The gems and jewellery industry plays a vital role in the Indian economy. It
contributes about 6-7 percent of the GDP and employs over 2.5 million workers, according
to FICCI. The Government of India recently declared the gems and jewellery industry as a
focal point for exports. India is considered a global hub for low costs and inexpensive
skilled labour. Government policies support the polishing and gem cutting industry, making
it the worlds largest. During the pandemic and after, the Government has continued to
support the industry. The gold prices soared during the lockdown period and saw a rise in
sales. Gold picked up momentum in the festive season and continued to show promise. The
gradual growth in the gold market is testimony that the industry is making a steady
recovery.
Jewellery retail takes the big spot after food with a combined 72 billion dollars in
value, only to grow more than double this size in the next ten years. In 2032, modern and
traditional retail will be 50% with each segment worth 95 million dollars.
In 2022, the global demand for gold jewellery totalled 2,086 tonnes. India was the
country with the highest demand, at roughly 600 tonnes, followed by China. Together the
two countries accounted for over one half of the worlds gold jewellery demand.
The Indian e-commerce market is expected to grow to $200 billion by 2026 from US$
48.5billion as of 2018. This growth has been triggered as a result of increasing internet
and smartphone penetration. The remarkable growth of Indian e-commerce has undeniably
aided several industries.
According to a study by McKinsey and Company, the share of the online jewellery market
in Asia is set to double, from 6% to 12% by 2020. About 18% of the sales are expected to
be made online by 2025 taking its worth to about $79 billion annually.
Customers were buying a small ticket size of jewellery online. With the proliferation
of e-commerce this ticket size has increased in the last 2 - 3 years and is expected to
grow as the customers journey matures.
According to a recent report, the Indian Online Jewellery market is projected to grow
to $3.7 Billion by 2025, at a CAGR of 28%. Online retailers offer unmatchable pricing,
wider variety, trendy patterns or designs, lab certification reports of their products,
and easy payment methods (like EMI) to gain the trust of a larger indigenous audience
base. Even though the real jewellery segment involves greater consultation and larger
average transactions, both established and emerging players are helping the segment to
catch up with reliable and transparent services.
Considering the significance of e-commerce, we enable customers to browse through our
designs and enable purchase of jewellery from anywhere and anytime at their convenience.
Various savings schemes and "Thangamayil DigiGold" App for easy, convenient,
flexible and instant savings in gold encouraging saving and investment amongst the people.
ECONOMIC OVERVIEW:
Strong economic growth in the first quarter of FY 2022 23 helped India overcome the UK
to become the fifth largest economy after it recovered from repeated waves of COVID-19
pandemic shock. Real GDP in the first quarter of 2022 23 is currently about 4% higher than
its corresponding
2019-20, indicating a strong start for Indias recovery from the pandemic.
Rising employment and substantially increasing private consumption, supported by rising
consumer sentiment, will support GDP growth in the coming months.
The Union Minister for Finance & Corporate Affairs Smt Nirmala Sitharaman tabled
the Economic Survey 2022-23 in Parliament, which projects a baseline GDP growth of 6.5 per
cent in real terms in FY24. The projection is broadly comparable to the estimates provided
by multilateral agencies such as the World Bank, the IMF, and the ADB and by RBI,
domestically.
It says, growth is expected to be brisk in FY24 as a vigorous credit disbursal, and
capital investment cycle is expected to unfold in India with the strengthening of the
balance sheets of the corporate and banking sectors. Further support to economic growth
will come from the expansion of public digital platforms and path-breaking measures such
as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive
schemes to boost manufacturing output. Despite the three shocks of COVID-19,
Russian-Ukraine conflict and the Central Banks across economies led by Federal Reserve
responding with synchronized policy rate hikes to curb inflation, leading to appreciation
of US Dollar and the widening of the Current Account Deficits (CAD) in net importing
economies, agencies worldwide continue to project India as the fastest- growing major
economy at 6.5-7.0 per cent in FY23.
