Golkunda Diamond Management Discussions


Global Economy

The global economy experienced a slowdown in 2022-23 due to high inflation rate, tightening financial conditions, increasing interest rates, rising geopolitical tensions, ongoing Russia and Ukraine war and some ongoing effects of Covid-19, as a result of these the global economy could only grow by 3.2% in 2022. With most of these challenges continuing in 2023, the global economy is projected by IMF to grow at 2.8% in 2023 which will be one of weakest growth rates since 2001. Concern over slowdowns in major economies remain, with recent troubles in banking sector aggravating worries that runaway inflation and tight monetary policy would hamper growth and financial investments. As per IMF close to 90% advanced economies will experience slowing growth this year.

Indian Economy

The Indian economy demonstrated resilience despite challenges in the global environment on the back of strong demand, support from Government policies and strong banking system. As per World Bank report of April 2023, India was one of the fastest growing economies in the world in 2022-23 at 7% growth. Outlook for lndian economy remains positive for 2023-24 with projected growth at 6.3%. IMFs bi-annual World Economic Outlook projects lndias retail inflation to ease in 2023-24 to 4.9% from 6.7% in FY 2022-23 which will help improve demand and the discretionary expenditure. lndias direct and indirect tax collections were robust in 2022-23. Direct tax collections increased by 17.63% and indirect tax collections increased by 22% over the previous year. Merchandise and service exports estimated at US$ 765 billion jumped by 16% during the year 2022-23. IMDs prediction of ‘normal rains during the current year at 96% of long period average will be good for agricultural sector and rural economy of lndia. lncreased focus on infrastructure development by the Government of lndia and affordable data pricing has helped the rural and semi urban areas not only in terms of improved employment opportunities and income source but has also brought them closer to urban centres and thereby increasing aspirations for better life style. Rural consumption of FMCG products grew by 8.9% during 2022-23 which indicates increased preference towards quality products. Changes in the weather pattern with increased unseasonal spells of heavy rains and larger periods of heatwaves during the summer months may however, have a negative impact on some sectors of the economy. With signs of resurgence of Covid-19 pandemic virus, the same needs to be closely monitored with increased preventive steps to control the spread so as not to adversely affect the economic growth in 2023-24.

Industry Structure and Developments:

The Company is a part of an Industry, which largely operates through unorganized constituents. However, unlike the industry, the Company has attempted to operate through as systematic and organized manner as possible. However, since Diamonds and Jewellery is one industry, in which India holds, commendable position in the world, akin to the software industry, one can look forward to more international involvement coming up in this industry.

Opportunities and Threats:

Following can be termed as the opportunities / strengths of the Company:

• Induction of widely experienced and specialized personnel on the Board.

• Good combination of technical as well as advisory personnel in the management.

• More and more benefits and exemptions are likely to come in the way of exports and Special Economic Zones and the Company, having commendable exports and being situated in SEEPZ-SEZ, is likely to receive the advantage of the same.

• Some of the world retail majors have decided sometime back to source part of their requirements from India. This shall further the growth of the Diamond industry in India.

• The unfavorable government policies cut throat competition amongst manufacturers and exporters remains major concerns for the Gems and Jewellery Business.

Outlook:

The Company has done reasonable in the current year and expects to achieve a really good percentage of market share in the Diamond manufacturing and Jewellery marketing fields. The outlook for the Company can therefore be termed as optimistic and expects higher growth then inflation and average grow thin the industry.

Growth of the Gems and Jewellery Industry is expected to be moderate to better in the years to come depending on the policies of the Government. However Gems and Jewellery Industry is seeing robust growth in the years to come. The Growth rate of the Gems and Jewellery Industry is closely related to the growth of the other Sector and hence movements and developments in the other sectors would also indirectly affect the future of Gems and Jewellery Industry.

Changes in Key Financial Ratios:

Pursuant to provisions of Regulation 34 (3) of SEBI (LODR) Regulation, 2015 read with Schedule V part B(1) details of changes in Key Financial Ratios is given hereunder:

S. NO. Key Financial Ratio FY 2022-23 *FY 2021-22
1. Inventory Turnover Ratio 9.04 8.91
2. Current Ratio 1.67 1.58
3. Debt Equity Ratio 1.33 1.62
4. Debt service coverage ratio 3.06 2.67
5. Return on equity ratio 0.23 0.22
6. Trade receivables turnover ratio 3.97 5.15
7. Trade payables turnover ratio 13.16 16.29
8. Net capital turnover ratio 5.81 7.21
9. Net profit ratio 4.15 3.15
10 Return on capital employed 32.29 31.89
11. Return on Investment 32.29 31.89

*Previous years Figures have been regrouped / rearranged wherever necessary

Risks and Concerns:

Following can be some of the risks and concerns the Company needs to be wary of:

• The largely unorganized structure of the market can affect the systematic functioning of the Company.

• Political instability, which has at tremendous impact on the capital markets.

• Likely opening up of the economy, which can be a double-edge sword.

• The Diamond market in India is heavily influenced by the US Markets.

• The major income component of the Company being exports, changes in economies or government policies of the countries to which the Company is exporting may also affect the operations of the Company.

• Increasing competition among the Indian Exporters in this industry.

• Internal Control Systems and their Adequacy:

The Company has adequate internal control procedures commensurate with the size of the Company and the nature of its business for purchase of stores, raw materials, components, plant and machinery, equipment and other assets, and for the sale of goods.

The Company also has in place an Audit Committee to have a periodic overview of the internal control procedures of the Company. The Audit committee is accessible at all times to the employees of the Company for any improvement to be recommended in the procedures in place.

Discussion on Financial Performance of the Company:

The financial performance of the Company has inclined in the year under review.

The sales were Rs.2,33,44,40,217 /- as compared to Rs. 2,38,06,11,579 /- in the previous year. The Profit after tax in the current year was Rs.9,42,64,854 /- as compared to Rs. 7,37,13,305/- in the previous year.

Export performance and Foreign Exchange earnings:

The Company is making contribution other foreign exchange earnings by the Country in view of the fact that the Export and Foreign exchange earnings stood at Rs.2,26,04,99,516/- during the financial year under review.

Industrial Relations and Human Resources:

The Company considers that its relationship with its employees is vital and ensures that employees feel valued and is endeavoring to create an environment and culture within which every employee can put his best efforts and maximize his contribution.

The Company ensures that all its employees remain competent through education, skills, training and experience as necessary. The Company has had cordial relations between the management and employees and an atmosphere of harmonious working to achieve the business objectives of the Company throughout the year. The Company is poised to motivate each of its employees to perform to the fullest extent possible and to appropriately reward their excellence

Cautionary Note:

Statements in this report and Corporate Governance Report read together with the Directors Report and financial statement describing the Companys objectives, projections, estimates, expectations and predictions, may be "forward looking statements". Actual results may differ from those expressed or implied due to variations in prices of raw materials, seasonal demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and other incidental factors.