Gautam Gems Ltd Management Discussions

OVERVIEW

This Management Discussion and Analysis (MD&A) Report presents the Managements perspective on the external environment and the gems and jewellery industry, along with the Companys strategic direction, operational and financial performance, key developments in human resources and industrial relations, risks and opportunities, and the adequacy of internal control systems during the financial year 2024-25.

The report is intended to provide a comprehensive understanding of the factors influencing the Companys business and its responses to the evolving market and regulatory landscape. It should be read in conjunction with the Companys audited financial statements, accompanying notes and other disclosures presented in the Integrated Annual Report for FY 2024-25.

The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS), in compliance with the applicable provisions of the Companies Act, 2013, as amended, and the rules and regulations prescribed by the Securities and Exchange Board of India (SEBI).

External Environment

Global Economic Landscape H

The global economic environment in FY 2024—25 continued to face considerable uncertainty, shaped by the interplay of macroeconomic normalization, geopolitical

developments and evolving trade dynamics. While several advanced economies began transitioning from tight monetary policies towards a more accommodative stance, persistent inflationary pressures and uneven recovery across regions continued to influence consumer sentiment and international trade

Global GDP growth during the year

was moderate, with estimates hovering around 2.8%. Advanced economies, particularly the United States and Eurozone countries, experienced slowed growth due to elevated interest rates for most of the year, labour market rigidities, and inflation in the services sector. The United Kingdom remained on a modest recovery trajectory, aided by improving consumer confidence and fiscal support. In contrast, emerging markets showed relatively stronger momentum, though this was tempered by currency volatility and external demand softness.

In China, a key market and trading partner in the global gems and jewellery value chain, growth stabilized but remained below pre-pandemic trends. Challenges in its property sector, weak domestic consumption, and global trade tensions continued to weigh on its recovery. These factors have had an indirect impact on the jewellery sector, influencing global demand for raw materials such as diamonds, gold, and coloured gemstones.

Amidst these macroeconomic trends, global trade volumes remained constrained, primarily due to increased protectionist policies, slower inventory cycles and supply chain realignments. For the luxury goods segment, which includes gems and jewellery, the recovery was regionally mixed—strong in some high-income markets, and sluggish in others, particularly where inflation eroded discretionary spending power.

Commodity price movements also played a significant role. Gold prices remained elevated for most of the year, driven by central bank buying, investor demand for safe-haven assets and geopolitical instability. While this supported the value of gold jewellery, it also increased input costs for manufacturers. Similarly, diamond prices saw corrections due to oversupply in certain grades, subdued retail demand, and rising consumer preference for lab-grown alternatives in specific markets.

INDIAN ECONOMY

India is one of the fastest-growing major economy. It demonstrated a growth rate of 6.5% in FY2024-25. Despite global headwinds, Indias growth is expected to remain rangebound, 6% - 6.5%, in the next couple of years. The economy is expected to be driven by strong domestic

consumption, government capital expenditure and robust expansion in the services and manufacturing sectors.

Inflation is projected to moderate and be rangebound, 4.0-4.5% in the near term, supported by favorable food price trends. Core inflation across goods and services has remained stable, while fuel prices have declined. The moderation in inflation has enabled the Reserve Bank of India to adopt a more accommodative stance, with interest rate cuts anticipated to stimulate consumer spending and credit growth. Foreign Portfolio Investment volatility is expected to subside, while softening crude oil prices will likely support exchange rate stability.

On the sectoral front, the services sector has demonstrated resilience, with financial services, real estate, professional services, public administration, and defense driving growth. Exports in the services sector have also recorded strong performance. Construction activities and utilityservices have supported industrial growth, while high value- added manufacturing exports—particularly in electronics, semiconductors and pharmaceuticals—have shown robust momentum. Agricultural production has remained strong, underpinning rural consumption, and contributing to steady economic activity in rural markets.

