Gitanjali Gems Ltd Management Discussions.


Global Gems & Jewellery Industry:

The global gems and jewellery industry over the past decade has witnessed significant changes and reported growth on account of increasing income as well as demand from the emerging economies across the world. Among the various types of jewellery, diamond studded jewellery accounted for the largest share of the global jewellery market, followed by plain gold jewellery. The growth in demand for diamond-studded jewellery has been due to diamonds inherent value and strong economic growth in key diamond jewellery consuming nations coupled with marketing efforts of diamond companies. According to CARE Research, US, China, and India are the largest consumers of gems and jewellery with China and India being largely gold dominated. In Western Europe, the UK and Italy are the largest consumers and Italy is also one of the worlds largest jewellery fabrication centers. Emerging markets, like China and India which have been traditional hubs of jewellery consumption, are expected to develop as the largest consumption markets for both traditional as well as branded jewellery.(Source: CARE Research)

According to CARE Research, Asia Pacific consists of the worlds largest jewellery market, with the main contributors being China and India, who are the largest consumers of jewellery in the world and have a large number of processing and manufacturing units.

Global Gems & Jewellery Structure

Indian Gems & Jewellery Industry:

India is a major processing hub for the global jewellery market, owing to its low-cost and highly-skilled labour advantage. According to CARE Research, India is also the worlds largest diamond-cutting and polishing centre and second largest gold jewellery centre.

The Indian gems and jewellery market comprises of jewellery (gold and silver), diamonds, coloured stones and pearls. According to CARE Research, Gold and diamond jewellery are the two major segments of the industry globally and India dominates in both of them. Of the total diamonds sold around the world, more than 90% (14 out of 15) diamonds are cut and polished in India (60% by value) because of the low-cost and highly-skilled manpower. Further, India continues to consume and import gold which crossed 850 tonnes per annum (CY2015). The gems and jewellery market is broadly bifurcated as shown in the following chart:

The Gems and Jewellery sector plays a significant role in the Indian economy, contributing to around 6-7 per countrys GDP (Source: CARE Research). India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour.

According to CARE Research, the gems and jewellery market in India is home to more than 500,000 players, with the majority being small players. The industry is also highly unorganized dominated by family run jewellers. However, in the recent years there has been a gradual shift to organized players, at both, a national as well as a regional level. The organized sector accounts for around 28% - 30% of the total market share as per CARE Research. However, an increasing number of large showrooms have quickly gained trust among customers with their diverse products, guarantee for purity and value for money. Driven by these factors, the organized sector is expected to grow at a steady pace and increase its market share in the future. Further, Indian consumers also lay emphasis on branded goods, designs and certification. Demand for studded jewellery has witnessed an upswing in stark contrast to pure gold jewellery purchased in earlier years.

Exports & Imports

According to CARE Research, Gems & Jewellery is one of the fastest growing sectors and is extremely export oriented and labour intensive. Based on its potential for growth and value addition, the Government of India has declared the Gems and 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.


According to CARE Research, 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 the total foreign reserves of the country. The overall net exports of Gems & Jewellery in FY 2016 stood at US$31.98 billion, whereas exports of cut and polished diamonds stood at US$19.99 billion. The Gems & Jewellery segment contributed 13.3% share in total exports, which makes the sector second largest exporter after petrochemicals which contributed 18.3% share in total exports in FY15, thereby contributing in a big way to the countrys foreign exchange earnings

The contribution of the gems & jewellery sector to the countrys total exports is as follows:

Year Export of Gems & Jewellery (US$ billion) Gold (US$ billion) Diamond (US$ billion)
FY2011-12 43.21 9.79 25.12
FY2012-13 39.13 13.03 19.01
FY2013-14 34.99 11.44 12.74
FY2014-15 36.26 26.08 24.58
FY2015-16 31.98 13.84 21.16
H1FY17 17.84 7.03 12.43

(Source: CMIE, CARE Research)

Gems and Jewellery exports declined in FY2015-16 to the lowest in six years, due to a slowing global economy which reduced the demand for luxury goods. Indias net G&J export at almost $31.98 billion, as compared to $36.22 billion the previous year, was down 5.3 per cent in dollar terms. The fall in G&J shipment was largely driven by a sharp fall in export of cut and polished diamonds at almost $19.99 bn as against $23.16 bn in 2014-15 (a fall of 7.5 per cent). In rupee terms, however, the slump was 13.7 per cent to Rs 1.31 lakh crore from Rs 1.41 lakh crore the previous year. The decline was partly compensated by a sharp upsurge in export of gold medallions and coins, and silver jewellery. The former jumped 84 per cent to $5.2 bn (Rs 34,243 crore) and of silver jewellery by 44.2 per cent to almost $3 bn (Rs 19,407 crore) from $2.1 bn (Rs 12,569 crore) the previous year (Source: CARE Research).

