vaishnavi gold ltd Management discussions
VAISHNAVI GOLD LIMITED
(FORMERLY MASTER MULTI-TECH LIMITED)
ANNUAL REPORT 2009-2010
MANAGEMENT DISCUSSION AND ANALYSIS
OVERVIEW:
The financial statements have been prepared in compliance with the
requirements of the Companies Act, 1956, guidelines issued by the
Securities and Exchange Board of India (SEBI) and other statutory
requirements. Our Management accepts responsibility for the integrity and
objectivity of these financial statements, as well as for various estimates
and judgments used therein. The estimates and judgments relating to the
financial statements have been made on a prudent and reasonable basis, so
that the financial statements reflect in a true and fair manner the form
and substance of transactions and reasonably present our state of affairs,
profits and cash flows for the year.
INDUSTRY STRUCTURE AND DEVELOPMENT:
ECONOMIC OVERVIEW:
GLOBAL ECONOMIC OVERVIEW:
After a sharp, broad and synchronized global downturn in late 2008 and
early 2009, a number of countries reported positive growth in 2009-10
consequently global growth is expected to rebound from a negative territory
in 2009 to be projected 3.9% in 2010 and 4.3% in 2011. Interestingly, the
growth is expected to be 5.1% in developing countries in 2010.
INDIAN ECONOMIC OVERVIEW:
The Indian economy grew 7.4% in 2009-10, compared with 6.7% in 2008-09,
following a strong fiscal stimulus, monetary easing, imported consumer
confidence return of risk appetite and large capital inflows. The real
turnaround happened in the last quarter of 2009-10, when the economy grew
8.6% Indias gems and jewellery industry provides employment opportunities
to 1.30 mn people directly or indirectly and comprises about 450,000
goldsmiths. The combination of skill and affordable cost makes the country
unique For instance Indias wage rate is estimated at a tenth of the cost
in developed markets.
Branded jewellery is a relatively recent phenomenon, where jewellery is
sold as fashion accessories or as everyday wear. A key driver was the
introduction of certification of gold and diamonds, lifetime returns and
buy-back schemes. The branded jewellery market is expected to grow a CAGR
of 41% across 2009-2012.
Exports:
Gems and jewellery export increased 16% from USD 24.49 trillion in 2008-09
to USD 28.41 billion in 2009-10. The US and the UK accounted for 70% of
this export and accounted from 13% of Indias total merchandise exports.
Correspondingly, Indias manufacturing output grew 10.9% in 2009-10 against
2.9% in 2008-09.
GLOBAL GEMS AND JEWELLERY INDUSTRY:
The global gem and jewellery industry grew across the last decade owing to
increasing demand from emerging global economies. Plain diamond jewellery
accounted for the largest share of the global jewellery market followed by
plain gold jewellery (marked by intensive design, wide design range and a
price range that extends from affordable to exclusive). The US has been the
largest gems and jewellery customer followed by China, India, the Middle
East and Japan India and China are expected to develop as the largest
consumer markets for traditional and branded jewellery Global Jewellery
sales are expected to reach USD 230 tin by 2015 Gold jewellery exports grew
9.38% from USD 8.61 billion in 2008-09 to USD 9.42 billion in 2009-10 gold
import was 739 tonnes in 2009-10 compared with 400 tonnes in 2008-09. Since
gold jewellery accounted for 80% of the Indian jewellery market, a majority
of the imported material was used in manufacture.
GOVERNMENT INITIATIVES:
* The Indian government encouraged the sectors growth through the
following initiatives.
* Permitted 100% foreign direct investment in gems and jewellery though the
automatic route
* Reduced import duty on platinum and exempted rough colored precious gems
stones from customs duty, rough and semi-precious stones are also exempt
from import duty.
* Permitted the duty free import of consumables for metals (other than gold
and platinum) up to 2% of freight on board value of exports.
* Permitted duty free import entitlement for rejected jewellery up to 2% of
freight on board value of exports.
* Permitted the import of gold (18 carat and above) under the replenishment
scheme.
* Permitted the establishment of SEZs and gems and jewellery parks to
promoted sectoral investment.
* Abolished the import duty on polished diamonds in May 2007
INDUSTRY SWOT ANALYSIS:
STRENGTHS:
* Abundant availability of skilled cheap labor
* India Dominates the Diamond Processing trade(11 out of 12diamonds are cut
and polished)
* Gold and Diamond Jewellery is expected to account for 82% of Total Gems
and Jewellery market by 2015.
* Low cost of production
* Supporting Government industrial/EXIM Policy
* A large number of Gem and Jewellery institutions provide a regular supply
of trained man power with required skills and knowledge.
WEAKNESS:
* Low indigenous resources of rough diamonds and gold
* Low labor productivity compared with Srilanka, China and Thailand,
* Small firms lacking Technological and Export promotion expertise.
* Removal of generalized system of preference will effect gold jewellery
exports.
OPPORTUNITIES:
* Untapped reserves and Gems favourbale Government policies provide
opportunities for Foreign direct investment in Mining and avenues for
global companies to explore precious metals and stones in India.
* Established capabilities across the value chain.
* India is the attractive potential market in Gem and Jewellery sector.
* Rising disposable incomes and aspirations .
* Rising population of earning youth.
THREATS:
* Volatility in Gold prices
* Infrastructure bottlenecks
* Low Technological upgradition.
* Chain and Malaysia emerging as potent competitors
* Fragmented Industry structure with low transparency
* Emergence of Policy and cutting centers like Angola, Namibia and
Botswana.
INTERNAL CONROL SYSTEMS AND THEIR ADEQUACY:
The philosophy we have with regard to internal control systems and their
adequacy has been formulation of effective systems and their strict
implementation to ensure that assets and interests of the Company are
safeguarded; checks and balances are in place to determine the accuracy and
reliability of accounting data. The Company has a well defined organization
structure with clear functional authority, limits for approval of all
transactions. The Company has a strong reporting system, which evaluates
and forewarns the management on issues related to compliance. Company
updates its internal control system from time to time, enabling it to
monitor employee adherence to internal procedures and external regulatory
guidelines.
FINANCIAL PERFORMANCE & OUTLOOK:
In the Coming Financial Years, the Board will put its major thrust in
developing domestic Jewellery Market, with its Innovative products and
Schemes. The company will put efforts to make the best use of the Synergies
resources available consequent to Merger.
The company has recently opened its new retail Jewellery Show Room in
Kukatpally Hyderabad with a Floor area of 4500 sqfts. The Company plans to
Expand its chain of stores across India, beginning with South.
HUMAN RESOURSES:
Human wealth is the ultimate wealth in for any industry. The Company
recognizes this fact and understands that employees are one of the most
important sources for sustained growth of any business. Quality personnel
delivering their optimum potential for the organization is the key
differentiator. The Company maintained good relations with its employees
and there was no unrest in the Company at any point of time.