Amrapali Industries Ltd Management Discussions.



The gems and jewellery sector plays a significant role in the Indian economy, contributing around 7 per cent to countrys GDP and 15 per cent to Indias total merchandise export. It employs over 4.64 million people, which is expected to reach 8.23 million by 2022. One of the fastest growing sectors, it is extremely export oriented and labour intensive.

Based on its potential for growth and value addition, the Government declared gems and jewellery sector as a focus area for export promotion. The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote RsBrand IndiaRs 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. 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 per cent of the worlds polished diamonds as per statistics from the Gem and Jewellery Export Promotion Council (GJEPC). Indias Gems and Jewellery sector has been contributing in a big way to the countryRss foreign exchange earnings (FEEs). Government has viewed this sector as a thrust area for export promotion. The Indian Government presently allows 100 per cent Foreign Direct Investment (FDI) in the sector through the automatic route. The sector employs over 4.64 million employees, which is expected to touch 8.23 million by 2022.

Market size

Indias gems and jewellery sector is one of the largest in the world, contributing 29 per cent to the global jewellery consumption. The sector is home to more than 300,000 gems and jewellery players. Its market size will grow by US$ 103.06 billion during 2019-2023.

Indias demand for gold reached 690.4 tonnes in 2019. Indias gems and jewellery export stood at US$ 29.01 billion in FY20P. During the same period, India exported US$ 18.66 billion worth of cut and polished diamonds, thereby contributing 64 per cent of the total gems and jewellery export.

Indias import of gems and jewellery stood at US$ 24.01 billion in FY20P.

India 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 contributes a major chunk to countryRss foreign reserves. The Goods and Services Tax (GST) will steer Indias gold demand going forward.


The gems and jewellery sector is witnessing changes in consumer preferences due to adoption of western lifestyle. Consumers are demanding new designs and varieties in jewellery, and branded jewellers have managed to fulfil their changing demands better than the unorganised players. Moreover, increase in per capita income has led to an increase in sales of jewellery as jewellery is a status symbol in India.

The cumulative Foreign Direct Investment (FDI) inflow in diamond and gold ornaments in the period April 2000 - March 2020 was US$ 1.17 billion according to Department for Promotion of Industry and Internal Trade (DPIIT).

Some of the key investments in this industry are listed below:

* In April 2020, majority of the players in the Indian market like Malabar Gold, Tanishq, and Joyalukkas offered jewellery online for Akshay Tritiya.

* Companies such as PC Jewellers, PNG Jewellers and Popley and Sons are planning to introduce a virtual-reality (VR) experience for their customers. The customer will have to wear a vR headset, through which they can select any jewellery, see it from different angles and zoom it to view intricate designs.

Government Initiatives

* Indian Government made hallmarking mandatory for Gold Jewellery and Artefacts. A period of one year is provided for implementation i.e. till January 2021.

* As per Union Budget 2019-20, the GST rate was reduced from 18 per cent to 5 per cent (*5 per cent without Input Tax Credit (ITC)) for services by way of job work in relation to gems and jewellery, leather goods, textiles etc.

* The Bureau of Indian Standards (BIS) has revised the standard on gold hallmarking in India from January 2018. The gold jewellery hallmark will now carry a BIS mark, purity in carat and fitness as well as the unitRss identification and the jewellers identification mark. The move is aimed at ensuring a quality check on gold jewellery.

* The Gem and Jewellery Export Promotion Council (GJEPC) signed a memorandum of understanding (MoU) with Maharashtra Industrial Development Corporation (MIDC) to build Indias largest jewellery park in at Ghansoli in Navi-Mumbai on 25 acres land with a capacity to have more than 5000 jewellery units of various sizes ranging from 500-10,000 square feet. The overall investment will be of Rs 13,500 crore (US$ 2.09 billion).

* Gold Monetisation Scheme enables individuals, trusts and mutual funds to deposit gold with banks and earn interest on the same in return.


Conversion rate used in April 2020, Rs 1 = US$ 0.013123.


The jewellery sector in the country continues to remain poised for growth on account of its demographics as well as increasing urbanisation and income levels. The demand for jewellery is also expanding beyond the traditional marriage functions to a life style and fashion accessory as well. However, at the same time the traditional demand for jewellery continues to remain strong. The sector is witnessing changes in customer preferences due to adoption of western lifestyle and their demand for new designs and varieties in jewellery. Further, rising quality awareness of customers has also provided a fillip to the organized retail segment, which is banking on its reliability and quality to compete against the highly fragmented unorganized jewellers.

The Indian middle class is expected to rise to 547 million by 2025 and this rise of young Indian middle class is expected to lead to an increase in demand for gold. There is a huge opportunity in the online sale of jewellery. Although, this channel generally caters to low ticket items only, but as a consequence of disruptions caused by the ongoing pandemic COVID-19 scare, this channel is expected to gain traction and gain popularity with the customers for even higher category jewellery.

