ECONOMIC OVERVIEW Global Economy
Following a turbulent year in 2022, the global economy is seen demonstrating signs of
resilience in 2023. Short-term economic prospects have improved as the factors responsible
for turbulence seem set to continue this year but with less intensity. Commodity and
energy prices that had seen unprecedented rise post Russia Ukraine conflict has moderated
over past few months though the war continues fuelling geo political tension. Inflation is
declining gradually but at apace lower than expected. China recovering from the set back
of COVID 19 and related restrictions and is reopening slowly raising the hope of improved
supply chain functioning.
However, the year ahead is expected to be full of challenges and uncertainties. Side
effects from the fast rise in interest rates and tightening of monetary policies through
last year are apparent amidst banking turbulence in the United States with the failure of
two regional banks and collapse of confidence in Credit Suisse a global bank raising
concerns of recession in the world economy.
The International Monetary Fund (IMF) has projected global Gross Domestic Product (GDP)
growth to decline from 3.4% in 2022 to 2.8% in 2023 before rising to 3.0% in 2024. Global
inflation is projected to decline although slower than initially anticipated, from 8.7% in
2022 to 7.0% in 2023 and 4.9% in 2024 on the back of lower commodity prices and tighter
monetary policies. Advanced economies grew at 2.7% in 2022 and are expected to grow at
1.3% in 2023 and 1.4% in 2024. The Emerging Market and Developing Economies (EMDE) fared
better and grew at 4.0% in 2022. For 2023 and 2024, the emerging economies are expected to
grow at 3.9% and 4.2%, respectively, with China and India leading the growth.
The economic conditions have started improving with the US showing improvement on the
back of an increase in private investment and improved consumer spending and reopening of
the Chinese economy as the country unshackled itself from pandemic-related restrictions. A
key factor for the continued economic improvement is containment of commodity prices and
smooth functioning of supply chain. Fiscal policy makers have a narrow path to walk to
improve the prospects and minimize the risk. The challenges faced by the globe needs a
co-ordinated and collective response to bolster the global economys resilience and
achieve the best outcome.
Indian Economy
The Indian economy has demonstrated remarkable resilience to exogenous shocks and has
repositioned itself among the worlds fastest-growing economies in FY 2022-23. As per the
second advance estimates released by the National Statistical Office (NSO), Indias GDP
growth is estimated at 7.0% in FY 2022-23 as against 9.1% growth recorded in FY 2021-22.
The merchandise exports stood at an alltime high of US$ 447.46 billion in FY 2022-23.
registering a growth of 6.03%, surpassing the record exports of US$ 422 billion achieved
in FY 2021-22. Retail inflation eased to 5.66% and the wholesale-price index (WPI)
inflation fell to 1.34% in March 2023 amid lower food and fuel costs.
The IMF projects the Indian economy to grow at 5.9% in FY 2023-24 before rising to 6.3%
in FY 2024-25. The optimistic growth stems from a slew of factors such as strong
investment activity bolstered by the governments push for infrastructure development,
rebound in private consumption, improvement in capacity utilisation, technology-enabled
development, and revival in credit growth.
Moreover, growth-enhancing policies such as the production-linked incentives (PLI)
schemes and the governments emphasis on selfreliance will augur well for India in the
coming years. With multiple growth levers in place, the Indian economy remains
attractively positioned to navigate global headwinds in FY 2023-24 and reach US$ 5
trillion mark by FY 2026-27. India is expected to become the third largest economy by FY
2027-28 surpassing Japan and Germany.