The Government of India (‘GOI) remains focused on fiscal consolidation, employment generation, and boosting capital investment. The share of capital expenditure in central government spending has continued to rise, playing a critical role in industrial and infrastructure development. Increased capital outlays on infrastructure and asset creation are expected to generate growth multipliers. The PLI scheme has successfully attracted investments and stimulated production across various industries. The Government is exploring further sectoral expansion to enhance domestic manufacturing and develop labor- intensive industries.

Despite Indias strong economic momentum, certain downside risks persist. Towards the end of 2024, economic activity moderated due to weaker private and foreign investment flows, impacting industrial output. The rupees depreciation, coupled with uncertainties surrounding cross border conflicts, global trade policies and supply chain disruptions, could pose a few challenges.

Overall, Indias economic outlook remains strong, driven by robust domestic demand, policy support, and sectoral resilience. Improving trade relations with the developed economies will provide the requisite impetus to the economy.

GLOBAL GEMS AND _[

JEWELLERY MARKET OVERVIEW

The global gems and jewellery market continue to demonstrate resilience, withstanding challenges posed by economic slowdowns, inflationary pressures, and geopolitical tensions. In 2023, the market was valued at approximately USD 103.06 billion and is projected to expand steadily over the coming years. This growth is largely attributed to risine disnosable incomes

in emerging markets, a renewed interest in investment-grade jewellery, and increasing globalization of branded jewellery trends.

Traditional segments such as gold and diamond jewellery maintain their dominance, particularly in Asia-Pacific, the Middle East, and North America. The United States remains the single largest market for gems and jewellery, while China and India are close followers in both consumption and production. Gold continues to be viewed as a store of value and a cultural asset, especially during economic uncertainty. Simultaneously, lab-grown diamonds are gaining rapid acceptance, particularly in Western markets, due to their affordability and ethical appeal, which resonate with environmentally conscious millennials and Gen Z consumers.

Technology is playing an increasingly influential role in reshaping the global jewellery retail environment. The proliferation of e-commerce platforms, virtual try-on tools and customization through AI has significantly enhanced consumer engagement and convenience. Additionally, traceability and transparency are becoming critical factors in consumer decisionmaking, with blockchain and third-party certifications helping brands build trust in a crowded marketplace.Going forward, while macroeconomic and trade-related risks remain, the industrys long-term outlook is positive. Innovation in design, ethical sourcing, digital transformation, and premiumisation are expected to drive demand across diverse global markets. Jewellery is not only retaining its place as a fashion and cultural symbol but also evolving as a lifestyle product with growing aspirational value

Indias gems and jewellery industry holds a strategically vital position in the global value chain, acting as a major hub for both manufacturing and exports while also serving one of the worlds largest consumer bases. In 2023, the market was valued at USD 43.71 billion and is forecasted to grow to USD 133.96 billion by 2030, reflecting a strong CAGR of 17.35%. The sector contributes nearly 7% to Indias GDP and provides employment to over 5 million individuals, making it one of the largest employment generators in the country.

Culturally, jewellery is deeply ingrained in Indian society, with demand driven primarily by weddings, festivals and traditional ceremonies. India ranks as the second-largest consumer of gold jewellery globally, with annual gold demand expected to reach 800-900 tonnes in 2024. The preference is gradually shifting from heavy, traditional pieces to more lightweight, daily- wear jewellery that aligns with modern lifestyles. Additionally, bridal jewellery remains a key driver, accounting for nearly 50—55% of gold jewellery sales.

Key Hubs for the Gems and Jewelry Industry

• Surat

• Mumbai

• Jaipur

• Thrichor

• Nellore

• Delhi

• Hyderabad

• Kolkata

On the export front, India maintains its global leadership in gemstone and diamond processing. In FY 2023-24, India exported USD 32.85 billion worth of gems and jewellery, with the United States accounting for 30.28% (USD 9.95 billion) of this volume. India also commands a 33%

share in global diamond exports, with Surat processing over 90% of the worlds rough diamonds. Key industry hubs include Mumbai (trading and manufacturing), Jaipur (colored gemstones), Thrissur (traditional gold), and Kolkata (handcrafted designs), each contributing uniquely to the sector.