Exports market grew at 14.43% in H1FY17 in comparison to H1FY16 mainly on account of picking up demand in markets like US, led by an increase in the Cut & Polished Diamond segment. However, the shipments of gold jewellery contracted by 26% during the period. (Source: CARE Research)

The export markets for the Indian gold jewellery segment are UAE, Hong Kong, USA, UK, Singapore, Bahrain, Australia, Canada, Malaysia, Kuwait and others (Source: CARE Research). Amongst them top 3 countries contributed 90%, 83% & 86% in FY2013, FY2014 & FY2015 respectively; as depicted below-


In CY2015, total domestic gold jewellery demand stood at 654.3 tonnes. Demand for domestic gold jewellery reached a historic high of 212.10 tonnes in Q3CY15; y-o-y growth of 15% on the back of drop in local price to ~Rs.25,000/10gms. However, gold jewellery demand hit a seven-year low of 88.4 tonnes during Q1CY16; a 41% y-o-y decline. This was largely on account of sharp rise in the local gold price and jewellers strike for more than 40 days to protest against imposition of 1% excise duty on jewellery manufacturing in the Union Budget 2016-17. Most of the gold demand is met by imports. The below chart depicts gold imports by India as a percentage to total imports:

During FY16, import of rough diamonds dropped in India in line with weaker exports on account of weak international demand, high rough diamond prices and high inventory holding by manufactures. Rough diamond imports reduced by 16.17% in FY16 to USD 14.04 billion compared to USD 16.75 billion in FY15, mirroring the fall in Indias export of polished diamonds. Imports of polished diamonds slumped nearly 58.28% to USD 2.77 billion. (Source: CARE Research).

The overall gross imports of Gems & Jewellery in FY16 stood at US$24.30 billion (Source: CARE Research). The percentage of imports of rough diamonds from various countries is as mentioned below:

Value Chain Analysis

India has very limited access to gold and diamond mines domestically and a significant proportion is imported every year. India imports rough diamonds in huge quantities which are then cut & polished and are exported back generating huge value addition. Some of these polished diamonds are used in manufacturing jewellery again for both local and international markets. Gold is also imported, refined and fabricated into fine jewellery primarily for local consumption but is also exported to the Middle East, US and Europe. Jewellery retailing is still evolving and more and more people are choosing branded products given demographic transformation.

Certification and Hallmarking

The Government of India has been protecting consumers from adulterated and sub-standard quality of gold by introducing the Hallmarking Scheme through the Bureau of Indian Standards (BIS). In January 2012 the Government of India has proposed to make hallmarking gold jewellery for quality control, mandatory. This would provide a boost to the growth of organized retailers.

With increased consumer awareness and demand for branded jewellery, there is increase in requirement for authoritative diamond grading and certification from reputed bodies. The diamond certification business has gone up in the country in the last few years, which has attracted many foreign gemological institutes to set up their offices in Mumbai, Surat and Delhi. Diamonds are typically priced by their actual quality grade, according to the Clarity, Colour, Cut and Carat weight (4Cs) and other factors. Unless a diamond is graded from a respected laboratory one will have little financial interest in the diamond and will also remain unsure about whether hes buying the right quality.


Traditionally, gold jewellery in India has been purchased because of its investment value along with aesthetic value, unlike in foreign countries where it is bought only for ornamental purposes. With changing demographics, the branding of jewellery and the retail revolution, young customers (from age groups of 20-40 years) prefer buying jewellery for fashion rather than for investment. Even the organized retailers in the sector have focused on advertisements by appointing celebrities to endorse products, organizing fashion shows and exhibitions to promote growth. All these efforts will lead to a much higher growth in the branded and therefore organized jewellery market.

