Industry Structure and Developments
Diamond is the rarest and the purest piece of nature that can only be cut and polished
but not mixed or merged with something else. Also it cannot be melted and reshaped.
diamond’s biggest competitor is gold, and lately the rare gem has been scoring over
the yellow metal on this front on several count. Diamond as an investment assets is
picking up pace in India. Although the pace is slow, this rise in investor interest is
being fuelled by a combination of factors: rarity of a diamond, rapidly growing demand for
this precious gem while supply is becoming a constraint, transparency, reliable
certification, added security features and import duty differential with gold.
The Indian diamond jewelry industry operates in the field of manufacturing, importing
as well as exporting. The fact that every 9 out of 10 diamonds cut and polished in the
world hail from India. India’s diamond industry, which is estimated to grow by an
average 10 to 15 percent each year in the next five years, accounts for 70-75 percent of
total diamond exports in world and employs 850,000 people, making it the largest cutting
hub by value and number of employees.
Industry sources said the US market, which accounts for 37 per cent in the diamond
jewellery segment of the world, is forecast to gain in ‘high single digits in 2014,
while there is a good momentum in the Chinese market as well. India is also expected to
revive this year after a collapse in the Rupee, which dented the sales of diamond
jewellery in 2013.
C.Mahendra Exports has its presence in the diamond studded jewellery business. Ciemme
Jewels Ltd., a subsidiary of the company, designs and manufactures, diamond studded
jewellery which is retailed under the brand name "Ciemme" across the world.
Today, C.Mahendra Exports enjoys an envious position in the diamond industry of being
one of the top exporters with an unblemished client record.
We also wish to continuously set elixir quality of standards of excellence both
personally and professionally that alone proves to be yardstick and example to our
dedication towards objectives.
a) Diamonds
India has had a long love affair with Diamonds throughout its history. In fact the
country is the biggest consumer in the world when it comes to rough diamonds. The coloured
gemstone sector is a fast growing segment of the Indian gems and jewellery industry. India
is a leading source for a spectrum of gemstones, progressing from its traditional
concentration on emeralds and Tanzanites to now manufacturing a dazzling array of coloured
gemstones.
India, a traditional leader in diamond manufacturing, has enjoyed its low cost- high
skill advantage over the past many years. The government has continuously provided a
conducive statutory environment for the industry. Yet Indian presence in the global
jewellery industry is yet to be felt. With all its marketing talent, India is yet to
create a leading international luxury brand in diamonds, despite being manufacturer for
many other international brands. The time for Indian diamond and jewellery industry has
come to take a quantum leap in the world scenario. The opportunity is there to be grabbed
with an enabling infrastructure, reduced red tapism and high levels of technological
innovations, in addition to the traditional Indian advantages.
b) Retail Sector of the Indian gems and jewellery market
The Indian branded jewellery market is growing far more rapidly than the overall
jewellery market due to all the factors includes strong performance of the Indian economy,
rise in the number of high net worth individuals and an increasingly youthful population
with high disposable incomes. Moreover, the changing lifestyle and culture of this
section, which has a greater exposure to global fashion and tastes. Branded jewellery
products are a perfect fit for the opportunities offered by the rapid development of
modern retail formats like malls, lifestyle stores etc.
Most of the branded offerings are in the diamond jewellery segment, with only a few
plain gold and coloured stone studded brands. There are brands for different niches and
price points which range from very high end designer jewellery for special occasions to
the more affordable collections for daily wear.
India has significant reserves of gold, diamond, ruby and other gemstones. Key states
with gemstone reserves and mining potential are Maharashtra, Madhya Pradesh, Orissa,
Chattisgarh, Bihar and Andhra Pradesh. Orissa has deposits of ruby and has about 20
varieties of various gemstones such as rhodoline, garnet, aquamarine, etc. Andhra Pradesh
has gold and diamond bearing areas, as well as occurrences of semi-precious and abrasive
stones spread over different districts. Diamonds are mined only at Panna in Madhya Pradesh
by the National Mining Development Corporation.
India is world’s largest cutting and polishing centre for diamonds; the cutting
and polishing industry is well supported by government policies and the banking sector
with around 50 banks providing nearly USD 3 billion of credit to the Indian diamond
industry. It is considered to be diamond polishing and processing capital of the world as
its artisans are skilled in processing small-sized diamonds. At present, India exports 95%
of the world’s diamonds, according to statistics released by the Gems and Jewellery
Export promotion Council (GJEPC). A major portion of the rough, uncut diamonds processed
in India is exported, either in the form of polished diamonds or finished diamond
jewellery. The country is one of the largest exporters of gems and jewellery and the
industry is considered to play a vital role in the Indian economy as it is a leading
foreign exchange earner. The sector is expected to generate up to USD 35 billion of
revenue from exports by the year 2015. The countries where demand is increasing for Indian
jewellery include the UAE, the US, Russia, Singapore, Hong Kong, Latin America and China.
The sector provides employment to around 1.8 million people. In the next five years,
the sector is expected to create additional employment for around 1.1 million people.
The hub of India’s jewellery industry is Mumbai that receives the majority of the
country’s gold and rough diamond imports. Mumbai has a considerable number of modern,
semi-automatic factories and laser-cutting units, the majority of which are located in the
special economic zone. Most of the diamond processing, though, is undertaken in Gujarat,
(primarily in Surat, Bhavnagar, Ahmadabad and Bhuj) and in Rajasthan (Jaipur).
c) Export of Gems and Jewellery
Indian gems & jewellery industry saw an increase in manufacturing activities
indicated by the 33 percent growth in the export of gold jewellery contributing
significantly to India’s foreign exchange earnings and supported balance of payments.
d) Government Initiatives
The Government of India has allowed 100 per cent foreign direct investment (FDI) in
Gems and jewellery sector through the automatic route.