The Indian market is undergoing rapid formalisation and digital transformation. Major retailers are investing in virtual try-on tools, AI-driven customization and omni-channel retailing to enhance customer experience and reach. Consumers are showing a growing preference for certified, branded, and personalised jewellery, while demand for lab-grown diamonds and platinum jewellery is also rising steadily.

Policy support has further catalyzed the sectors growth. The government has introduced mandatory hallmarking, zero customs duty on lab-grown diamond seeds, and export infrastructure development through Common Facility Centers (CFCs). These efforts, along with favourable trade relations and FTAs, are expected to propel Indias gems and jewellery exports beyond USD 100 billion by 2027, solidifying its role as a global industry leader.

GOVERNMENT INITIATIVES

• In the Union Budget 2024, the government proposed reduction in the basic customs duty on gold and silver to 6% and on platinum to 6.4%.

• The sector now has AEO status from the finance ministry, easing export-import processes with quicker cargo release, 50% lower bank guarantees.

• The Indian government accepted the recommendation of GJEPC to promote indigenous manufacturing in the emerging Lab- grown diamond sector by providing research grants to the Indian Institute of Technology (IIT) for five years.

• India has signed an FTA with the UAE which will further boost exports and is expected to reach the target of US$ 52 billion.

• The Government has reduced custom duty on cut and polished diamond and colored gemstones from 7.5% to 5% and NIL.

• Revised SEZ Act is also expected to boost gems and jewellery exports.

• In September 2021, Ms. Anupriya Patel, Minister of State for Commerce, and Industry said that reforms such as the revamped gold monetisation scheme, reduction in import duty of gold,

hallmarking and others would help the industry grow. The market export target is US$ 43.75 billion for 2021.

• The government has reduced import duty for Gold & Silver (from 12.5% to 7.5%) and Platinum & Pallidum (from 12.5% to 10%) to bring down the prices of precious metals in the local market.

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

• In December 2020, All India Gem and Jewellery Domestic Council (GJC) welcomed the decision to make hallmarking compulsory from June 2021 in a phased manner; urged the government to examine the key concerns of the industry for smooth implementation of the initiative.

• Hallmarking of gold jewellery is set to begin on June 15, 2021. In view of the COVID-19 pandemic, the government accepted the request of stakeholders to provide jewellers some more time to prepare for implementation and resolve issues. Earlier, the date of implementation was June 01, 2021.

• In December 2020, the Finance Ministry notified that the amendment under the Prevention of Money Laundering Act (PMLA), notifying dealers in precious metals and stones, will maintain records of cash transactions worth Rs. 10 lakh (US$ 13.61 thousand) or more cumulatively with a single customer.

[Source: https://www.ibe f. org/industry/gems-jewellery-india]

OUTLOOK

India is projected to grow at 6.2% in FY 2025-26. India is on track to become the worlds third- largest economy by 2030, driven by infrastructure investment, private capital expenditure and financial services expansion. Ongoing reforms support long-term growth. Indias positive outlook is underpinned by its demographic dividend, increased capital investment, proactive policies, and strong consumer demand. Improved rural consumption, driven by moderating inflation, further strengthens this trajectory. Government focuses on capital expenditure, fiscal discipline and rising business/consumer confidence support investment and consumption.

Initiatives like Make in India 2.0, Ease of Doing Business reforms, and the PLI scheme aim to strengthen infrastructure, manufacturing and exports, positioning India as a global manufacturing hub.

Anticipating inflation aligning with targets by 2025, a more accommodative monetary policy is expected. Infrastructure development and public policies will drive capital formation, while rural demand will be supported by initiatives like PMGKAY.

(Source: PIB, MoSPI, Economic Survey, IMF)

UNION BUDGET 2025-26

The Union Budget 2025-26 presents a balanced, growth-oriented financial framework that addresses both immediate and long-term economic priorities. By raising the income tax exemption limit to 12 lakhs annually, the budget significantly increases disposable income for middle-class households, encouraging greater consumption and savings. With a strong focus on infrastructure development—particularly in roads, railways, and urban facilities— the budget aims to enhance connectivity, create jobs and stimulate demand in related sectors. Support for the Production Linked Incentive (PLI) scheme and the "Make in India" initiative

positions India as a global manufacturing hub while transforming India Post into a key player in improving logistics and financial inclusion in rural areas.

