(Forming Part of Directors Report)
ECONOMIC SCENARIO
Indian Economy Overview
Financial Year 2020-21 witnessed what has probably been the most pervasive pandemic in
the history of mankind. The pandemic led to severe loss of lives and livelihood resulting
in decline in incomes, increase in rate of unemployment, financial distress in industries
which are more contact led and outdoors and increase in poverty levels across the world.
The pandemic continues to impact the world and the second wave of Covid-19 has hit some
of the countries like India extremely hard .The GDP numbers plummeted in Q1 of FY2020-21
to -24.4% on account of strict lockdowns imposed by the government to curb the spread of
the virus. There were mobility restrictions, disruption in sales and distribution and
supply chain, reverse migration of labour force, shifts in consumer behavior towards
essential categories and severe impact on retail sales channels.
With gradual unlocking of the economy, Q2 FY2020-21 saw sequential recovery, albeit the
GDP growth rate remained in the negative on account of declines in construction activity
and non-essential services like travel, entertainment, and hospitality industries.
Indian economy returned to the growth side in Q3 of FY2020-21 on account of pent-up
demand, festive spending, and a jump in government expenditure. The big surprise in terms
of the sectors of production was the healthy expansion in financial, real estate and
professional services (+6.6%), and construction (+6.2%).
During Q4 the GDP reported growth of 1.6% and was on the path to recovery when the
second wave of Covid-19 came like a bolt from the blue. This deadly wave has led to a huge
humanitarian crisis in the country making India the second highest in the world in terms
of number of cases and third highest in number of deaths. The lockdowns in various parts
of the country during April and May have once again put a shadow on economic growth and is
likely to impact the GDP growth going forward.
Retail inflation (average) in India, based on consumer price index (CPI), accelerated
from 4.8% in FY2020 to 6.2% in FY2021. This pick-up in inflation was largely driven by
food inflation which rose from 6.0% in FY2020 to 7.5% in FY2021. (Source: WHO coronavirus
(COVID-19) dashboard as on April 10, 2021, International Monetary Fund (January 2021),
National Statistics Office, Bloomberg)
Gems and Jewellery Retail Industry in India
The supply chain disruption and restrictions over movement of non-essential goods in
April and May resulted in Jewellery demand falling sharply by 74 per cent during the first
quarter of FY21. Sales linked to Akshaya Tritiya was lost and the sharp rise in gold
prices further dented the consumer sentiments.
Demand also remained weak in the second quarter, declining 48 per cent year-on-year
with sustained rise in gold prices and extended lockdown in key metro cities like Chennai
and Mumbai.
Although Jewellery demand showed continued signs of quarterly recovery from the lows
reached in Q1 when market lockdowns were at their peak, it remained very weak in Q3 and
registered a fall of nearly 42 per cent year-on year basis.
Substantial wedding purchases, encouraged by declining gold prices, and improving
consumer sentiment buoyed by a pickup in economic activity, supported Indian gold
Jewellery demand in in Q4 of FY2020-21. Demand was 39% higher y-o-y but remained subdued
compared with previous historical levels.
OPPORTUNITIES AND THREATS
Despite the immediate uncertain future which the entire economy is facing as new lock
downs are imposed in various areas of the nation in response to rising Covid-19 cases,
consumer confidence has dipped. This is likely to impact the recovery cycle of the
industry. it is predicted there will be revival of consumer interest in gold Jewellery due
to-
• Customers preference in choosing hallmarked products over products made by
un-organized manufacturers.
• In the coming years, growth in gems and Jewellery sector would largely be
contributed by the development of large retailers/brands and the Company is expected to
benefit from this growth in organized retail.
• Strong possibility of revival of the Indian economy after a one year pause and
result in favour of discretionary spending categories.
RISKS AND CONCERNS
Currently the sales of the Company are adversely impacted due to COVID-19 and the
subsequent lockdown conditions. Though the lock down is now being relaxed gradually the
consumer sentiments and the footfalls are expected to remain muted for the coming few
months and the situation is expected to start returning to normal only in end of FY
2021-22. However, the complete FY 2021-22 is also expected to be a de-growth year for the
Company with emphasis on consolidation only.
Given the traditional nature of the category, the risks to the business are essentially
regulatory (as opposed to product substitution through technology or a sudden onslaught by
international brand/s) and gold price volatility.
Due to macro-economic forces, during times of great uncertainty, gold prices tend to
rise internationally as well as in the domestic market. Coupled with a slide in rupee
versus the dollar, this could make the base gold rate extremely high and would impact
customer demand temporarily, till people get used to the new normal. However, if
volatility continues in either direction, customers tend to defer their purchases. It is
presently unclear how the situation would evolve in the midterm.
