World Economy;
According to the International Monetary Fund (IMF), the global economy is estimated to
have grown at 3.4% in CY22. Global economic growth is expected to moderate further to 2.8%
in CY23 before slightly rebounding to 3.0% in CY24. Advanced economies witnessed
multi-decade high inflation due to continued supply chain constraints and elevated energy
and commodity prices. Emerging markets and developing economies, too, faced inflation.
As the global economy prepared to leave the pandemic behind, the Russia-Ukraine
conflict delayed the normalisation of supply chains. At the same time, China adopted a
stringent zero-COVID policy for most of CY22. Central banks across major economies,
spearheaded by the US Federal Reserve, responded with synchronised rate hikes to tame
inflation. The weakness of the Chinese economy also weighed on global growth. However,
during the second half of the CY22, the economic growth rebounded, banking on crucial
factors such as easing inflation, robust labour markets, solid household consumption and
business investments. Moreover, China reopened in November 2022, adding to the upward
shift in global activity.
Despite central banks raising interest rates and declining food and energy prices,
underlying price pressures remain stubborn, particularly due to tight labour markets in
several economies. The rapid increase in policy rates have led to visible side effects,
including highlighted vulnerabilities in the banking sector and growing concerns of
contagion across the broader financial industry, including non-banking financial
institutions. Despite declining headline inflation, core inflation has yet to reach its
peak. Owing to ongoing inflationary pressures, interest rates are expected to remain
elevated. (Source: IMF - World Economic Outlook, April 2023)
Indian Economy:
The year 2022 was memorable for India as the nation celebrated its 75th year of
independence while claiming its place as the worlds fifth-largest economy, boasting a
nominal GDP of $3.5 trillion. According to CSO estimates, the Indian economy grew by 7.2%,
the fastest among major economies, driven by strong domestic private consumption,
government expenditure on infrastructure and a favourable investment climate. Although
India, too, faced high inflation, the Reserve Bank of India undertook a series of policy
rate hikes to bring it down within its comfort range. Despite the challenges of higher oil
prices leading to increased import bills and trade deficits, concerns about the current
account deficit and its financing has eased over time.
Indias economy has displayed remarkable resilience amidst global challenges,
positioning itself as the frontrunner in growth among major economies. The latest economic
survey anticipates a substantial GDP growth rate of 6.5% in FY24, further consolidating
Indias impressive growth trajectory. (Source: Economic Survey of India, 2022-2023)
Gems and Jewellery Industry review:
Gems and Jewellery comprises of the following sub-sectors:
• Diamonds
• Gemstones
• Pearl
• Gold, Silver and Platinum Jewellery
The Gems and Jewellery sector plays a significant role in the Indian economy,
contributing around 7.5% of the countrys GDP and about 14% to Indias total merchandise
exports, accounting for the third largest commodity share. The gem and jewellery sector
employ over 5 million people.
From April-March 2023, Indias gems and jewellery exports were at US$ 37.46 billion
according to figures released by the Gem & Jewellery Export Council (GJEPC). Indias
gems & jewellery exports are expected to reach US$ 100 billion by 2027. From
April-March 2023, Indias diamond exports were at US$ 22.04 billion.
The Government of India, along with all the stakeholders of gems and jewellery sector,
is well committed towards aggressively promoting exports, identifying challenges and
addressing them with necessary interventions, assisting exporters, especially SME units,
and exploring new markets while consolidating existing ones. With strong growth prospects,
the government of India has also declared the gems & jewellery sector as a focus area
for export promotion. The Government has recently undertaken 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
of its low costs and availability of high-skilled labour.
Indian exports of gems & jewellery comprises various items such as cut and polished
diamonds, silver and gold jewellery, gold medallions and coins, rough diamonds, coloured
gemstones and others.
Western Region is key exporting hub for the gems and jewellery industry contributing
almost 77% of the total exports in 2021-22. Surat, a city of Gujarat state in the western
region of India has more than 450 organised jewellery manufacturers, importers &
exporters, making it the jewellery manufacturing hub of the world.
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 75% of the worlds polished 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% Foreign Direct Investment (FDI) in the sector
through the automatic route.
Cut & Polished Diamonds is the largest exported commodity within gem and jewellery
sector with exports valued at US$ 25.04 billion for in F.Y 23.
The Government has reduced custom duty on cut and polished diamond and colored
gemstones from 7.5% to 5% and duty on the simply sawn diamond was reduced to nil.
Industry Trend - Diamond Jewellery:
• Increasing demand for precious gem stones: Changing preferences of young
people from gold to coloured gemstone, platinum and palladium jewellery.
• Multiple occasions for purchase: Women are buying diamond jewellery for
occasions other than marriage.
• Focus on technology: Emergence of new manufacturing techniques.
• Changing demographics impacting demand: Bridal diamond jewellery is the
foundation of industry, but product popular with millennial is helping to spur growth.
• Growth of lab created diamonds: Also known as synthetic diamonds, artificial
diamonds, cultivated diamonds or cultured diamonds.
• Focus on Quality: Introduction of cumulative FDI (in $) in diamond and gold
ornaments stricter quality norms and hallmarking.
Opportunities and Threats:
(a) Opportunities/Strength
• Induction of widely experienced and specialized personnel on the Board.