The budget also reflects a commitment to clean mobility and renewable energy through extended subsidies under the FAME India Phase II scheme and investments in EV charging infrastructure, promoting a greener economy. With a targeted fiscal deficit of 4.4% of GDP for FY 2025-26, down from 4.8%, the government emphasises fiscal consolidation, ensuring that growth-oriented reforms are pursued on a stable and sustainable path.

OPPORTUNITIES AND THREATS

The diamond, gold, and luxury goods industry continues to evolve, offering both promising opportunities and potential challenges. The Company closely monitors market trends, consumer behavior, and technological advancements to leverage growth avenues while remaining vigilant against emerging threats. A balanced and strategic approach enables the Company to strengthen its market position and adapt to changing dynamics. The key opportunities and threats are summarized below:

Opportunities

1. Shifting Consumer Preferences Toward Branded and Ethical Jewellery

A rising segment of consumers— particularly millennials and Gen Z— are increasingly gravitating toward branded, ethically sourced and certified jewellery. This generational shift represents a powerful opportunity for the Company to enhance its positioning around transparency, traceability, and social responsibility, thereby commanding premium pricing and deepening brand trust.

2. Emergence of Lab-Grown Diamonds (LGDs)

The growing acceptance and demand for lab-grown diamonds offer a unique growth corridor. With lower environmental impact, price affordability, and expanding global recognition, LGDs present an attractive, scalable opportunity. By strategically entering this space— through design innovation, dedicated branding, or strategic alliances—the Company can access a younger and more conscious buyer segment.

3. Expansion into Underpenetrated Global Markets

India remains a dominant force in global diamond processing. However, the potential for higher-margin export growth lies in under-tapped regions like Africa, Southeast Asia, and select Middle Eastern markets. With their rising disposable income and evolving consumer culture, these markets provide the Company with an opportunity to diversify geographically and reduce dependence on mature Western economies.

4. Tailoring for Urban Middle-Class and Aspirational Buyers

The expanding urban middle-class population in India, with rising aspirations and evolving lifestyle preferences, is increasingly viewing jewellery as a lifestyle product, not just a traditional asset. Offering accessible luxury through modular collections, lightweight designs, and financing options can help the Company tap into this fast-growing demographic.

1. Price Volatility of Precious Inputs

The Company operates in a segment heavily exposed to global commodity price fluctuations. Volatility in the prices of rough diamonds, gold, or other precious metals directly impacts margin stability. Without dynamic inventory planning and hedging mechanisms, sudden shifts can erode profitability.

2. Intensifying Market Competition and Margin Pressures

The jewellery market—both domestic and export-oriented—is increasingly competitive, with branded players, low-cost regional manufacturers, and global digital-first brands competing on design, price and service. Maintaining market share and profitability under these conditions requires sustained

investment in innovation, branding, and customer experience.

3. Regulatory Shifts and Compliance Costs

Frequent regulatory interventions—such as changes in import duties, hallmarking mandates, or certification standards—can introduce unpredictability in cost structures and compliance timelines. Especially in the export sector, bilateral trade agreements or geopolitical tensions may also affect cross-border operations.

4. Changes in Consumer Behavior

Preferences are shifting rapidly toward customization, digital buying, and ethically sourced products. A failure to adapt product offerings or customer engagement models to these evolving expectations could lead to brand erosion and lost relevance among younger consumers.

5. Global Macroeconomic Headwinds

Global demand for luxury goods is sensitive to economic cycles, Inflation, currency depreciation, interest rate movements, or geopolitical crises in key export destinations can directly impact order volumes, pricing flexibility, and working capital cycles.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Gautam Gems Limited operates in a single business segment encompassing the trading, manufacturing and processing of rough and polished diamonds, along with gold jewelry. As the Companys activities are concentrated within this core area, separate segmental reporting is not applicable.

