.

Material development in Human Resources / Industrial Relations front, including number of people employed:

The Company prides in its people-centric principle in guiding its relationship with its employees. Employees are a key facet to the Company and the Company acknowledges that their contribution has played a key role in its growth and success. The Company ensures that safe working conditions are provided both in the manufacturing plants as well as offices of the Company. The Company regularly conducts medical checkups of all the workers at the factory regularly and updates their skills with training and development programmes, which take place at all levels. The Company pursues a culture of rewarding of excellence and commitment and encouraging bonding and team work. The Company believes in creating positive, proactive and professional work environments where talents are nurtured and careers are advanced.

Cautionary Statement:

Statement in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

The Company is not under obligation to publicity amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events.

BY ORDER OF THE BOARD
For ALKA DIAMOND INDUSTRIES LIMITED	PLACE: - MUMBAI.
Sd/-	DATE : - 02.09.2017
GOPAL M. VERMA
MANAGING DIRECTOR
DIN: 01687709