Changing Trends in the Indian Jewellery Sector

Traditional Practice Emerging Trend
Gold jewellery consumption emanates from traditional and investment-related demand. It is regarded as a fashion accessory by the growing young population.
Demand peaks during weddings and festival seasons. Weddings & Festivals still remain the main demand drivers but jewellery use for regular wear and gifting has evened out the demand throughout the year.
Consumption of pure gold (22 Karat)- preferred . Traditional & ethnic designs preferred. Lower karatage & light-weight jewellery preferred.
Trend is more towards fashionable and contemporary designs.
Purchase from unorganized family jewellers dominated. Hence the industry lacked transparency. Growing preference for brands, retail stores & e-retailing. Introduction of hallmarking & certifications.
Pre-dominance of gold (yellow)-based jewellery. Acceptance of white gold, platinum and diamond- studded jewellery. Even imitation jewellery is gaining acceptance.
Jewellery largely sold on prevailing gold price, per gram, plus labour charges. Branded players sell on a fixed-price basis.

(Source: CARE Research)

Growth Prospects for Domestic Gems and Jewellery in India

Traditionally gold jewellery has been an important part of Indian culture. The demand for gold jewellery is driven by festivals and weddings. As per Indian tradition, buying gold is considered auspicious on days like ‘Akshay-Tritiya and

‘Dhan-Teras. In marriages, gold jewellery is a preferred gift given by the family of the bride and the groom. About 60% of the Indian jewellery market is contributed by rural India. Gold jewellery is popular among farmers and an upsurge in gold demand is typically seen after a good harvest season. According to CARE Research, on an average, India consumes about 800-850 tonnes of gold annually, majority of which is imported.

Further, demand for diamond jewellery in India has not only increased due to changes in consumer preferences and increase in income levels but also because of rising gold prices and increasing cost effectiveness of diamonds as India is a low cost diamond processing hub.

Important Savings and Investment Channel

Apart from cultural and social significance, gold is also valued as an important savings and investment vehicle in India, second only to bank deposits. People in rural India have very few savings options and make it a point to save or invest their money in gold given that gold is highly portable, holds its value well, in times of uncertainty and can be easily converted to cash either through sale or for loan guarantees. More importantly, it has been observed that gold acts as a natural hedge against inflation.Gold is easily available throughout India and can be used for dual purpose of investment as well as jewellery. Also, other asset classes like equities are too complicated and volatile, whereas real estate requires an investment which is too high for an average household in India. Gold is a simpler alternative and can be bought in smaller denominations. As gold can be bought in smaller denominations, investment in gold is a common saving strategy for Indian households. Investing in gold is matter of culture and is a value instilled in Indians from very early on.

Increasing acceptability of diamond jewellery

Traditionally, jewellery industry in India mainly comprised jewellery made from gold, as there were misconceptions and myths associated with diamonds of being unlucky. This is changing with an increased acceptance of diamond jewellery in the domestic markets. Also, diamond jewellery is increasingly accepted for weddings and engagement especially bridal jewellery.

Diamond as a fashion statement

Diamond jewellery is increasingly contributing to the changing fashion trends of the high class and middle class society of India, to differentiate them from other people. Diamond demand has also been benefited by increasing exposure to glamorous and fashionable world.

Increased Marketing

De Beers constantly works towards promoting the diamond jewellery market worldwide including India and has launched flagship brands in local markets, after intensive consumer research. Based on their market research and analysis, brands are introduced, nurtured and then handed over to its promoter partners to run. This brings awareness amongst people and induces them to buy diamond.

Rising income, urbanization and increasing savings levels

Being one of the youngest nations in the world, India is poised for a steady economic growth. According to United

Nations, urban population in India now comprises 30% of the total population and is estimated that the percentage of urban population will increase to 41% of the total population by 2030. According to CARE Research, the average household savings are expected to triple during the period from 2010 to 2020; the average savings rate in India is about 30-40% which only helps in further demand for gold since gold and silver are the traditional saving options. The average investment pattern of savings in India is follows.

Average Households Savings Pattern

Source : CARE Research

Further, increasing education levels among women has increased the percentage of women workforce in the country, thereby increasing influence on purchasing decisions. Furthermore, increase in disposable income in the hands of working couples and changing lifestyles have contributed to the demand for diamond jewellery.

The median age in the country is 26.2 years, one of the lowest in the world compared to 36.9 years in US, 44.8 years in Japan and 35.5 years in China. With rising young and urban population in the country combined with the higher growth rate of GDP, there would be an increase in the annual disposable income with the people. Also, the enhanced efforts on quality certifications for gold have helped in removing the malpractices in the industry, moving towards global standards

(Source: CARE Research).