The Survey says, the credit growth to the Micro, Small, and Medium Enterprises (MSME)
sector has been remarkably high, over 30.6 per cent, on average during Jan-Nov 2022,
supported by the extended Emergency Credit Line
Guarantee Scheme (ECLGS) of the Union government. It adds that the recovery of MSMEs is
proceeding apace, as is evident in the amounts of Goods and Services Tax (GST) they pay,
while the Emergency Credit Line Guarantee Scheme (ECGLS) is easing their debt servicing
concerns.
The Capital Expenditure (Capex) of the central government, which increased by 63.4 per
cent in the first eight months of FY23, was another growth driver of the Indian economy in
the current year, crowding in the private Capex since the January-March quarter of 2022.
The Economic Survey FY 23 notes with optimism that Indian economy appears to have moved
on after its encounter with the pandemic, staging a full recovery in FY22 ahead of many
nations and positioning itself to ascend to the pre-pandemic growth path in FY23. Yet in
the current year, India has also faced the challenge of reining in inflation that the
European strife accentuated. Measures taken by the government and RBI, along with the
easing of global commodity prices, have finally managed to bring retail inflation below
the RBI upper tolerance target in November 2022.
The Indian jewellery business saw a 60% increase in the second quarter of this fiscal
year compared to the same period in FY20, the year the coronavirus hit the nation.
Demand decreased 2% on a YoY basis, according to rating agency ICRA.
Due to a high base, the decline was attributed to a 70% increase in jewellery demand in
India in the second quarter of FY22. After the restrictions brought on by the pandemic
were lifted, demand skyrocketed.
GOVERNMENT POLICIES AND SUPPORT:
Indias gold demand stood at 774 tonnes in 2022. In the fourth quarter of 2022 demand
for gold stood at 219.7 tonnes. The Government has permitted 100% FDI under the automatic
route in this sector. The Government has reduced custom duty on cut and polished diamond
and coloured gemstones from 7.5% to 5% and NIL. The Government has made hallmarking
mandatory for gold jewellery and artefacts thereby promoting organized retail jewellery
and thus enabling in fostering our growth.
MARKET SEGMENTATION:
In fiscal year 2020, the market size of jewellery and watches in the organized retail
sector amounted to 20.2 billion U.S. dollars in India. The market size is likely to
increase to 38 billion U.S. dollars in the fiscal year 2025. The India gems and jewellery
market is segmented based on type, distribution channel, region, and competitional
landscape. Based on type, the market is further fragmented into gold, diamond, silver,
gemstones, others (pearl, platinum, etc.). Based on the distribution channel, the market
is segmented into offline and online. The market analysis also the regional segmentation
to devise regional market segmentation, divided among north, south, west & east.
In terms of value, the market is segmented into five categories, namely necklaces,
rings, earrings, bracelets, and others. Rings emerged as the largest segment in 2022, with
a market share of 33.7%. This segment is likely to retain its pole position throughout the
forecast period to claim a market share of 34.5% by 2030.
CHALLENGES IN MARKET POSITIONING:
India is one of the first countries to make the finest jewellery from minerals and
metals, and even today, most of the jewellery made in India are handmade and
hand-polished. The industry is dominated by family jewellers who constitute nearly 96% of
the market. Due to stiff competition in the retail trade, there is a possibility that our
market share from a particular place of operation or region may decline.
A lot of new entrants to the retail trade suffer from lack of knowledge of customers
preference and on quality parameters and price war. Therefore, your company with its
fuller penetration to rural market is well placed to participate in the rural success
story of the country. In order to maintain/improve market share in the areas we operate in
the light of sagging regressive demand trends, we have cautiously brought down the mark up
value for our products moderately and also improved customer service through online and
offline mode. Providing product knowledge, the customers to buy a quality product in the
market.