Rising global uncertainties in the recent months have led to investors resorting to gold and silver as their preferred asset class for investment. Due to this, prices of such precious metals peaked during the year. On an average, international (monthly) gold prices surged 16% YoY in FY20. The falling interest rate also helped grow investors preference towards gold and silver.

Challenges for the sector have graved after the outbreak of COVID-19 in China which has taken a shape of pandemic and caused stalled manufacturing and trading activities, cancellation of business events, deferment of committed order positions, reduced demand, elongation of receivables etc. in the sector.

The Company does not perceive any major or predictable threats except that the retail jewellery is already a working capital intensive business and the demand for jewellery is now increasing beyond the traditional wedding jewellery. This increase in demand requires additional investment in inventory. Also though the diamond jewellery has higher margins it also has a much longer cash conversion cycle vis-a-vis gold and all of these factors have only increased the working capital intensity of the jewellery business.


In regard to resource allocation and assessment of segment performance focuses, there is mainly one segment and the performance of the Company has been provided in "Discussion on Financial Performance with respect to Operational Performance".


The World Gold Council (WGC) sees gold becoming a strong financial asset in India once the Centre rolls out its proposed comprehensive gold policy this year.

According to the new policy, banks will be allowed to do Bullion Banking (take risk in bullion) and new infrastructure such as spot exchanges would be a reality, ushering in transparency and thereby benefiting consumers and small jewellers in particular, PR Somasundaram, Managing Director-India, WGC, told Business Line here.

Bullion banking will enable consumers to do bullion-related transactions with banks with ease. Spot exchange will solve for liquidity in the market.

It may be recalled that a draft policy for promotion of gold as a financial asset has already been circulated to relevant Ministries for comments, and a proposal to set up a gold exchange is under consideration by the government.

Against the background of the ongoing Covid-19 pandemic and increased economic uncertainty, gold has become a go-to asset for many investors looking to diversify and hedge their portfolios. Over the past few months, gains in silver prices have lagged those of its yellow peer. While gold has soared by almost 18 per cent year-to-date, the white metal has inched higher by a shy 3 per cent. Nonetheless, with the market remaining firmly bullish, many believe that silver is well positioned to eventually surge to fresh highs. The metal had a somewhat good time in 2019, with its price surging more than 15 per cent and many analysts predicting it to have a great year ahead. According to the silver price trend chart, in September 2019, its value reached highs of $19.50 per ounce and ended the year at $18 per ounce.

In 2020, however, financial markets were turned upside down. At the beginning of the year, silver saw its price skyrocketing amid the reports of a US airstrike killing a top Iranian general and Iranian missile attacks on US military bases in Iraq. As frightened investors ran to safe-haven assets, the metal hiked past the $18.83 mark for the first time in almost four months. But once the tensions between the nations de-escalated, the commodity dropped to its previous lows of $17.81.

Shortly after, the pandemic hit the world, influencing not only the performance of silver but all global markets. Silver prices quickly shed 38 per cent to hit an 11 -year low in March as the start of Covid-19 lockdowns saw investors quitting their positions in favour of cash.

Gold had a remarkable performance in the first half of 2020, increasing by 16.8% in US-dollar terms and significantly outperforming all other major asset classes. By the end of June, the LBMA Gold Price PM was trading close to US$1,770/oz, a level not seen since 2012, and gold prices were reaching record or near-record highs in all other major currencies.

Though equity markets around the world rebounded sharply from their Q1 lows, the high level of uncertainty surrounding the COVID- 19 pandemic and the ultra-low interest rate environment supported strong flight-to-quality flows. Like money market and high-quality bond funds, gold benefited from investors need to reduce risk, with the recognition of gold as a hedge further underscored by the record inflows seen in gold-backed ETFs.


As regards to banks their role in supplying to domestic market has already diminished significantly, from 45 per cent of the total supplies for domestic trade in 2017 calendar year, their share in 2018 was only 35 per cent. In volume terms year-on-year it had declined by 40 per cent to 178 tonnes.

The gold metal loan given by banks may also be under threat if refiners start providing a similar product which is known as "unfixed deferred sales" for 90 days at a premium lower than what banks provide. Such competitive pricing is good but at what cost? And who will regulate their functioning? RBI powers are limited currently only to an extent of payment mechanisms post import. Overtime with mushrooming refiners and poor due diligence in sourcing, banks lost at both ends- one banks losing comfort to onboard a refiner as the client and secondly not able to source from domestic market, eventually banks closed their operation in the country. Although late, the authorities became more cognizant of the situation and started taking corrective measures following which we are again noticing international banks willing to resume business with the country.