INDUSTRY OVERVIEW
Global Gems and Jewellery Industry
The upbeat sentiment and positive growth witnessed post Covid continued in the first
half of FY 2022-23. Global demand for natural diamond jewellery grew in the first half
with US leading the growth. China was the only country to experience a decline in diamond
demand, largely due to the impact of Covid-19-related lockdowns and slowing
macroeconomic fundamentals. A combination of better than expected wage growth and a steady
pace of employment growth contributed towards higher consumer demand in the US. However,
the persistently high inflation, interest rate hikes and tightening of monitory policies
by almost all the central banks, and the global economic challenges exacerbated by the
Russia-Ukraine conflict dented consumer confidence, and consequently, demand softened in
the second half of the year. Rising inflation and rising interest cost had notable impact
on the middle class leading to tighter budgets and softer sentiments. Mid stream players
and retailers focused on lightening the inventory amidst uncertain economic scenario
postponing the orders leading to dent in the prices and accumulation of inventory at
upstream levels.
Digitisation and sustainability were the major trends that were seen in 2022 with the
rise of digital technology and virtual consumer experiences; and increasing transparency
and traceability in the diamond supply chain. The Industry is witnessing accelerated
digital transformation as the online market share of diamond jewellery continues to rise.
Retail brands have launched live streaming, short video marketing and other new sales
strategies. Integrated e-commerce platforms continue to pay more attention to the
jewellery category recognising its potential. Sustainability is the key aspect as the
conscious consumers buying decisions increasingly lie around the questions of ethics,
environmentalism, and sustainability.
In the short to medium term, fears around a resurgence of the Covid-19 pandemic have
been overtaken by concerns about historically high rates of inflation, soaring cost of
energy and the rising cost of living for consumers globally. The geopolitical turmoil in
Eastern Europe and other regions exacerbates the challenges for the global macroeconomic
environment, leading to reduced consumer confidence and lower discretionary spending. On
account of these factors, the industry growth is expected to remain subdued in 2023 in
countries with higher inflation. Demand is expected to improve in the second half of
2023-24 with data in US indicating economic revival and China opening up gradually.
Indian Gems and Jewellery Industry
Indias gems and jewellery industry has shown remarkable resilience and perseverance in
the face of global challenges. Despite high inflation in USA and other western economies,
rough supply disruption due to sanctions on Russia and the pandemic-related lockdowns in
China for major part of the year, the industry has managed to demonstrate a commendable
performance. In FY 2022-23, Indias overall exports of gems and jewellery declined
marginally by 4.74% to US$37.47 billion as compared to US$39.33 billion in FY 2021-22.
India is the worlds second-largest gold consumer and the worlds largest diamond
cutting and polishing centre. India is a leader in manufacturing of cut & Polished
diamonds and steadily growing in jewellery manufacturing. Indian manufacturers leverage
ancient jewellery traditions dating back 5000 years and are adept at employing innovative
best-in-class technology to create globally appalling collections. Indias gold and
diamond trade contributes 7.5% to the countrys GDP and 14% to Indias total merchandise
exports.
Government has acknowledged the contribution made by the gem and jewellery industry in
countrys economic growth. Recognising its potential, the Government is very supportive
for development and growth of the industry. Various measures have been taken to support
the small and mid size enterprises, reduction of import duty, interest subvention,
development of mega common facility centres (CFC), establishment of jewellery park with
state of the art facilities etc will go a long way boosting the sector. Timely
implementation of the India-UAE Comprehensive Economic Partnership Agreement (CEPA) and
India-Australia Economic Cooperation and Trade Agreement has resulted in a remarkable
growth in industry exports. Trade agreements with various other countries are in the
pipeline which will bolster the export.
Cut and Polished Diamonds
India is a key player in the global diamond market. Nine out of every ten diamonds in
the world are processed in India making it the worlds largest exporter of diamonds. The
industry is leading employment generator, accounting for nearly 95% of the global
workforce in the diamond industry. The overall gross exports of cut and polished diamonds
in FY 2022-23 declined by 9.78% to US$22.04 billion compared to US$24.43 billion in FY
2021-22.