MONSOON:
India will likely see below-normal monsoon rain this year, according to a private
forecaster, a prospect that could hurt its vast agriculture sector and stoke inflation in
Asias third-biggest economy. The coming season may bring only 94% of the rain India
usually gets from June to September as per Skymet predictions.
Monsoon failure has the potential to adversely affect the companys business and
earnings particularly in south Tamil Nadu, where agricultural activities are dependent on
monsoon. Rising inflation and high interest rates are other areas of concern that would
deplete the residual income of the people to be spent on discretionary items like gold
ornaments.
CHANGE IN LIFESTYLE:
The global jewellery market size was valued at USD 340.69 billion in 2022 and is
expected to expand at a compound annual growth rate (CAGR) of 4.6% from 2023 to 2030.
Increasing disposable income and innovative jewellery designs offered by manufacturers
are expected to drive product demand. Changing lifestyles and perceptions of jewellery as
a status symbol are expected to boost growth. COVID-19 has had a positive effect on
jewellery sales, with 30% of consumers in a recent poll reporting they purchased more
jewellery during the pandemic, according to a study from the supplier group the Plumb
Club. The increasing acceptance of jewellery among men is also propelling the market.
Products such as cufflinks, plain gold chains, tie bars, cartography necklaces, and signet
rings are some of the products commonly in demand among men. The change in peoples taste
and preferences are ascertained through various sources and accordingly change in our
product mix were done by well equipped team.
Economic risk
Economic slowdown can affect the demand and the sales for the company.
Mitigation: The Company has a diversified product portfolio that generates robust sales
from either of the category to balance any uncertain circumstances. The present Indian
economy is quite strong as commodity prices have been stable. Since jewellery industry is
always associated with wedding and other traditional occasions and demand for jewellery
remain constant.
Competition risk
Increasing competition from new entrants as well as existing ones.
Mitigation: The Company manufactures quality products and better services and offers
that at a reasonable price to reach people through communications via different media It
undertakes extensive promotion and advertising to create value , positioning and recall
for the power brands.
Margin risk
Lack of control over the cost, may lead to lower profitability and can impact future
growth prospects.
The centralised procurement policy, by which our team anticipates stock requirement and
make bulk purchases at the time when gold price is low. The economies of scale and correct
procurement timing enable the company to significantly reduce the cost of the raw
material. The company procures a certain quantum of gold on lease from banks and purchases
gold on daily basis on the actual sale made by it. This strategy safeguards the company
from gold price fluctuation.
Gold price fluctuation risks
Gold price fluctuation risk could arise on account of frequent changes in gold prices
either up or downside momentum. It could have adverse impact on earnings. We are
maintaining our inventory price hedging around 76:24 basis. This will help the company
with any gold price fluctuation. Your Board will take appropriate action in managing the
fluctuation impact in gold price movement from time to time to increase to 75:25basis.
Change in Government Policies
New government regulations pertaining to taxation and banking stringent norms will
affect the demand and supply chain.
Your company with help of well-experienced IT and managerial personnel, the
implications of all these regulations are clearly analysed, interpreted and necessary
compliance measures are undertaken.
Human Resources
Employee attrition may affect the operation of the Company.
Mitigation: The Company encourages new talent and provides specialised training to the
sales force to ensure the roots are grounded well, improving the performance standards,
improving incentive scheme to the employees and positively contribute towards growth of
the company.
Seasonal Risk:
Sluggish sales of products due to seasonal changes may affect profitability of the
Company. Mitigation: The wide ranged designed product profile and customer needs product
will help against the seasonal ups and downs.
Compliance risk
Non-compliance of regulations may raise the operation risk for the Company. Mitigation:
The Company has a structured internal control system in place to ensure all statutory
rules and regulations are met including changes in taxation and other regulatory
framework.
Cost management:
The Company is improving meticulously its focus on cost through a resourceful operating
system, increase in the production Capacity and strengthening of manufacturing units and
various sourcing points are being pursued to reduce manufacturing costs and also
delivering quality product at lower price. Logistics facilities are strengthened. Synergy
optimization in various cost components is achieved.