Low-cost and highly-skilled labour advantage in the country

The G&J industry is highly labour intensive, employs between 3.2 million to 3.4 million people directly or indirectly. It has highly skilled and low-cost manpower with a vast traditional knowledge and expertise in jewellery-making, which provides a huge fillip to the growth of the G&J industry. India has well-established capabilities in making hand-made jewellery in traditional as well as modern designs. The Indian hand-made jewellery has a large ethnic demand in various countries with a high Indian population like the Middle East, USA and Canada. With the traditional hand-made jewellery, India has also progressed in using the latest technologies in diamond-processing and jewellery-making.

Jewellery-making, diamond polishing and setting are high-skilled jobs. Although, machines are required to complete some part of the work, the processing is essentially labour intensive. India, with its availability of low-cost skilled labour is in an ideal position to deliver products of good design and quality. India is, therefore, the largest country for diamond processing and gold manufacturing in the world.

Branded & Retail Jewellery Segment

Branded Jewellery

Jewellery companies seek to strengthen and differentiate their brands through unique, distinctive designs. The growth in the branded jewellery segment is primarily driven by young consumers who are generally brand conscious, emerging market consumers for whom established brands inspire trust and a sense of upgraded lifestyle. Further the gradual shift in jewellery retailing from the traditional way of retailing to the modern, organized way of selling both online and offline has attracted PE firms as well.

According to CARE Research, gold jewellery makes up for 80% of the Rs.300,000 crore gems and jewellery market of India during CY15.The organized segment accounts for almost 28% - 30% while the unorganized one; primarily comprising local and independent stores, makes up for balance of the retail gems and jewellery market. Jewellery in India is retailed mainly through single stores, shop-in-shops, regional stores and national stores. The purchase of jewellery is largely based on trust exhibited by customers.

According to CARE Research, Indias organized gems and jewellery retail market has been growing at a much faster pace in recent years than the unorganized one. According to CARE Research, organized retailers are expected to continue to gain market share at the expense of unorganized players by expanding in to Tier – II/ III markets which are expected to be the major growth drivers of domestic gold jewellery. Compulsory hallmarking of jewellery is also expected to aid the organized retailers.

Further, the organized retailers, having strong financial strength, provide a whole new shopping experience for customers through the ambience of their stores, range of product, quality and trust factor leading to rising demand for branded jewellery. (Source: CARE Research)

Online Jewellery Market Place

The growing e-commerce market has been challenging all conventional modes of business recently, unlike old times where buying jewellery traditionally meant a visit to the trusted family jeweler. The growth in the online space has compelled even the top jewellery houses to adapt to the changing trends by tying up with online service providers. The rationale for this is the change seen in consumer behavior over the years especially that of young Indian women, who are exposed to global trends and are increasingly shopping online. Due to comfort and convenience for shoppers along with giving the considerable time to decide and not making it obligatory to purchase at the visit; the online jewellery market is projected to grow leaps & bounds. According to industry news, the Indian online jewellery market is estimated to be USD 150 million in FY2015, forming about 0.35% of the domestic market size. However, the market is growing at a high growth rate. CARE Research estimates online retail to grow at a faster rate than organized retail largely due to base effect, convenience and young buyers open to experience new buying trends.

Competitive Landscape

Traditionally, the Indian G&J industry was highly fragmented with consumers typically buying from their family jewellers. However, in the last decade the industry has undergone a structural change and more G&J players are moving up the value chain towards an increasing focus for branded jewellery. According to CARE Research, Jewellery retailing is not only high margin and lucrative but is also largely untapped in India, thereby offering a huge upside. Also due to rising gold prices, plain gold jewellery is losing ground to diamond jewellery. Further, jewellers have also launched low-value low-priced diamonds targeted at wider audiences, which further fuels overall demand. Increased off-take in diamonds and other precious stone jewellery, serves well for jewellers, since margins on these products are higher.

The market is hugely underpenetrated and there is ample scope for all new entrants. Given rising media and western influences people are more inclined towards branded jewellery and are willing to pay a premium for the same. In the past few years, many domestic companies have opened G&J specialty stores in India to meet the changing taste of local populace and have also opened stores abroad to serve the Indian diaspora in countries where demand for traditional Indian crafted jewellery is high.