FDI up to 74 per cent is allowed under the automatic route for exploration and mining
of diamonds and precious stones. Further, 100 per cent FDI is allowed for exploration and
mining of gold and silver and minerals other than diamonds and precious stones, metallurgy
and processing, etc.
e) Road Ahead
The US and Japanese jewellery markets will bounce back with an estimated 5 per cent
growth while China will remain stable at 10 per cent growth, as per Mr Vipul Shah,
Chairman, GjEPC.
C Mahendra Exports Limited deals in only natural and untreated diamonds ensuring full
disclosure to the consumer. C Mahendra Exports Limited buys diamonds from sources that do
not encourage any conflict, terrorism, or illicit trade activity. Entire procurement of
diamonds is from sources that are verifiable and not engaged in any money laundering
activity. The Company has appointed a Compliance Officer to act on best effort basis to
prevent any malpractices in procuring diamonds or sales to customers.
Currently, the Indian gems and jewellery market is dominated by the unorganized sector;
however, the trend is set to change in near future due to the growing acceptance of
branded jewellery market. Segment-wise Performance
The Company has only one business segment viz. Gems and Jewellery, which is being
considered as the primary segment.
The financial information about business segment is not applicable since segment
results / revenue / assets of the wind mill business are not more than 10 percent of the
combined business results / revenue / assets.
Details of segment-wise performance included in the segmental reporting being a part of
notes on accounts as annexure of the Annual Report.
Opportunities, Threats and Outlook
The Indian diamond industry is the heart of the world diamond industry today. Indian
manufactures have helped the diamond world recover from the downturn of 2008 and give
diamond it’s true value in its four decades of existence. It is no hidden fact that
diamonds manufactured in India constitute 65% by value, 85% by volume and 92% by pieces of
the world diamond production, making the country not only the leading global manufacturer
but also one of the highest consumers of rough diamonds in the world today. We are
recently working with the government to start a unique concept called "Notified Free
Trade Zone" for rough diamonds, which will give the opportunity to the diamond mining
companies trade roughs in India at a tax friendly environment, where the concept is that
if you bring diamonds in that zone, you only pay one-time tax for the sales you do.
India is not only a leading manufacturing and export centre for gem and jewellery
products. The love that we as Indians have for gold and jewellery is known to all.
India’s consumption of Gem & Jewellery has grown rapidly over the years at the
rate of 10-15% per annum and today the domestic Indian market is estimated to be over US$
30 billion. While the country is the largest consumer of Gold globally, the demand for
Diamonds and Diamond jewellery has been growing at a rate of over 40% per annum. In fact,
in a recent study, it has been seen that India and China are now emerging as one of the
leaders in the global jewellery industry in terms of consumption, besides production and
trade.
China is attempting to corner supply of rough diamonds by pushing for direct deals with
African countries and thus posing a threat to the nation’s gems and jewellery trade,
a study released by industry body Assocham. If trends are anything to go by, Surat, which
accounts for about 95 per cent of the world’s diamond trade, may loose its crown of
‘The Diamond City’ to China, according to the study. Expressing concern over
Surat-based diamond polishing units considering to relocating, Assocham said it could
affect employment scenario there.
It also estimates that the domestic market for gems and jewellery will touch USD 35
billion to USD 40 billion by 2015. India has several strengths that have made it a
significant force in the global gems and jewellery business. These are:
• Highly skilled, yet low-cost labour.
• Established manufacturing excellence in jewellery and diamond polishing.
• India is the most technologically advanced diamond cutting centre in the world.
• Opportunity to address one of the world’s largest and fastest-growing gems
and jewellery markets.
• Opportunity to leverage India’s strengths to address the global market.
Threats
• Volatility in prices of rough gemstones.
• China posing threat to the Indian diamond industry.
• The diamond manufacturers and the artisans have thus advanced further in their
field sustaining their profits even as they glitter in various stores in India.
• Diamond exporters are feeling the heat of the US meltdown. With the demand gone
down not only in the international market, but in the domestic market as well, more orders
are being cancelled every day.
Risk Factors
Players in this industry are heavily dependent on imports and exports and are,
therefore, susceptible to exchange rate movements. Any volatility in exchange rate affects
their margins
The gems and jewellery sector is affected by the rupee/ dollar exchange rate because it
is export-oriented. Any volatility in the exchange rates affects the margins of the
players. For instance, the recent appreciation in the rupee against the dollar had made
the exports of gems and jewellery less competitive in its key export destinations. As the
gems and jewellery sector is highly dependent on imports for its raw materials, the
players have to maintain a high level of inventory. However, maintaining this inventory
becomes difficult for the players during the slack season, as it carries inventory price
risk. For instance, due to the current recessionary trends, the demand slumped and
inventory piled up much to the chagrin of the players.
Manufacturing risks could arise from the inability to maintain stable operating
environment. The company mitigates this risk by operating state- of- the- art diamond
cutting and polishing facilities and jewellery manufacturing units.
Internal control systems and their adequacy
The Company has strong internal control systems which have been found adequate by the
management of the company. The audit committee reviews the internal control system /
procedure periodically to ensure its adequacy and effectiveness.
+91-9892691696