Global economic slowdown and inflationary pressures affected the demand for diamonds in
Indias key markets, including the USA and China. Covid restrictions in China, which is
the second largest consumer of CPDs accounting for 10% of the global demand, for a large
part of FY23 accentuated the volume decline. However, certain regions in Europe and
South-East Asia performed well. India is totally dependent on imports for its requirements
of rough diamonds with Russia being one of the major suppliers. India encountered
difficulties due to inconsistent Russian rough diamond supply due to sanctions and
various restrictive measures imposed due to ongoing Russia - Ukraine conflict. Also the
supply is impacted with beneficiation programmes followed by many mining countries such as
Namibia, Botswana, and Angola preferring to cut rough diamonds in their own countries to
support economic development. Nonetheless, it is expected that stability will return to
the diamond market in the coming months with improved conditions in USA, China and Far
East Asia.
Jewellery
India is rapidly gaining prominence as one of the hub of the global jewellery market
owing to its low cost of production and availability of skilled labour. The sector is home
to more than 300,000 gems and jewellery players. Indian jewellery designs have gained
international acclaim for their exquisite craftsmanship and unique aesthetics. The
intricate details, traditional and contemporary look, exclusive finishing have attracted
global attention. This recognition has opened up opportunities for Indian jewellers to
expand their exports and cater to the global market.
Traditionally, the jewellery business was restricted to family owned or proprietor-run
entities. Over the past few years, the jewellery industry has been transforming by leaps
and bounds and aligning itself with the advancing corporate culture. Moreover, from just a
handful of organised retailers a decade back, India now has several large chains with a
pan-India presence. Chain stores are shifting their focus to Tier 2 and Tier 3 cities,
where there remains aspirational consumer demand ready to be tapped. With rapid growth and
consumerism, there is a proliferation in the retail outlets and franchisee stores along
with an increase in the presence of online players through e-Commerce websites and
applications.
The industry is seeing increased penetration of branded and organised players due to
rising brand consciousness and adoption of western lifestyles by consumers. Increasing
urbanisation, pioneering product launches, and technological advancements in product
development are further propelling the growth of the organised jewellery market. While the
jewellery retail sector continues the trend it began over a decade ago and becomes
increasingly organised, the manufacturing sector is only at the beginning of this journey.
Ethical sourcing, environment sustainability, compliance with the laws of the land, safe
and healthy working environment are becoming norms for the manufacturing sector. In the
coming years, growth in the gems and jewellery sector will largely be contributed by the
development of large retailers and brands.
To encourage and streamline the manufacturing of gems and jewellery, various state
governments are looking at promoting the set-up of jewellery parks by themselves or by
industry bodies. These integrated industrial parks provide access to facilities under one
roof, including manufacturing units, commercial areas, and residences for industrial
workers, commercial support services and an exhibition centre. The mega common facility
centre (CFC) coming up in SEEPZ, Mumbai is in line with the vision of the government to
modernize the sector and help the medium and small-scale units with latest technology.
Similarly, GJEPC has already started building one of the largest jewellery parks in the
world in Navi Mumbai, which seeks to transform Indian exports of jewellery in line with
that of leading exporting countries in the world.
OUTLOOK
The year ahead for the industry is laden with challenges as economic pressures weigh
heavily on middle-class consumers. Rising inflation, restrictive central bank policies and
unwinding of surplus liquidity in key markets of US and Europe have resulted in tighter
budgets and a shift in consumer behaviour. Further, reopening of China is slower than
anticipated and recovery is expected to take a longer time. However, the situation is
expected to improve in the later half of the year with inflation and interest rates
reaching its peak, stability in commodity and energy prices and moderation in supply chain
issues.
Considering its tremendous contribution and growth potential, the government has
declared the gems and jewellery sector as a focus area for export promotion. The
Government along with all the stake holders of the gems and jewellery sector is well
committed towards aggressively promoting exports, identifying challenges and addressing
them, assisting exporters, especially SME units and exploring new markets while
consolidating the existing ones. Various reforms have been undertaken to promote
investment and upgrade technology and skills to promote Brand India in the international
market. Notable initiatives include 100% FDI in the sector under the automatic route;
reduction in customs duty on cut and polished diamonds and coloured gemstones; and import
duty cuts on gold and silver jewellery; setting up of jewellery parks; development of
common facility centres amongst others.