The Company continues to focus on its primary product categories, including polished diamonds of various grades, sizes and shapes, as well as select gold jewelry offerings. Performance during the financial year was primarily driven by domestic demand and existing customer relationships. Product quality, consistency in service and timely delivery remain key factors supporting the Companys performance in this unified business vertical.

Accordingly, the financial results of the Company reflect the performance of this single integrated segment, and no further segmental bifurcation is required under applicable accounting standards.

RISK & CONCERNS

The Company operates in a dynamic global environment, which presents a wide array of risks inherent to the diamond, gold and luxury goods industry. Proactively identifying and managing these risks is critical to ensuring long-term sustainability and stakeholder value. The key categories of risks and the Companys mitigation strategies are outlined below:

I. Market-Related Risks

The global diamond and precious

metals industry is influenced by macroeconomic cycles, geopolitical dynamics, and changing consumer preferences. Being a non-essential luxury segment, demand for diamonds and gold is particularly sensitive to global economic sentiment, disposable income, and retail consumption trends.

Fluctuations in the prices of diamonds and gold, driven by international supply-demand imbalances, speculative activities, and currency exchange volatility, may adversely impact revenue, margins, and working capital requirements. Additionally, the emergence of lab-grown diamonds and alternative jewelry materials is gradually altering traditional buying behavior, potentially impacting long-term demand for natural diamonds.

Competition is intensifying with a mix of organized players, artisanal traders and digital-first entrants expanding their footprint across domestic and international markets. This may lead to pricing pressures, margin erosion or loss of market share for players unable to adapt quickly.

Key Mitigation Strategies:

To address market-related and operational risks, the Company is actively focusing on expanding into value-added segments such as certified gemstones, customized jewelry and branded product lines that cater to evolving customer preferences and offer higher margins. Efforts are underway to strengthen strategic

partnerships and widen distribution networks in order to enhance market access across domestic and export geographies. The Company closely monitors emerging consumer trends, enabling it to realign its product portfolio with high-demand segments and maintain competitiveness.

II. Financial Risks

The Companys financial performance is influenced

by several external and internal factors, including currency volatility, interest rate fluctuations and global commodity cycles. Given that a substantial part of the diamond and gold trade is conducted in foreign currencies (primarily USD), adverse exchange rate movements may affect export competitiveness and profitability.

The sector is also capital-intensive in nature due to high inventory values and longer operating cycles, making liquidity and cash flow management a critical aspect. Credit risk from delayed payments or counterparty defaults may further strain operational flexibility.

Changes in the fair value of certain assets, if not aligned with prevailing market conditions, could result in impairments, adversely affecting the balance sheet.

Key Mitigation Strategies:

To manage financial risks effectively, the Company places strong emphasis on integrating cash flow forecasting with its procurement and sales planning processes. This ensures that liquidity is maintained in line with business needs and market fluctuations. The Company follows a conservative approach to leverage, maintaining low debt levels and relying primarily on internal accruals and relationship-based financing to support its operations. A disciplined approach to receivables management is in place, with regular monitoring of customer credit profiles and collection cycles to minimize defaults and maintain a healthy working capital position.

III. Regulatory and Compliance Risks

As a listed entity operating in the highly regulated sectors of precious stones and gold trading, the Company is subject to a wide range of statutory and compliance frameworks. These include, but are not limited to, adherence to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Companies Act, 2013, applicable provisions under the Income Tax Act, Goods and Services Tax (GST) laws and other sector-specific rules and reporting norms.

Any delays or lapses in complying with financial disclosures, statutory filings, or corporate governance obligations may lead to penalties, regulatory scrutiny or damage to the Companys reputation.

Moreover, with increased focus on responsible business practices, ethical sourcing and transparent operations, the Company must remain vigilant to evolving compliance expectations, even within the domestic market.

Key Mitigation Strategies:

To mitigate such risks, the Company has established dedicated compliance and legal functions that actively monitor regulatory developments and ensure timely and accurate disclosures. Internal audit mechanisms and process-level checks are implemented to minimize the risk of reporting errors or non-compliance. The Company also engages with regulatory bodies and

industry associations to stay abreast of policy changes and maintain alignment with best practices. Additionally, it adopts recognized standards of ethical sourcing and transparent business conduct to reinforce stakeholder confidence and minimize compliance- related risks.