Challenges faced by the Gems and Jewellery Sector

Dependence on import for key raw materials

Indigenous availability of raw material plays a crucial role in the growth of any industry. In India 90 per cent of raw material is imported and its supply is limited. Rough diamonds as raw material account for more than 50 per cent of imports. The top 4 Diamond mining companies account for approximately 70% of total Rough diamonds mined globally and can potentially control their prices. These rough diamonds are cut, polished and exported. India imports rough diamonds mainly from Africa,

Belgium, the UK, Israel and the UAE etc while gold jewellery is imported from Switzerland, South Africa, the UAE and Australia etc. Raw pearls and precious and semi-precious stones are imported from Belgium, the UK and Hong Kong etc. Europe has become the largest importing destination of raw material for Indian gems and jewellery industry. The sector being hugely dependent on imported raw material and exports giving fewer earnings in foreign exchange stands a concern. (Source: CARE Research)

Competition Threats

According to CARE Research, India presently enjoys dominance in the worlds cut and polished diamonds market. However, in the long run China is expected to emerge as a major rival on account of similar qualities like cheap economic labour, infrastructure and technology.

Highly Regulated Sector

Import duties on gold have often been raised (currently 10%) to align with the overall economic interest of the nation, with gold imports being a key contributor to the nations current account deficit (CAD).

Government Initiatives

The Reserve Bank of India has announced norms for gold monetization scheme, which allows individuals, trusts and mutual funds to deposit gold with banks in return for interest, to help reduce gold imports and alleviate pressure on trade balance.

The Reserve Bank of India (RBI) has liberalized gold import norms. With this, star and premier export houses can import the commodity, while banks and nominated agencies can offer gold for domestic use as loans to bullion traders and jewellers.

India has signed a Memorandum of Understanding (MoU) with Russia to source data on diamond trade between the two countries. According to CARE Research, India is the top global processor of diamonds, while Russia is the largest rough diamond producer. Further, Government of India is planning to establish a special zone with tax benefits for diamond import and trading in Mumbai, in an effort to develop the city as a rival to Antwerp and Dubai, which are currently the top trading hubs for diamond. (Source: CARE Research)

Due to shortage of skilled manpower, the Gems and

Jewellery Skill Council of India is planning to train over four million people till 2022. The council aims to train, skill and enhance 4.07 million people by 2022. The council plans to tie-up with the existing training institutes including Gemological Institute of America (GIA) and Indian Gemological Institute (IGI), along with setting up of new institutes in major diamond cutting and processing centres. (Source: CARE Research)

The GJEPC has also proposed to develop a jewellery park on Thane-Belapur Road which is around five kilometers from Mumbai with a view to boost the Mumbai-based jewellery industry by providing modern facilities and services.

In September 2015, the Government of India approved the gold monetization plan in the form of revamped Gold Deposit Scheme (GDS) and the Gold Metal Loan Scheme (GML) to mobilize tonnes of gold stored in households and temples across the country.

(Source: CARE Research)

The recent announcement by the government with regards to proposed amendments to the Income tax act stipulates; whereby no seizure of gold jewellery and ornaments to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of family. Further the proposed amendments also do not seek to tax inherited gold & jewellery and also those items that are purchased through disclosed or agriculture income by Central Board of Direct Taxes (CBDT), the apex direct taxes body.


It can be said that the prospects of the Indian gems and jewellery market are quite promising due to overall rising disposable incomes and the emergence and growth of innovating selling concepts in this digital era which offer the new age consumers the convenience and quality that they seek. Further, the governments overall policies supporting the industry make for a rather conducive environment for growth.

Key Developments during the year

In February 2016, the Govt. of India (GOI) announced 1% excise duty on jewellery under the Union Budget 2016-17. As a matter of protest, many jewellers pan-India participated in a strike from March-April 2016.

This resulted in loss of business due to closure of outlets of many jewellers. It also impacted festive purchases of many people who may have delayed their purchases or purchased through modern channels of trade like Shop-in-Shops or though e-Commerce.

In November 2016, due to demonetization our business was impacted for about 3 months in India. However due to good demand overseas there was recovery in sales during that period. In long run it would be favorable for organized players like us. Also, In June 2017, the GST council decided to tax polished diamonds, gold and gold jewellery at 3% and rough diamonds at 0.25% under the Goods and Services

Tax (GST) applicable from 1st July 2017. As a unified tax nationally, the GST replaced Value Added Tax (VAT), Excise Duty, Octroi and other duties levied on the sector. As input credit is available under GST, it is expected that there will be a limited impact on the industry. GST is expected to increase compliance and bring all players at par, thus giving an impetus to organized channels of sale. As GST is also expected to help pan-India sale of goods and services under the same framework, it is expected to boost trade and commerce.