It is time the contours for operation of the refiners in India is better defined, and the sourcing guidelines are made mandatory in line with OECDs five-step framework at least by creating a guideline that fits Indian refinery, their financing and remittances models need to be reviewed by the RBI as only two out of the sixteen countries from where refiners import are FATF member countries and more importantly avoid a situation where a shutdown of one refiner can create a potential supply squeeze in the market. When one entity controls 25 to 30 per cent of the refining market locally, systemic risks will increase.


Equipping the Company with an engaged and productive workforce is essential to our success. We look for commitment, skills and innovative approach in people. In assessing capability, we consider technical skills and knowledge that have been acquired through experience and practice, along with mental processing ability, social process skills and their application.

We continue to invest in developing a pipeline of future talent and nurture them. As part of this process, we provide development and training opportunities to our workforce, which motivates and encourages them to grow in their work.

As on March 31, 2020, the Company had 27 permanent employees. The Company has been maintaining cordial and healthy Industrial Relations, which has helped to a great extent in achieving the upper growth.


Financial Results:

(Amount Rs in Lakh)

Particulars F.Y. 2019-20 F.Y. 2018-19
Revenue from operations 1,328,341.76 1,408,114.72
Other Income 532.43 1,207.04
Total Income 1,328,874.19 1,409,321.76
Operating expenditure before Finance cost, depreciation and amortization 1,328,146.12 1,408,865.10
Earnings before Finance cost, depreciation and amortization (EBITDA) 728.07 456.66
Less: Finance costs 487.27 304.79
Less: Depreciation and amortization expense 176.79 191.01
Profit/(Loss) before tax 64.00 (39.14)
Less: Tax expense 18.19 (32.56)
Profit/(Loss) for the year (PAT) 45.81 (6.59)

The revenue from operations decreased to Rs 1,328,341.76 lakh as against Rs 1,408,114.72 Lakh in the previous Year. The revenue from operation was decreased by 5.67% over the previous year. The reduction in trading of the Gold and shares led the Company to achieve lesser revenue. However, with the reduction in other expenses, the Company manages to achieve profit during the financial year 201920.

The profit before Tax for the current year is Rs 64.00 lakh as against the loss before tax of Rs 39.14 lakh in the previous year resulted into profit after tax of Rs 45.81 Lakh compared to loss after tax of previous year Rs 6.59 Lakh.


Though the various risks associated with the business cannot be eliminated completely, all efforts are made to minimize the impact of such risks on the operations of the Company. Necessary internal control systems are also put in place by the Company on various activities across the board to ensure that business operations are directed towards attaining the stated organizational objectives with optimum utilization of the resources. Apart from these internal control procedures, a well-defined and established system of internal audit is in operation to independently review and strengthen these control measures, which is carried out by a reputed firm of Chartered Accountants. The audit is based on an internal audit plan, which is reviewed each year in consultation with the statutory auditor of the Company and the audit committee. The conduct of internal audit is oriented towards the review of internal controls and risks in its operations.

M/s. D G M S & CO., Chartered Accountants (FRN: 0112187W), the statutory auditors of the Company has audited the financial statements included in this annual report and has issued an report annexed as an Annexure B of the Audit Report of the Company on our internal control over financial reporting (as defined in section 143 of Companies Act, 2013).

The audit committee reviews reports submitted by the management and audit reports submitted by internal auditors and statutory auditor. Suggestions for improvement are considered and the audit committee follows up on corrective action. The audit committee also meets the statutory auditors of the Company to ascertain, inter alia, their views on the adequacy of internal control systems and keeps the board of directors informed of its major- observations periodically. Based on its evaluation (as defined in section 177 of Companies Act 2013), our audit committee has concluded that, as of March 31, 2020, our internal financial controls were adequate and operating effectively.


Particulars F.Y. 2019-20 F.Y. 2018-19 Reason
Debtors Turnover 968.89 times 1637.75 times Debtor Turnover Ratio is reduced due to increase in credit sale of the Company.
Inventory Turnover 535.58 times 7425.22 times Inventory Turnover is increased due to increase in Inventory.
Interest Coverage Ratio 1.13 0.87 Increased due to profit compared to loss for previous financial year.
Current Ratio 0.49 : 1.00 0.57 : 1.00 Reduced due to increase in Trade Payables.
Debt Equity Ratio 5.10 : 1.00 0.09 : 1.00 Increased due to increase in financial liabilities.
Operating Profit Margin (%) 0.06% 0.01% Reduction in Operating Expenses resulted in to increase in operating profit margin.
Net Profit Margin (%) 0.00% (0.00%) --


This report contains statements that may be "forward looking" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Company future business developments and economic performance. While these forward looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macroeconomic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Company undertakes no obligation to publicly revise any forward looking statements to reflect future/likely events or circumstances.