IV. Operational Risks

The Companys operations are reliant on the consistent availability of rough diamonds and gold from markets as well as smooth coordination across various stages such as cutting, polishing, certification and

distribution. While the supply chain is primarily domestic, any disruptions—such as transportation delays, strikes, regulatory changes or interruptions in supply from key local vendors—can impact production schedules and inventory flow.

Manufacturing and polishing activities require high levels of precision and depend on skilled craftsmanship. Any malfunction in machinery, breakdown of IT systems or infrastructure- related issues may lead to production slowdowns, quality inconsistencies or missed delivery timelines. Furthermore, the availability and retention of experienced artisans and trained personnel remain critical to maintaining operational throughput and product quality.

Due to the nature of the business, which involves handling high-value inventory such as diamonds and gold, physical security and accurate valuation also represent significant operational risks. Breaches in security protocols or lapses in asset verification can result in material financial losses and reputational impact.

Key Mitigation Strategies:

To address these challenges, the Company focuses on maintaining strong relationships with a diverse base of suppliers to ensure supply continuity. Regular training, upskilling and retention programs are conducted to preserve artisanal expertise and ensure a steady talent pipeline. The Company has also implemented stringent physical security measures to safeguard inventory and mitigate theft or loss risks.

V. Strategic and Business Model Risks

The gems and jewelry industry is influenced by shifting consumer preferences, economic cycles, fashion trends and evolving perceptions of luxury. In this dynamic environment, the Company faces strategic risks related to its ability to remain relevant, competitive, and aligned with changing market expectations. Factors such as the growing popularity of lab-grown diamonds, rising demand for certified and ethically sourced stones and changing design trends could affect the demand for traditional diamond and gold products.

In addition, the industry is becoming increasingly competitive, with both organized and unorganized players offering similar products. Any inability to effectively differentiate offerings or maintain consistent quality standards may result in reduced customer preference or loss of market share. Moreover, the long-standing nature of traditional business models in the industry poses challenges when adapting to modern retail practices, shifting consumer behavior or regulatory expectations around transparency and traceability.

Key Mitigation Strategies:

To address these risks, the Company focuses on maintaining strong supplier and customer relationships, upholding consistent product quality and offering a range of stones and jewelry that cater to varied customer preferences. Emphasis is placed on certified products and ethical sourcing to align with the growing importance of trust and transparency in the industry. The Company regularly evaluates market trends and customer feedback to inform its inventory mix and business planning. Strengthening brand reputation through word-of-mouth, customer

-term strategic approach.

VI. Human Resource and People Risks

The diamond and gold industry is highly dependent on skilled labor, particularly experienced artisans, craftsmen, and trading professionals. The Companys ability to maintain consistent quality and operational efficiency is closely tied to the availability and retention of such skilled personnel. Attrition of experienced staff or difficulties in attracting new talent could impact productivity, training costs, and overall business continuity.

Additionally, the Company must ensure

compliance with applicable labor laws, health and safety regulations, and workplace standards. Any failure to maintain a safe and fair working environment may lead to workforce dissatisfaction, legal exposure, or reputational risks. Given the manual nature of the work involved, there is also a need for constant attention to physical working conditions and employee well-being.

Key Mitigation Strategies:

The Company places strong emphasis on employee engagement, maintaining safety standards, and following fair labor practices. Training and mentoring are regularly conducted to improve skills and preserve the artisanal expertise that the business depends upon.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Gautam Gems Limited has in place a well-structured and effective internal control system, which is continuously reviewed and strengthened to align with the scale and complexity of its operations. These controls are designed to ensure the orderly and efficient conduct of business, safeguard the Companys assets, ensure the accuracy of accounting records and promote adherence to applicable laws and regulations.

The internal control framework encompasses defined policies, standard operating procedures and clear delegation of authority across all key functions. Both internal and external auditors periodically evaluate these systems and their observations and suggestions are reviewed by the Audit Committee of the Board for timely implementation and improvement.