The future growth of the gems and jewellery industry is expected to be driven by
expanding middle class with rising disposable income, evolving lifestyles, rising
aspiration with exposure to social media, aggressive marketing and branding by key
players. Other major drivers include e-commerce boom, product innovation ane
technological advancements, and introduction of nswer and aesthetic jewellery se gments.
Retailers are increasingly eocusing on expanding into newjewellery categoriee to attract
consumers. Increasing feenetration os organised players implies greateravailab
ility oe variety in terms of products and desitjns and an Rnhanced shopping
experience. As per the research reports the Global Gems and Jewellery Market size is
estimated to grow at a CAGR of 7.55% between 2022 and 2027.
COMPANY OVERVIEW
Asian Star Company Limited (the Company) was established in 1971 and is one of the
worlds most prominent and respected diamantaires with a legacy spanning over 50 years.
With a relentless focus on innovation and excellence, its vertically integrated operations
span the entire value chain from rough sourcing to diamond cutting and polishing,
jewellery manufacturing to distribution and retailing. The Company has a robust
manufacturing infrastructure and highly skilled design and development team to support its
operations.
The Companys operations are spread across the globe covering major diamond consuming
cities, namely New York, Chicago, Antwerp, Dubai, Shanghai, Hong Kong, Bangkok and
Singapore in addition to Indian cities of Surat, Mumbai, Ahmedabad, Hyderabad, Hosur and
Chennai. The factories, offices and marketing arms are strategically placed at all major
manufacturing, trading and consumption centres of the diamond industry.
The Company has an arrangement of direct supply of rough diamonds from the leading
global mining companies. The Company is an approved manufacturer of the worlds leading
retail brands, reiterating its expert craftsmanship and unwavering commitment to quality
and integrity. The Company follows stringent measures of quality assurance and internal
audits in order to maintain the highest level of pipeline integrity, and abide by the
industry-approved standards of ethical business practices by complying with the Code of
Practices set down by Responsible Jewellery Council and ISO 9001:2015 certified by TUV
NORD.
Manufacturing Facility for Polished Diamond
The Company has a state-of-the-art diamond cutting and polishing facility located in
Surat, Gujarat spread across an area of 1 lakh sq. ft. This facility employs over 900
skilled artisans and is equipped with modern and sophisticated equipment and technology.
The Company has an extremely skilled production team capable of addressing different
complexities of diamond cutting. The Company is recognised for its consistency in quality
and cut and its products are acknowledged as Asian Star Make in the global industry. Its
extensive portfolio spans varied colours and shapes with diamonds ranging up to 5 carats
in size in fine make. The certified diamonds, EX-EX-EX Hearts & Arrows cut, and other
proprietary customized cuts produced by the Company are benchmarks in the industry. Our
portfolio of special cuts and mine-origin programmes enables us to deliver the
differentiation that gives our customers a competitive edge in the market. The Company has
earned a sterling reputation for both the exceptional quality of its diamonds and its
collaborative working culture.
Manufacturing Facility for Jewellery
Over the years, our dedication and innovative outlook led to our growth from being a
generic manufacturer to offering custom-made collections and private-labels as a
full-service jewellery powerhouse. Backed by its world-class manufacturing competencies,
the Company has emerged as the supplier of choice for leading jewellery brands and retail
chains worldwide. It has three in-house manufacturing facilities - two located at SEEPZ
and MIDC in Mumbai, Maharashtra; and one at Hosur in Tamil Nadu, spread across a total
area of 60,000 sq. ft. The annual production capacity of these units is around 7,50,000
pieces. The SEEPZ facility exclusively caters to international markets, and the MIDC and
Hosur units serve domestic market demand. The Company has established expertise in bridal,
fashion, solitaires ceramic fine jewellery and mens jewellery. It has also commenced
manufacturing and distribution of specialised jewellery for designer brands and private
labels.