The companys operations has also been severally hampered due to the pending open offer
approval of the promoter with SEBI from June 2014 onwards and as result the entire
promoter shareholding is locked in an escrow account as per SEBI guidelines and continues.
As a consequence, the Company has not been unable to raise any funds and with the
promoters unable to take charge of the Company the same is presently managed by a Board
consisting of a majority of Non- Executive Independent Directors.
SEBI has passed an order on June 17, 2021, allowing the Promoter to go ahead with the
open offer subject to certain conditions. This order is expected to have a positive impact
on the Company in the near future.
OUTLOOK
While impact of the second wave of Covid-19 is coming down as this report goes into
print, the future is still uncertain. As per recent estimates released by RBI, the GDP is
likely to grow at 9.5% during FY2021-22. As per estimates provided by World Bank in Global
Economic Prospects June 2021, the Indian economy is expected to grow by 8.3% in 2021.
Considering that the gold Jewellery retail industry witnessed more than 35% volume
contraction in FY2021, the pace of recovery is likely to be slow.
However, the sectors long-term outlook remains favorable supported by cultural
underpinnings, an evolving lifestyle, growing disposable income, favorable demographic
dividend, and the growing penetration of organized sector
PRODUCT-WISE PERFORMANCE
The Company is a single product entity, viz jewellery and its operations include retail
and export of jewellery. The jewellery has three subsets consisting of gold, diamonds and
others.
During the year under review there was no export of jewellery. 100% revenue from
operation was from domestic sale.
FINANCIAL PERFORMANCE
The financial statements of the Company have been prepared in accordance with the
accounting principles generally accepted in India, including the Accounting Standards
specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies
(Accounts) Rules, 2014 (as amended) and in compliance with IND-AS requirements as
applicable to the Company. The financial statements have been prepared on a going concern
basis and the accounting policies adopted in the preparation of the financial statements
are consistent with those followed in the previous year.
The highlights of the financial performance of the Company during the year are as
under:
|
|
(Rs. In Lacs) |
| Particulars |
2020-21 |
2019-20 |
| Gross Income |
143.50 |
1516.35 |
| Profit/ (Loss) before tax and Exceptional items |
(485.48) |
911.79 |
| Less: Exceptional items |
- |
- |
| Profit/ (Loss) before tax |
(485.48) |
911.79 |
| Less: Tax Expenses |
14.67 |
(13.10) |
| Profit/ Loss after tax |
(500.14) |
924.89 |
The aforementioned Profit/ Loss figures includes un-realized foreign exchange
gains/loss on the over-due export receivable as referred already in the financial
statements and notes thereon.
INTERNAL CONTROLS AND COMPLIANCE WITH LAW
The Company has designed and implemented a process driven framework for Internal
Financial Controls ("IFC") within the meaning of the explanation to Section
134(5) (e) of the Companies Act, 2013. For the year ended 31st March 2021, the
Board is of the opinion that the Company has sound IFC commensurate with the nature and
size of its business operations and operating effectively and no material weakness exists.
The Company has a process in place to continuously monitor the same and identify gaps, if
any, and implement new and/or improved controls wherever the effect of such gaps would
have a material effect on the Companys operations.
The internal auditors of the company conduct audit of various department and areas. The
Internal Audit Department reports its findings and observations to the Audit Committee
which meets to review the audit issues and to follow up implementation of corrective
actions. The statutory auditors also provide assurance on the adequacy of the internal
control systems in the Company.
During the year, the company had identified one case of misappropriation and recovered
Rs.12.06 Lakhs and the balance recoverable amount as on 31.03.2021 stands at
Rs.27.29Lakhs. The company further under its fidelity cover of Rs.5Crore had already filed
a claim with the insurance company as well as police complaint regarding the same. The
detail of misappropriation has been shared with the statutory as well as the internal
auditors of the company.
HUMAN RESOURCES
The Companys Human Resources philosophy is to establish and build a strong performance
and competency driven culture with greater sense of accountability and responsibility. The
Company has taken pragmatic steps for strengthening organizational competency through
involvement and development of employees as well as installing effective systems for
improving the productivity, equality and accountability at functional levels.
As part of its business streamlining and cost management strategies it also looks at
effective human capital management and as on 31st March 2021 had 11 employees
of which 4 were women employees.
CAUTIONARY STATEMENT
Some of the statements in this report, describing your Companys objectives and
expectations expressed in good faith, may constitute ‘forward looking statements
within the meaning of applicable laws and regulations. Actual results might differ
materially from those, in the event of changes in the assumptions/market conditions
including regulatory changes.
The Company assumes no responsibility in respect of the forward-looking statements
herein, which may undergo changes in future for reasons beyond its control.
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