• Good combination of technical as well as advisory personnel in the management.
• More and more benefits and exemptions are likely to come in the way of exports
and Special Economic Zones and the Company, having commendable exports and being situated
in SEZ, is likely to receive the advantage of the same.
• Some of the world retail majors have decided sometime back to source part of
their requirements from India. This shall further the growth of the Diamond industry in
India.
(b) Threats
• Fast-changing Fashion Trends
Jewellery being a vital fashion and lifestyle statement, demands the players to be more
agile, and responsive to the constantly evolving trends and consumer preferences.
• Regulatory Framework
Changes in regulation and stringent compliance may cause temporary blip in sales during
the transition period. Macro economic factors such as Rupee fluctuations, enactment of new
laws such as GST, KYC norms and quality consciousness amongst export markets.
• Liquidity Crisis
The industry is highly capital intensive in nature with long working capital cycles,
owing to the long conversion cycle from procurement of rough diamonds to sale of polished
stock. It is required to maintain high levels of inventory at all points in time to
service its clients orders in a timely manner Strength of the balance sheet and access to
easy credit is often required to facilitate and sustain ease in operations.
Risks and Concerns:
• The largely unorganized structure of the market can affect the systematic
functioning of the Company.
• Political instability, which has at tremendous impact on the capital markets.
• Likely opening up of the economy, which can be a double-edge sword.
• The Diamond market in India is heavily influenced by the US Markets.
• The major income component of the Company being exports, changes in economies or
government policies of the countries to which the Company is exporting may also affect the
operations of the Company.
• Increasing competition among the Indian Exporters in this industry.
Company Overview:
The Company is a part of an Industry, which largely operates through unorganized
constituents. However, unlike the industry, the Company has attempted to operate through
as systematic and organized manner as possible. However, since Diamonds and Jewellery is
one industry, in which India holds, commendable position in the world, akin to the
software industry, one can look forward to more international involvement coming up in
this industry.
With a combination of skilled craftsmen, world-class manufacturing facility and
technology and strong focus on innovation, the Company manufactures unique and high
quality products meeting highest quality standards.
The Company leverages its strong team of creative designers and skilled craftsmanship
along with the modern research and computer-aided design to deliver products matching the
latest trends and consumer preferences. The Company invests in training designers, mapping
international trends and evolving global styles. Company also sources designs from
international market where required to compliment its own collection. This ensures
designers are well informed about world trends, and local tastes and preferences before
introducing new styles and continue to launch new collection ahead of the market trends,
year-on-year.
Highlights of Performance:
The Company has done reasonable in the current year and expects to achieve a really
good percentage of market share in the Diamond manufacturing and Jewellery marketing
fields. The outlook for the Company can therefore be termed as optimistic and expects
higher growth then inflation and average growth in the industry.
• In 2022-23, Net Sale of Rs. 5,47,498.88 lakhs, decline by 12.50% from
Rs.6,25,743.47lakhs in 2021-22.
• In 2022-23, EBITDA (before exceptional items) of Rs. 2,945.86 lakhs, decline by
19.50% from Rs. 3,659.27 lakhs in 2021-22.
• In 2022-23, Profit before tax at Rs.2,603.92 lakhs, decline of 25.63 % from Rs.
3,501.47 lakhs 2021-22.
• In 2022-23, Net Profit after Tax recorded at Rs. 2,006.58 lakhs against Rs.
2,907.68 lakhs in 2021-22.
• In 2022-23, EPS recorded at Rs. 15.87 per share against EPS Rs.23.00 per share
in 2021-22.
• In 2022-23 Export of Rs. 4,06,965.62 lakhs against export revenue recorded of
Rs. 4,83,997.04 lakhs in the 2021-22.
Changes in Key Financial Ratios:
Pursuant to provisions of Regulation34 (3) of SEBI (LODR) Regulation, 2015 read with
Schedule V part B(1) details of changes in Key Financial Ratios are provided in note 34 of
financial Statements.
Audit and Internal Control System:
Sagar Diamonds has well-established processes and clearly-defined roles and
responsibilities for people at various levels. This, coupled with adequate internal
information systems embedded in business automation software, ensures proper information
flow for the decision-making process. An internal audit conducted by an independent firm,
reviews by the Audit Committee, and requisite guidelines and procedures augment the
internal controls. The internal control system is designed to ensure that financial and
other records are reliable for preparing financial statements and other information. These
procedures ensure that all transactions are properly reported and classified in the
financial records.
Human Resources & Industrial Relation:
The company considers human resources as one of the vital and important factors for
sustained growth. The human resources strategy is to attract talent in the industry,
develop and upgrade their skill and competence on the job and ensure employee satisfaction
through reward, appreciation and development of environment based on culture and values
nurtured by the Group over the years. The industrial relations within the Company have
remained harmonious throughout the year.
Cautionary Statement:
The statements in the "Management Discussion and Analysis Report" section
describes the company objectives, projections, estimates, expectations and predictions,
which may be "forward looking statements" within the meaning of the applicable
laws and regulations. The annual results can differ materially from those expressed or
implied, depending upon the economic and climatic conditions, Government policies and
other incidental factors.
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