Internal Financial Controls (IFC) are in place, covering financial reporting, operational controls and compliance risk mitigation. The Company has put in place controls around related party transactions and ensures strict adherence to governance protocols. The Board of Directors and the Audit Committee regularly monitor the adequacy and effectiveness of these internal financial controls.

The internal audit program is structured in consultation with statutory auditors to maintain independence and ensure comprehensive coverage across business functions. Audit findings, along with corrective actions taken, are presented to the Audit Committee on a regular basis. This robust control environment helps the Company ensure the integrity of financial reporting, secure operational efficiency, and comply with all regulatory requirements.

INDUSTRIAL RELATIONS AND HUMAN RESOURCE MANAGEMENT

Gautam Gems Limited recognizes that human capital is one of the most valuable assets driving its long-term success and sustainability. The Companys workforce plays a pivotal role in supporting business operations, maintaining craftsmanship standards and ensuring customer satisfaction.

Throughout the year, the Company has focused on enhancing its human resource policies and strengthening employee engagement initiatives. Efforts have been directed toward improving workplace conditions, offering skill development opportunities, and fostering a culture of accountability and mutual respect. Training programs, both on technical skills and soft skills, are conducted periodically to enhance individual capabilities and operational effectiveness.

As of the end of the financial year, the Company had a total of 17 employees on its payroll. The work environment continues to be collaborative and performance-driven. The Company also places high importance on employee health and safety, especially for workers engaged in manufacturing and polishing activities. Safety protocols are in place at the operational level, and adequate measures are taken to ensure a secure and hazard-free workplace.

Industrial relations during the year remained harmonious, with no disruptions or labor-related issues reported. The Company continues to attract talent from across India to support its expansion and long-term business goals, while promoting a culture that values loyalty, integrity, and excellence.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

1. Revenue Trends and Strategic Approach

In FY25, Gautam Gems Limited reported revenue from operations of approximately Rs.78.34 crore, a decline from Rs.101.34 crore in FY24. This

reduction in turnover, close to 23%, is not solely indicative of weakening demand but also reflects a deliberate strategic shift. The company appears to have taken a more conservative sales approach, likely focusing on higher-quality trades, reduced customer credit cycles, and selective order fulfillment to manage risk during a year of uncertain market sentiment, particularly in the gems and jewellery segment.

This strategic discipline is also supported by relatively stable other income, which rose slightly

from Rs.0.24 crore to Rs.0.25 crore. This suggests a continued focus on optimizing other financial assets without over-reliance on core sales to drive overall receipts.

2. Cost Structure and Operational Realignment

The cost of purchases decreased from Rs.124.83 crore in FY24 to Rs.74.74 crore in FY25. However, the drop-in procurement was accompanied by a more balanced inventory management strategy. Inventories fell marginally from Rs.45.27 crore to Rs.43.24 crore, showing the company is no longer aggressively stocking goods — a prudent step given demand unpredictability and the capital-intensive nature of gem trading.

Changes in inventories of finished goods and stock-in-trade were minor (around Rs.2 crore increase), indicating that production or procurement was closely aligned with demand. This contrasts with the previous year, where inventory swings played a larger role in earnings volatility.

3. Profitability and Margin Pressures

Gautam Gems Limited reported a net profit of Rs.0.28 crore in FY25, compared to Rs.0.38 crore in FY24, reflecting a modest decline. While profitability stayed in positive territory, the compression underscores margin pressure in the face of reduced revenue and relatively fixed cost structures.

Employee benefit expenses remained broadly stable at Rs.0.66 crore, with only a marginal decline from the previous year (Rs.0.91 crore). Similarly, finance costs were maintained at Rs.0.33

-line contraction, the company chose not to aggressively cut administrative or workforce-related

expenses — possibly reflecting a deliberate strategy to preserve operational readiness and core capabilities for future scale-up.

Depreciation and amortization expenses saw a slight reduction to Rs.0.07 crore, in line with lower fixed asset activity. However, the impact on the overall cost base was minimal, suggesting that the primary margin squeeze stemmed from subdued revenue generation rather than cost inflation.