Corporate Profile

Gitanjali Group is the worlds largest integrated branded jewellery manufacturer-retailer with an annual turnover of around $ 2.5 billion. Established in 1966, today its activities are spread across the entire value chain from rough diamond sourcing, cutting, polishing and distribution, jewellery manufacturing to branding and retailing gold and diamond jewellery in India and abroad. The Group pioneered jewellery retail revolution in India by launching ‘Gili way back in 1994. It today owns and distributes eight out of the top ten jewellery brands in the country including Gili, Nakshatra, Asmi, Sangini, Nizam and Parineeta to name a few. Gitanjalis extensive network of own stores, shop-in-shops and franchise outlets span across 200 cities and 3,000 points of sale.

It has world-class diamond processing facilities in India located at Surat and Hyderabad. Domestic jewellery manufacturing facilities are located at Mumbai, Hyderabad, Surat and Jaipur while the international manufacturing set up is in Thailand. The Groups international design hub is located in Italy.

Over the last two decades, the Group has expanded operations in USA, UK, Belgium, Italy, Singapore and Japan.

Today the group owns a large retail chain in the US, Samuels Jewelers Inc; and has acquired a number of brands such as Stefan Hafner, Valente, Io Si, Poratti and others in Italy, and has also launched a collection of Italian jewellery called Viola Italia. The group also has a fast developing presence in China, the Middle East and other new markets.

Competitive Strengths

Integrated Play – Presence at every stage of the value chain allows for supply chain efficiencies and overall operational synergies.

Designing Strength – Designs are the Groups key assets. Gitanjali ensures to pick the finest designers from top institutes. Many of these today are award-winning designers and are integral for the groups strategy of brand creation and growth. Italy is the companys international design centre and mainly caters to the companys international operations. Our manufacturing and designing strengths allow us to constantly innovate and cater to evolving consumer trends across the globe.

Manufacturing Prowess – Gitanjali has its state of the art manufacturing facilities strategically located across India and Thailand with the facility in Thailand being one of the largest in Thailand. Our strong manufacturing base serves as a solid back-end to feed our retailing business. This integration ensures consistent supply, economies of scale, superior quality finish and allows us the flexibility to adapt to changing consumer needs rapidly.

Well Established Brands – Gitanjali changed the way jewellery was viewed and bought in India, when it launched Gili in 1994. Ever since, the company acquired and even created several brands which have become household names today. Some of these like Nakshatra and Asmi are doing well not just in India, but also in international markets which have an Indian populace. Over the years the group has created a bouquet of Indian and international brands with a view to cater to various occasions, price points, age groups as well as geographies.

Omni-Channel Retail Network – The group has a well established network of stores, shop-in-shops, franchisees and distributors. After having explored multiple retail formats like these, over the years, Gitanjali has now forayed into innovative selling concepts such as digital selling and is also exploring other channels such as Canteens, Cruise Liners, In-flight, Duty free Stores at airports, etc with a view to widen its reach and acceptability.

Global Presence – Gitanjali enjoys a well established presence not only in India but also overseas. Truly a global player, it is present across the top jewellery markets of the world. In the largest diamond jewellery market of the world, which is the USA, Gitanjali has a footprint of around 118 stores of Samuels Jewelers and also several retailers. It also has a minority stake in the 3rd largest retail chain in Japan (Verite) and a 20% stake in GSTV Co. Ltd. (One of Japans largest jewellery selling TV channels). In the Middle East, the group enjoys a presence through a few own stores as well as through shop-in-shops in leading jewellery retailers. Gitanjali also supplies jewellery to several retail stores in China. Our diversified presence across geographies helps in de-risking our portfolio.

Ability to Innovate – The ability to innovate has been one of Gitanjalis biggest strengths as it has allowed the group to keep up with the latest trends and address evolving needs. The groups integrated play is what has allowed it the flexibility to innovate and adapt to changing preferences in a time-effective manner. The latest addition to the list of innovations is the introduction of jewellery range made of new age unique precious metal positioned between Gold and Silver, which is all set to revolutionise the jewellery industry.

Strong Marketing Capabilities - Gitanjalis brands are a testimony of the marketing efforts that go in creating and maintaining their image. Most of the groups brands are a household name today, and reckon with jewellery in India. Tremendous efforts are consistently made to grow and establish these brands. Today, the group is recognised as one of the largest investors in media in the diamond jewellery sector in the country and also the largest print advertiser across categories in the country.

