Laxmi Goldorna House Ltd Management Discussions

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Laxmi Goldorna House Limited

Ahmedabad

GEMS AND JEWELLERY INDUSTRY

Growing demand:

• Indias gems and jewellery exports reached US$ 39.45 billion in 2021-22, a 54.68% rise from the previous year.
• In 2022, India ranks first among the top exporters in cut & polished diamonds, and second in gold jewellery, silver jewellery and lab-grown diamonds.

Increasing Investments:

• The total foreign direct investment (FDI) inflows in the gems and jewellery sector during 2021-22 stood at US$ 58.77 billion.
• In September 2021, Malbar Group invested Rs. 750 Crore (US$ 100 million) in a gold refinery and jewellery unit in Hyderabad.

Policy Support /Government Initiatives

• The Government has permitted 100% FDI under the automatic route** in this sector.
• The Government has reduced custom duty on cut and polished diamond and colored gemstones from 7.5% to 5% and NIL.

Attractive Opportunities

• Indias gold demand will witness a sharp upswing to top 800 tonnes in 2023.
• In the fourth quarter of 2022 demand for gold rose stood at 219.7 tonnes.
• The FDI inflows in the gems and jewellery sector increased by 60.78% in FY22 on a year-over- year basis.

(Source - https://www.ibef.org/industry/gems-jewellery-india.aspx)

INDIAN REAL ESTATE INDUSTRY

The real estate sector is one of the most globally recognized sectors. It comprises of four sub-sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

Demand

• According to Savills India, real estate demand for data centres is expected to increase by 15-18 million sq. ft. by 2025
• The sales in the luxury residential market scaled by 151% year-over-year (y-o-y) in the quarter from January-March, 2023
• Organized retail real estate stock is expected to increase by 28% to 82 million sq. ft. by 2023.

Opportunities

• As per ICRA estimates, Indian firms are expected to raise >Rs. 3.5 trillion (US$ 48 billion) through infrastructure and real estate investment trusts in 2022, as compared with raised funds worth US$ 29 billion to date;
• Private market investor, Blackstone, which has significantly invested in the Indian real estate sector (worth Rs. 3.8 lakh crore (US$ 50 billion), is seeking to invest an additional Rs. 1.7 lakh crore (US$ 22 billion) by 2030.

Policy Support

• Driven by increasing transparency and returns, theres a surge in private investment in the sector.
• The Government has allowed FDI of up to 100% for townships and settlements development projects;
• In the Union Budget 2023-24, a commitment of Rs. 79,000 Crore (US$ 9.64 billion) for PM Awas Yojana has been announced, which represents a 66% increase compared to the last year.

Investments

• The Private Equity Investments in Indias real estate sector, stood at US$ 4.2 billion in 2023.
• FDI in the sector (including construction development & activities) stood at US$ 55.5 billion from April 2000-December 2022.

Road Ahead

The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, which will allow all kind of investors to invest in the Indian real estate market. It would create an opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in the Indian market in the coming years. Responding to an increasingly well-informed consumer base and bearing in mind the aspect of globalisation, Indian real estate developers have shifted gears and accepted fresh challenges. The most marked change has been the shift from family-owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also

investing in centralized processes to source material and organize manpower and hiring qualified professionals in areas like project management, architecture and engineering.

The residential sector is expected to grow significantly, with the central government aiming to build 20 million affordable houses in urban areas across the country by 2022, under the ambitious Pradhan Mantri Awas Yojana (PMAY) scheme of the Union Ministry of Housing and Urban Affairs. Expected growth in the number of housing units in urban areas will increase the demand for commercial and retail office space.

The current shortage of housing in urban areas is estimated to be ~10 million units. An additional 25 million units of affordable housing are required by 2030 to meet the growth in the countrys urban population.

The growing flow of FDI in Indian real estate is encouraging increased transparency. Developers, in order to attract funding, have revamped their accounting and management systems to meet due diligence standards. Indian real estate is expected to attract a substantial amount of FDI in the next two years with US$ 8 billion capital infusion by FY22.

(Source - https://www.ibef.org/industry/real-estate-india.aspx)

SWOT ANALYSIS OF OUR COMPANY

Strengths

• Experienced and resourceful promoters having diversified business interest
• Availability of raw material in the local market or purchasing of old jewels
• Availability of Low cost and skilled technical and professional Manpower
• Comfortable capital structure with below unity gearing level
• High-quality jewellery at competitive prices

Weaknesses

• Moderate scale of operations and thin profit margins
• Weak debt coverage indicators
• Highly working capital-intensive nature of operation leading to 90% utilization of working capital bank borrowings.
• Project funding and execution risk
• Susceptibility of margins to volatile raw material prices
• Presence in highly fragmented, nature driven and competitive gems & jewellery industry

Opportunities

• Encasing the reputation for development in another area.
• High and increasing purchasing power of the people
• Expansion of business in real estate activities

Threats

• The injection of fresh, creative designs in a somewhat stagnant industry
• Fluctuation in Gold prices
• High entry cost in the newer markets.
• Competition from family owned business in this sector
• Competition with big real estates groups.

RISKS AND CONCERNS

The Indian economy is on a high growth trajectory, with several favourable macroeconomic indicators supporting the growth momentum. The jewellery industry is expected to benefit from the recent developments in the economy. Higher income in the hands of farmers and rural population, driven by normal monsoon forecast, will translate into robust spending and consumption, thus fuelling the demand for jewellery. Frequent regulatory changes and fluctuations in gold and commodity prices may pose a challenge to the Companys margins. Presence of unorganised players and expansion of regional players results in intense competition in the jewellery industry.

FINANCIAL PERFORMANCE

The Companys financial performance for the year ended on March 31, 2023 is as below:

(Rs.)

Particulars	2022-23	2021-22
Total Revenue	60,90,63,170	59,88,53,728
Total Expenditure	60,35,34,762	59,71,68,651
Profit /(Loss) Before Tax	55,28,408	16,85,077
Less: Current Tax	14,05,949	(4,50,000)

 

Deferred Tax	1,65,515	24,247
Profit /(Loss) after Taxation	39,56,945	12,59,324
Balance carried to Balance Sheet	39,56,945	12,59,324
Earnings Per Share(EPS)
Basic	0.19	0.06
Diluted	0.19	0.06

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has implemented proper system for safeguarding the operations/business of the company, through which the assets are verified and frauds, errors are reduced and accounts, information connected to it are maintained such, so as to timely completion of the statements. The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information. The company gets internal audit and verification done at regular intervals. The requirement of having internal auditor compulsory by statue in case of listed and other classes of companies as prescribed shall further strengthen the internal control measures of company.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS FRONT

Your Company has undertaken employees development initiatives, which have very positive impact on the morale and team spirit of the employees. The company has continued to give special attention to human resources and overall development.

CAUTIONARY STATEMENT

Certain statements in the reports of the Board of Directors and Managements discussions and analysis may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied since Companys operations are influence by many external and internal factors beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any of these statements on the basis of any subsequent developments, information or events.

Registered Office: Laxmi House, Opp. Bandharano Khancho, M. G. Haveli Road, Manekchowk, Ahmedabad – 380001, Gujarat, India	By Order of the Board For Laxmi Goldorna House Limited
Jayesh Chinubhai Shah Managing Director DIN: 02479665		Rupalben Jayeshkumar Shah Whole Time Director DIN: 02479662

Date: 28^th August, 2023 Place: Ahmedabad, Gujarat