The overall trend points to a company managing profitability through disciplined cost control, without compromising on foundational infrastructure — positioning itself for improved margins once top line growth stabilizes.

4. Balance Sheet Strength and Financial Prudence

Total assets reduced slightly

portion of the asset base continues to be composed of inventories and trade receivables, which jointly account for over 90% of current assets — a typical structure in trading businesses.

The equity base remained firm at Rs.42.85 crore, while other equity improved marginally from Rs.8.17 crore to Rs.8.43 crore, reflecting retained earnings. Importantly, the company maintained a low-debt profile, with total borrowings (both current and non-current) remaining under Rs.6.5 crore. Deferred tax liabilities increased slightly to Rs.0.20 crore, but these are within a manageable range.

5. Cash Flow Efficiency

Despite the moderate profitability, cash flow from operations improved significantly, moving from a negative Rs.26.01 crore in FY24 to a positive Rs.0.30 crore in FY25. This shift is a result of better working capital discipline, including a reduction in trade receivables and tighter inventory turnover.

Investing and financing cash flows remained marginal, showing the company was not engaged in significant capital expansion or shareholder distributions, but rather focused on preserving liquidity.

given the companys low fixed cost base.

6. Operational Overview and Business Direction

Operationally, Gautam Gems Limited appears to be recalibrating its model — shifting from volume-driven trading to a more measured, value-focused strategy. The consistent, albeit modest, profitability even during a lower turnover phase, suggests that the company is consciously avoiding aggressive growth that might over-leverage its balance sheet or compromise quality.

The stability in core operations, cautious procurement, and tighter cash control mechanisms position the company well if market conditions improve in the coming periods. Importantly, the company has not diluted equity or relied on external debt, preserving shareholder value and financial independence.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

The following table presents the key financial ratios for Gautam Gems Limited for the financial years 2023 and 2024, highlighting significant changes:

Ratio	FY 2025	FY 2024	% Change	Explanation
Debtors Turnover	3.24	4.08	20.51%	-
Inventory Turnover	1.81	2.24	19.06	-
Current Ratio	3.52	3.17	11.19%	-
Debt Equity Ratio	0.12	0.08	48.68	Slight increase in Financial Cost

These changes highlight operational challenges with slower receivables and inventory turnover, impacting cash flows. Nevertheless, interest coverage improved, indicating manageable financial expenses relative to earnings. Liquidity and leverage ratios remained stable, signaling sound financial health despite margin pressures.

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR

The Return on Net Worth (RONW) declined from 0.75 in FY 2024 to 0.55% in FY 2025, representing a decrease This reduction stems primarily from the decline in net profits, which dropped from Rs.0.38 crore to Rs.0.28 crore, against a relatively stable net worth base. The subdued profitability was driven by margin compression amid declining revenue, while equity levels remain

human resources, despite lower sales, contributed to higher fixed costs relative to income, further impacting returns. However, the stable capital base positions the company well for leveraging growth opportunities once market conditions improve.

DISCLOSURE OF ACCOUNTING TREATMENT

In the preparation of its financial statements for the financial year, The Company has followed all applicable Indian Accounting Standards (Ind AS) as prescribed under the Companies Act, 2013. There has been no deviation or alternative treatment adopted in the accounting of any transaction that differs from the prescribed standards.

Accordingly, no disclosure is required regarding any alternate accounting treatment, as the financial statements present a true and fair view of the state of affairs of the Company in full compliance with the applicable accounting framework.

CAUTIONARY STATEMENT

Certain statements in this Report describing the Companys objectives, projections, estimates,meaning of applicable laws and regulations. These forward-looking statements are based on various assumptions and are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those expressed or implied herein.

Factors that may affect the actual outcomes include, but are not limited to, changes in domestic market conditions, economic developments, variations in demand and supply, changes in governmental policies and tax regimes, fluctuations in commodity prices, and the impact of natural calamities and other unforeseen events—most of which are beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify, or revise any forward-looking statements based on subsequent developments, information, or events.