Distribution
The Company has a widespread presence in major diamond trading and consuming centres in
Asia, Europe, USA and Middle East. With its extensive marketing network, the Company has
access to information on the latest market updates and global design trends, which enables
it to better serve its customers and deliver unique products. At the heart of Companys
business strategy lays the sincerity of always putting our customers first, and the
passion to create customer experiences that are personal, positive and beyond
expectations. Harnessing its vast knowledge of the product and the market, the Company
endeavour to fulfil its customers every need by offering bespoke services and value-add
programmes.
Retail
The Company has a spacious and luxurious jewellery boutique, housing pret diamond
jewellery and serving high net-worth individuals (HNIs). It offers curated collections of
exquisitely crafted, versatile and wearable pieces. The boutique also undertakes
customised orders to create innovative, bespoke jewellery for discerning customers for
special occasions. The unique collections are inspired by diverse sources such as nature,
art and history.
FINANCIAL OVERVIEW
FY 2022-2023 witnessed a decelerating economic conditions across the globe amid rising
inflation, aggressive monetary tightening and geo political tensions due to Russia -
Ukraine war and continuing stringent restrictions in China to curb the Covid cases. The
conditions deteriorated further during the third quarter with three major economies the
USA, China and Europe weakening further igniting fear of recession. The Gem and Jewellery
industry also had its impact as the demand slowed down in the key markets in the second
half with dent in consumer spending power and sentiment.
The Company has achieved a steady and satisfactory performance during this challenging
and uncertain economic scenario. The Company has continued to scale the new highs with
consolidated turnover for the year reaching Rs.4,478 crore from that of Rs. 4,423 crore in
FY 2022-23. With focus on value underpinned by efficiency, our margins have
significantly improved. EBIDTA for the year was Rs. 148 crore, compared to Rs. 130 crore,
and our PBT (excluding other income and exceptional items) was Rs. 116 crore, up from Rs.
111 crore in the previous year. Our mainstay diamond business grew to Rs. 3,751 crore from
Rs. 3,660 crore, while there was a marginal decline in our diamond jewellery business from
Rs. 757 crore in the previous year to Rs. 725 crore in the current year. The Company will
closely monitor and access the developments in the coming year and re-evaluate and realign
its strategies to achieve greater heights.
OPPORTUNITIES
India emerging as a preferred destination
In recent years, the world has witnessed a shift in the global economic landscape due
to geopolitical and trade tensions between major nations. This has led to a surge in the
adoption of the China Plus One strategy by multinational corporations, which seeks to
reduce their dependence on China by diversifying their investments to other nations.
India, with its robust manufacturing sector and favourable government policies, has
emerged as a significant beneficiary. The China Plus One strategy presents significant
opportunities for India to enhance its manufacturing capabilities and attract more foreign
investment which augurs well for the gems and jewellery sector.
Evolving customer preferences for sustainably sourced diamonds
Ethical sourcing and sustainability have become major factors influencing the buying
decisions of millennial and Gen Z. Consumers are increasingly demanding to know the origin
of their diamonds. In the recent years, through the application of blockchain technology,
the industry has made great strides in product traceability system to track the entire
journey of a diamond from mine to market. All the organised players are following the
globally accepted norms and guideline which enhances consumer confidence. This has helped
Indian players emerge as the preferred supplier to all the leading Oewellers and Retail
chains across the globe.
Growing proliferation of technology and digital marketing
The rise of digital technology continues to transform the way diamonds and jewellery
are marketed and sold. With more and more
consumers shopping online, diamond retailers are investing in digital platforms and
virtual experiences to enhance their customer engagement and sales. Leading players are
introducing virtual-reality (VR) experiences, through which, customers can select any
jewellery, see it from different angles and zoom on it to view intricate designs. Online
sales which account for about 1-2% of the fine jewellery segment has tremendous potential.