Development Plans

Our strategic intent is to leverage upon the strength of our well balanced business model and to build brands and products that offer quality, trust and value to consumers. The focus has always been and continues to be value creation. We plan to achieve this by implementing the following strategies:

Focus on studded jewellery

Gitanjali has been focused on the growth of its studded jewellery business globally. As a category, studded jewellery is not just high-margin but also extremely popular in large global markets like USA, China, Japan and Middle East. Gitanjalis presence and aggressive expansion plans in these markets have attributed and will continue to attribute to overall growth.

Focus on Product Innovations

Product innovations have been part of Gitanjalis DNA. After having introduced coloured gemstones with alternative metals, the latest one from the group is jewellery range made of New Age Metal which is positioned between silver and gold and comes with its unique set of benefits to consumers and investors alike.

This metal is all set to revolutionize the Indian jewellery market. The group will continue to churn out more such ideas and products in the time to come.

Focus on Channel Innovations

The Group has always focused on expanding its reach and acceptance. Over the years after having explored multiple retail formats such as stores, franchisees, shop-in-shops and distribution, the group has very effectively made a mark in the digital space as well, through its exclusive and multi-brand portals as well as through market places. Going forward, growth will come through expansion of modern retail as well as the digital space and newer avenues such as army canteens, duty free stores at airports, in-flight, cruise liners, etc.

Expanding International Presence

Gitanjali plans to increase its international presence by expanding the studded jewellery retail and distribution business worldwide. In the US Samuels plans to expand in 15 key locations in Texas, California, Ohio, Indiana and Utah. This market cluster offers economies of scale for operations and marketing. Samuels is also considering expansion in boutique store formats. Also, the groups Indian brands like Nakshatra & Asmi have been well received in international markets with an Indian diaspora. So the Group will continue to expand and grow these brands globally.

Brand Extension

Gitanjali has leveraged upon the tremendous brand recall its brands enjoy and have extended some brands to include lifestyle categories such as apparels and accessories. Going forward, this segment shall also continue to grow to support the companys online growth.

Opportunities and Threats

The jewellery industry worldwide is evolving and we perceive this as an opportunity to pursue tremendous growth in all the key global markets.

In India approximately 90% of the jewellery purchase is for weddings and investments and the market is mindset driven as jewellery purchase in India is more of a necessity than a luxury. This aspect renders this category as relatively price inelastic.

Also, the advent of the millennial consumer provides a more conducive environment for organized players like Gitanjali. These new age consumers who prefer quality and convenience are the ones who will contribute to major growth of modern retail and digital channels. This offers a huge growth opportunity to players like Gitanjali who are already into this space.

Another opportunity that the company sees is the huge potential in rural India and we intend tapping that market further, with new concepts which will appeal to both, rural entrepreneurs as well as rural consumers.

Further a lot of international markets like Russia, Brazil, Saudi Arabia, etc offer tremendous growth potential for players like Gitanjali and we are well poised to capitalize on this opportunity.

On the other hand, there would still be some factors that could impact demand. These would mainly pertain to macro economic conditions such as the regulatory environment, slow demand, price volatility, etc. These are the key factors which could impact the companys growth and margins.

Human Capital

Gitanjali recognizes its employees as a key asset and has immense faith and confidence in their capability to contribute significantly to the growth of the organization.

The company believes in building a distinctly progressive organization by developing & nurturing competent and highly engaged employees across all levels. Gitanjali empowers its employees and provides them with opportunities to grow along with the organization. The company always strives to ensure that it makes for a great work place.

Internal Controls

The framework for our Roadmap guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable growth.

• People: Provide for a conducive atmosphere for growth where people are inspired to be the best they can.

• Portfolio: Constantly innovate and make pioneering introductions in the branded Jewellery space by offering high-quality, varied branded jewellery options at competitive prices.

• Process: We believe in and adhere to structured operating processes in order to achieve profits and productivity.

• Profit: Focus on value creation and maximize long-term returns to stakeholders while being mindful of our overall responsibilities.

• Productivity: Be a highly effective, lean and fast-moving organization.

In order to ensure the above, the company has adequate internal control systems in place. These govern its internal business processes across departments to ensure operational efficiency, adherence to internal policies, compliance with applicablelaws and regulations, optimum resource and asset utilization, and accurate reporting of financial transactions. The adequacy and efficacy of the control environment is assessed periodically to ensure that its strength is reinforced in keeping with the requirements of a dynamic business environment.

Observations of significance in summarized internal audit reports are reviewed by a qualified and independent Audit Committee on a regular basis.

Potential Risks and Concerns

At Gitanjali, risks are identified and managed through a range of measures and initiatives that have allowed the company to achieve success across markets.