Internal control systems and their adequacy
The Company has in place adequate system of internal control. It has documented
procedures covering all financial and operating functions. These controls have been
designed to provide a reasonable assurance with regard to maintaining of proper accounting
controls, monitoring of operations, protecting assets from unauthorized use or losses,
compliances with regulations and for ensuring reliability of financial reporting. The
Company has continued its efforts to align all its processes and controls with global best
practices in these areas as well.
Some significant features of the internal control systems are:
• Documenting Major Business Process including financial reporting, Computer
Controlling, Security Checks and Top Committee level Plans
• A comprehensive information security policy and continuous upgrades to IT system
• Audit Committee of the Board of Directors, comprising independent directors,
which is functional since October 2007, regularly reviews the audit plans, significant
audit findings, adequacy of internal controls, compliance with Accounting Standards, as
well as, reasons for changes in accounting policies and practices, if any.
• A well established multi-disciplinary Internal Audit team, which reviews and
reports to management and the Audit Committee about the compliance with internal controls
and the efficiency and effectiveness of operations the key process risks
• Monthly meeting of the top management committee to review operations and plans
in key business areas
• Corporate policies on accounting and major processes.
• Well-defined processes for formulating and reviewing annual and long term
business plans.
• Preparation and monitoring of annual budgets for all trading activities.
• Having introduced and continually upgraded, improved and fine tuned state of the
art Enterprise Resource Planning (ERP) since August 2008, supplier Relations Management
and Customer Relations Management, to connect its different locations, dealers and
vendors.
Anti-fraud programme.
The Board takes responsibility for the total process of risk management in the
organization. The Audit Committee reviews reports covering operational, financial and
other business risk areas. Taking into Consideration the high risk associated with this
business, the organization and management have taken necessary measures towards achieving
an environment free of fraud. This is also facilitated by internal audit. The business
risks are managed through cross functional involvement and intense communication across
businesses. Results of the risk assessment and residual risks are presented to the senior
management.
INFORMATION TECHNOLOGY
Thangamayil Jewellery Limited has a jewellery retail based information technology savvy
department deploying the best retail solutions in the market to enhance, develop, support
and maintain our retail business activity across all our showrooms Thangamayil has
developed an information technology team to test and maintain our own solutions across the
showrooms. As a base platform for our ERP we used SAP Business One solution across the
showrooms. End to end application to meet the requirements of Jewellery retail business
needs, right from purchase of ornament to sale of it, customer management and inventory
handling.
Thangamayil jewellery E-commerce is a first of its kind in online jewellery retail
segment with an in-store experience of selling 22kt gold ornaments, silver articles,
diamond and platinum jewels. The in-store experience to a customer is to view more variety
ornaments on every online visit (not a confined catalogue) with the store price. The
ornaments are real photographed pictures with exact product details and real time priced
based on the market rate of gold and silver. and
HUMAN RESOURCES & INDUSTRIAL RELATIONS
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.
With the changing and turbulent business scenario, the Companys basic focus is to
upgrade the skill and knowledge level of the existing human assets to the required level
by providing appropriate leadership at all levels motivating them to face the hard facts
of business, inculcating the attitude for speed of action and taking responsibilities. In
order to keep the employees skill, knowledge and business facilities updated, ongoing in
house and external training is provided to the employees at all levels. The effort to
rationalize and streamline the work force is a continuous process. The industrial
relations scenario remained harmonious throughout the year. Note: Forward looking
statements embedded in the Management Discussion and Analysis above is based on certain
assumptions and expectations of future events.
The Company cannot guarantee that these assumptions and expectations are accurate or
will be realized. The Companys actual results, performance or achievements could thus
differ materially from those projected in any such forward looking statements. The Company
assumes no responsibility to publicly amend, modify or revise any forward looking
statements, on the basis of any subsequent developments, information or events.
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