Rising demand for jewellery among young, middle-class population
With a growing population of young, aspirational middle class consumers and working
women, the jewellery sector is poised to benefit from an increase in disposable incomes
and a desire for luxury items. Weddings and festivals remain the most important drivers of
jewellery demand while bridal jewellery alone accounts for at least half of the market
share. The emergence of festival gift exchanges and changing consumer preferences toward
celebration presents for their families and friends are also driving the growth.
RISKS, THREATS & CONCERNS Challenges owing to sanctions on Russia
India is dependent on import of rough diamonds for its raw material requirements.
Russia is one of the major suppliers of rough diamonds accounting for about 30-35% of the
supplies. Sanctions on Russia have affected the supplies of rough diamond resulting in
uncertainty about its availability and firming up prices of rough diamonds. This can have
major impact on the diamond polishing segment. The Company has been preferred customer
with the major mining companies and has been able to procure its requirements without many
difficulties.
Slowdown in consumer demand amidst tightening monetary conditions
Record high inflation amid recessionary conditions in the West is worrying
manufacturers in the gems and jewellery sector. Major economies across the world have been
tightening their monetary policies and raising interest rates to stymie rising inflation
which has impacted consumer sentiment and capacity for spending on luxury and jewellery
products. Demand is expected to improve from the second half of the year with data for the
past few months indicating that inflation has peaked and economic situation is
stabilising.
Delay in re opening of Chinese market
China has been grappling with challenges posed by the spread of Covid 19. Its zero
tolerance policy with strict restrictive measures has crippled their economy drying up the
demand for gems and jewellery. China is gradually reopening and their government has been
taking various measures to support the economy. However, it is slow paced and taking
longer than expected. China is one of the major markets for the Industry albeit for larger
size stones, is having a major impact on the overall export. The Company is not affected
much as its core business is in smaller sizes of diamonds.
Increasing popularity of lab-grown diamonds
Lab-grown diamonds continue to gain popularity among consumers, particularly among
millennials and Gen Z, who prioritize sustainability and ethical sourcing. Also it
provides an affordable option which can have a major influence on buying decisions in the
current economic scenario. The demand for these diamonds is mainly in larger size stones
as it can have a material impact in terms of value involved and also the production of
smaller goods is not very cost effective. Industry is aggressively promoting the natural
diamonds and all the organised players have been following regulations for ethical
sourcing and sustainability giving comfort and confidence to the consumers. Cost
optimisation and innovative designs are the other measures adapted by the industry to face
this challenge.
INTERNALCONTROLS
The Company has a robust internal financial reporting and control system for
appropriate and accurate recording and reporting of financial and operational information
and safeguarding of its assets. In keeping with the size and nature of its business and
complexity of its aperations,the Company has included detailee processes, guidelines, and
arocedures in the internal control systoms. The internal control frampwork encompasser
governance, compliance, audit, control, ane reporting,with a strong intent to cmerm to
compliance with all applicable laws and regulations. The internal control systems are
responsible for safeguarding sensitive data, conduct audit process, maintain proper
accounting controls, accurate documentation, and monitor all operations. The internal
controls facilitate prompt detection and redressal of any deviations in business
operations.
The Audit Committne periodicolly reviews the internal crntrol systems to ensure their
adeq uacy and effectiveness and emooth operations with minima l risk; of fraud or any
other discrepancies. The Board also monitors the review conducted by the Audit Committee
and ensures correction of any variance, as may be required. During the year under review,
no material weakness was reflected in the design or operation.
HUMAN RESOURCES
Employees are the most important asset and pivotal to the growth and success of the
Company. The HR policy of the Company aims to create a congenial, transparent, and
inclusive work environment for the overall growth and development of its workforce. The
Company strives to maintain high levels of engagement, consistent performance, and an
innovative mindset to minimise attrition. Periodic learning and development trainings,
interactive sessions and conversations between the management and employees, and quality
and production workshops are organised to foster a growth-oriented culture. Regular skill
development and training programmes are also conducted to enhance the skills and
capabilities of employees. Employee satisfaction and empowerment is ensured through
appropriate reward and recognition programmes in addition to sincere appreciation by the
management.
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