Mini Diamonds (India) Ltd Management Discussions.

INDUSTRY OVERVIEW

The Gems and Jewellery sector plays a significant role in the Indian economy, contributing around 7 per cent of the countrys GDP. One of the fastest growing sectors, it 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.

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. Moreover, India exports 95 per cent of the worlds diamonds, (Source: Gems and Jewellery Export promotion Council (GJEPC)). Indias Gems and Jewellery sector has been contributing in a big way to the countrys foreign exchange earnings (FEEs). The Government of India has viewed the sector as a thrust area for export promotion. The Indian government presently allows 100 per cent Foreign Direct Investment (FDI) in the sector through the automatic route.

India is one of the largest centres for cut and polished diamonds. 9 of 10 diamonds in the world are cut and polished in India and Japan is the third largest consumer of polished diamonds and one of the leading consumers of gold, precious stones and studded jewellery in the world.

OPPORTUNITIES & THREATS

India is a country where jewellery and precious metal shows the status of the person, thus rendering the demand for our product relatively price inelastic. Also, there is tremendous opportunity for organized players like Mini Diamonds (India) Limited to grow as consumer tastes and preferences evolve. The new age consumer prefers convenience and quality. Although traditional jewellers still occupies 90% of the industry. This offers a huge growth opportunity players like us.

However, the jewellery industry is highly capital intensive due to its long working capital and realisation cycle. A few recent incidents of financial defaults have created a liquidity squeeze in the industry, prompting banks and financial institutions to reduce their exposure to industry players. This liquidity crunch has caused a slowdown in profitability and growth of the jewellery industry.

Investments/Developments opportunities

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.

The cumulative Foreign Direct Investment (FDI) inflows in diamond and gold ornaments in the period April 2000-September 2017 were US$ 1,045.58 million, according to Department of Industrial Policy and Promotion (DIPP).

Government Initiatives

India has signed a Memorandum of Understanding (MoU) with Russia to source data on diamond trade between the two countries. India is the top global processor of diamonds, while Russia is the largest rough diamond producer. The 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.

The Bureau of Indian Standards (BIS) has revised the standard on gold hallmarking in India from January 2018. The gold jewellery hallmark will now carry a BIS mark, purity in carat and fitness as well as the units identification and the jewellers identification mark. The move is aimed at ensuring a quality check on gold jewellery.

Challenges faced by the Indian Gems & Jewellery Industry

• High dependence on Imports All raw materials are imported

• Volatile raw material prices

• Limited financing options for the industry

• Limited Research and Technology Adoption

• Falling demand at any point in time would stall the expansion plans of organized retail players.

• Competing luxury products may eat into jewellery sales.

• Risk of Talent Shortage

Development Plans

Our strategic intent is to leverage upon business model and our competitive strength to build brands and products that offer quality, trust and value to consumers. The focus has always been and continues to be value creation.

Outlook

It can be said that the prospects of the Indian gems and jewellery market is quite promising with increasing focus of the world towards the quality of gems and jewellery products and better purchasing power of the people in India. The industry derives its strength from availability of cheap labour and strong demand from the domestic market. India is one of the leading players in the Gems and Jewellery market. Over the long term, diamond jewellery demand is likely to witness consistent growth driven by evolving lifestyles, higher disposable incomes, changing tastes and preferences, advent of the online platform and rising demand from tier 2, tier 3 cities and the rural markets

Corporate Profile

Mini Diamonds (India) Limited is a Public Limited company incorporated on 12th February 1987. It is classified as Non-govt Company and is registered at Registrar of Companies, Mumbai. Its authorized and paid up share capital is Rs. 3,50,00,000 and 3,45,00,000 with a turnover of around $10 Million. The company is involved in cutting and polishing of Diamonds.

Risk Management

Risk is an important element of corporate functioning and governance. Your Company has established the process of identifying, analyzing and treating risks, which could prevent the Company from effectively achieving its objectives. It ensures that all the risks are timely defined and mitigated in accordance with the well structured risk management process.

Internal Control System

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: Be a great place to work for where people are inspired to be the best they can.

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

• Profit: Maximize long-term return 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 are to supervise its internal business processes across departments to ensure operational efficiency, compliance with internal policies, applicable laws and regulations, optimum resource and asset utilization, and accurate reporting of financial transactions. The adequacy and efficacy of the control environment is analyzed periodically to ensure that its robustness 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.

Human Resources:

People are the most valued assets of the Company. They work individually and collectively contributing to the achievement of the objectives of the business. The relation between the employees and the Company had been cordial throughout the year. Your Companys corporate culture and the vision and values help unite the workforce and provide standards for how your Company conducts the business. There are no permanent employees on the roll of the Company, however the Company employees people on a temporary or freelance basis.

Code of Conduct:

The Board of Directors has prescribed norms of ethical practices and code of conduct for the Directors of the Company.

The code of Conduct of the Company lays down the principles, values, standards and rules of behaviour that guide the decisions, procedures and systems of the Company in a way that:- (a) it contributes to the welfare of its stakeholders, and (b) respects the rights of all constituents affected by its operations.

The Code of Conduct is reviewed from time to time by the Board.

Financial Performance of the Company

During the year under review your Company has reported a Total Revenue of INR 1,11,40,18,443 /- out of which non-operating revenue is INR 5,23,796 /- which has decreased by INR 2,58,648/- as compared to the previous year.

Significant changes in the key financial ratios

Financial 2018-19 2017-18 Changes (in %) Reason if the %
Ratio change is more than 25%
Debtor 1.45 1.54 -0.09 N.A
Turnover
Inventory 9.31 -7.91 1.85 N.A
Turnover
Interest 0.08 1.20 -13.93 N.A
Coverage
Ratio
Current Ratio 1.07 1.04 0.02 N.A
Debt Equity 13.29 16.01 -0.21 N.A
Ratio
Operating -0.01 0.42 32.59 Due to fluctuation in the exchange price of dollar.
Profit Margin
(%)
Net profit -0.01 0.002 1.24 N.A
Margin (%)
Return on Net -0.18 0.04 1.22 The change in the Return on Net Worth has been due to the slump in the profits of the Company.
Worth