• Macro economic factors such as a downturn and changes in the regulatory environment do play an important role in impacting the companys business. However the companys vertically integrated model and geographically diversified presence immunizes the business against these risks to a great extent.

• Manufacturing risks could arise from the inability to maintain a stable operating environment. The company mitigates this risk by operating state-of-the-art manufacturing units. Also, the geographic diversification of the facilities helps mitigate the risk of region-specific uncertainties in terms of the regulatory environment, calamities - natural or otherwise and any other such issues.

• Competitor risks could arise from a growing presence of local, national and international luxury players in terms of impact on growth and market share. However, Gitanjalis size and integration allow it to capture additional margins across the value chain. Further its innovative spirit constantly enables it to explore and introduce new avenues for growth. Thus helping it to not only preserve but also increase its market share.

• Innovation risks could arise from an inability to innovate which could weaken the sales cycle. Gitanjalis vertical integration allows for it to constantly innovate. The groups innovative initiatives such as design, product & channel innovations help it to mitigate the risk of constantly changing consumer trends.

• Commodity price fluctuation risks could arise on account of changes in the prices of raw materials and inconsistency in the availability of the same. These could adversely impact earnings. However, the Company being a DTC Sightholder manages to procure rough diamonds in a timely and cost-effective manner. The companys strong brands command a premium, which helps absorb price fluctuations to a fair extent. This helps mitigate commodity price fluctuation risks.

• Forex risks could arise from the company being exposed to foreign currency fluctuations which could impact its rupee earnings. Gitanjali imports rough diamonds but since it is a net exporter of diamonds and jewellery, it only needs to hedge the net exposure which it adequately does via hedging instruments such as forward contracts, etc.

• Intellectual Property risks could arise if the Company is unable to protect its intellectual property rights.

The Groups brands are a significant part of its identity. Gitanjali has invested considerable effort in protecting its intellectual property rights, including trademark registrations, designs and domain names.

• Human Capital risks could arise from the non-availability of an adequately trained and skilled workforce. In order to mitigate this risk the Company ensures regular training and mentoring sessions and takes every effort to build and retain a skilled workforce. The company also has processes and systems in place to help assess and rationalize manpower and other operational costs in order to enhance operational efficiencies and sustain and grow in a challenging business environment.

Corporate Performance

Consolidated revenues increased from Rs. 1,415,920.86 lacs in 2015-16 to Rs 1,683,143.97 lacs in 2016-17. The increase in revenues has been due to improved global demand.

Consolidated PBT increased from Rs. 9,782.15 lacs in 2015-16 to Rs. 16,140.10 lacs in 2016-17. Consolidated PAT increased from Rs. 10,460.90 lacs in 2015-16 to Rs. 16,683.38 lacs in 2016-17. This increase was mainly due to better demand coupled with reduction in finance and operational costs.

The Jewellery segment revenues grew from Rs. 1,126,240.29 lacs in 2015-16 to Rs. 1,416,303.43 lacs in 2016-17. The diamond segment revenues declined from Rs. 272,209.08 lacs in 2015-16 to Rs. 240,983.19 lacs in 2016-17.

The overall Indian business was Rs. 471,864.30 lacs in 2016-17 as compared to Rs. 635,652.42 lacs in 2015-16, while the international business improved to Rs. 1,185,422.32 lacs in 2016-17 from Rs. 762,796.95 lacs in 2015-16.

The Depreciation & Amortisation expenses decreased from Rs. 8,101.89 lacs in 2015-16 to Rs. 7,496.47 lacs in 2016-17.

The finance cost decreased from Rs. 72,986.54 lacs in 2015-16 to Rs. 69,394.27 lacs in 2016-17 on account of decrease in long term borrowings from Rs. 67,481.36 lacs in 2015-16 to Rs. 37,630.98 lacs in 2016-17 and increase in short term borrowings from Rs. 746,423.39 lacs in 2015-16 to Rs. 757,400.22 lacs in 2016-17.

Basic & Diluted Earnings per share increased from Rs. 10.32 in 2015-16 to Rs. 14.62 in 2016-17.

The Other Equity grew from Rs. 622,330.14 lacs in 2015-16 to Rs. 644,370.58 lacs in 2016-17.

Inventories increased from Rs. 572,271.00 lacs in 2015-16 to Rs. 717,194.73 lacs in 2016-17.

Trade receivables increased from Rs. 1,154,268.73 lacs in 2015-16 to Rs. 1,282,866.04 lacs in 2016-17.