Goenka Diamond & Jewels Ltd Management Discussions.

The company is promoted by Mr. Nandlal Goenka who has around 46 years of experience in the gems and jewellery business and his son, Mr. Navneet Goenka who is supremely qualified and has acquired professional qualifications in grading and jewellery designing from Gemological Institute of America, New York.

OVERVIEW

The company is in the business of cutting and polishing of diamonds and manufacturing and retailing of diamond jewellery. The company was initially in the business of export of coloured stones and has since then expanded into diamond trade in 1994 and manufacturing of diamond studded jewellery in 2003.

Consistent supply of rough diamonds of desired quality, at a competitive price is one of the critical success factors of the companys business. The company supplies the polished diamonds primarily to wholesalers, jewellery manufacturers, traders and retailers based in India The company was in the export business in earlier years , however, the company has not been able to perform well during the recent past including the year under review.

INDUSTRY STRUCTURE AND DEVELOPMENTS

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. 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 are able to fulfil their changing demands better than the local 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.

SEGMENT WISE PERFORMANCE OF THE COMPANY

The company has two segments Diamond and Jewelley. Please refer to note no. 34 to Financial Statements for segment wise performance.

OUTLOOK

For Financial Year 2019 - 2020, The Company will mainly focus on taking all possible efforts to recover old trade receivables. It has already initiated legal action where ever considered necessary. With regard to recall of loans, liquidity crunch and non-availability of finance, the Company will take active steps to revive its business operations; and intends to take further steps for settlement of loans, including one time settlement of loans with banks and takeover of loan by other institutions.

RISK AND CONCERNS

Looking at the scenario in India in case of gems and jewellery industry, Risks associated with operating in a particular industry and include risks arising from demand changes, changes in customers choice and industry changes. Gold price fluctuation risk could arise on account of frequent changes in gold prices either up or downside momentum. It could have adverse impact on earnings. Forex risks could arise from the company being exposed to foreign currency fluctuations which could impact its rupee earnings. Diamond prices usually are not very volatile over a long period of time.

The Company manages monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives. The Companys management systems, organizational structures, processes standards, code of conduct and behaviors govern how the company conducts the business and manages associated trade risks.

FACTORS AFFECTING OUR OPERATIONS

Gems and Jewellery Industry

The Gems and Jewellery Industry is one of the key growth drivers for the Indian economy and effectively contribute to the countrys GDP. The jewellery sector attracts huge competition owing to significant presence of unorganised players. In gems and jewellery industry, sluggish sales of products due to seasonal changes may affect profitability of the Company. The Gems and Jewellery sector plays a significant role in the Indian economy.

The Company may be exposed to Foreign Exchange Fluctuation

The recent past has witnessed a high volatility in the foreign exchange market. However, the company has not been able to perform well during the recent past including the year under review. In view of the fact that diamond companies have to generally extend a long credit period to its international customers, volatility in foreign exchange rates may adversely affect the revenue.

High Working Capital Intensive Industry vis-a-vis Low Priority Sector for Bankers

In the diamond industry, there is a norm of longer credit period and high inventory levels, considering which it becomes high working capital intensive industry, whereas it is a low priority sector from the perspective of bankers. Due to financial crunch company is not in position to avail further working capital facilities which is adversely affecting its operations.

Competition

Since the company deals in larger size diamonds; and most of the diamond players deal in smaller size diamonds, this reduces the level of competition in the market.

Global Economic Scenario

There is uncertainty in the Global Economy for Diamond Industry which affects the business operations of the Company

Human Capital

Company recognizes their employees to be a significant part of its accomplishments. The Company helps employees foster ambitions and sees them improve through their learning and skill development. The Companys employees are well motivated through the performance rewarding programme.

Witnessing Changing pattern in Consumer preferences

India is one of the leading players in the Gems and Jewellery. India exports of gems and jewellery are composed of a variety of items like cut and polished diamonds, gold and silver jewellery, gold medallions and coins, coloured gemstones, and rough diamonds etc. India is one of the largest gold jewellery exporters of the world.

Internal Controls

The company adheres to the internal control and procedures laid down in respective policies of the company.

The system supervises its internal business processes across departments to ensure operational efficiency, cost reduction, accountability, compliance with internal policies, applicable laws and regulation, optimum resources and assets utilization and accurate reporting of financial transactions. These transactions are well authorized, recorded and reported to the management. The company follows all Indian Accounting Standard (Ind As) for maintaining the books of accounts and reporting of financial statements. The Audit Committee of the Board of Directors, comprising of Non-Executive Independent Directors review the quarterly Internal Audit Report provided by Internal Auditor of the Company.

Cautionary Statement

Statements in this report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions are within the meaning of applicable laws or regulations. These statements are based on certain assumptions and reasonable expectation of future events. Actual results could however differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include changes in the government regulations, tax laws, statues and other incidental factors as applicable to the company.

Acknowledgement

Your Directors take this opportunity to express their deep sense of gratitude to the vendors, business associates, employees, investors and banks for their continued support and co-operation during the year under review.

On behalf of the Board of Directors
For Goenka Diamond and Jewels Limited
NANDLAL GOENKA NAVNEET GOENKA
Chairman Vice Chairman & Managing Director
Place: Mumbai
Date: August 14, 2019