Motisons Jewellers Ltd Management Discussions

The Gems and Jewellery ("G&J") industry is a broad spectrum industry consisting of varied activities, like manufacture and trading of jewellery consisting of gold jewellery (with varied purities of 22 kt, 18kt & 14 kt), diamond & gem stones studded jewellery and processing of rough diamonds to create cut & polished diamonds. In India certain varieties of traditional jewellery like Polki, Kundan etc. continue to be worn at special occasions mainly weddings.

In addition, silver jewellery, has gained much popularity in recent times due to its variety of designs as well as affordability. The G&J industry continues to remain dependent upon the capabilities of artisans who continue to bring out the magic by their skills. The majority of jewellery in India continues to be handmade though the use of machines is now increasing in the cutting & polishing of diamonds. India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour. The skills of Indian karigars has ensured that it remains the top most country in the world in the field of handmade gold jewellery as well as cutting and polishing of diamonds.

The G&J industry plays a vital role in the Indian economy as it is one of the largest exporters of the country and also provides employment to a very large number of artisans.

As per rough estimates there are almost half a million jewellery retail outlets across the country. Retail jewellery shops are present in every nook and corner of the country. However, majority of these outlets are in the unorganized segment though the share of branded jewellers is increasing steadily. Many organized jewellers are now expanding their operations from a single store to become a multi store chain. As in many other sectors in jewellery also the concept of becoming a franchisee of an established brand is also catching up. This provides the brands an opportunity to expand in an asset light manner.

The strong domestic chains are also opening stores overseas, especially in the Middle East, which has a sizeable Indian diaspora as well as sizeable demand (especially of gold jewellery) from local population as well. In addition there is a demand for traditional jewellery from NRIs all across the world, which is met through exports.

Cumulative FDI inflows in diamond and gold ornaments in India stood at US$ 1,276.52 million between April 2000-March 2024, according to the Department for Promotion of Industry and Internal Trade (DPIIT).

In January 2024, Prime Minister Mr. Narendra Modi inaugurated the commencement of the Bharat Ratnam Mega CFC at the SEEPZ SEZ in Mumbai in virtual mode (remotely). Bharat Ratnam Mega CFC is a Socio-economic project promoted by the Ministry of Commerce and Industry, GJEPC India and SEEPZ SEZ authority to drive exports from the country. This project aims at creating a world-class infrastructure for promoting the inherent skills of the gems & jewellery manufacturing industry. The Mega Common Facilitation Centre provides a supportive and collaborative environment for entrepreneurs, MSMEs and small businesses to grow and thrive.

In September 2023, The Gem & Jewellery Export Promotion Council (GJEPC) has achieved a significant milestone by facilitating Indias first jewellery exports through courier mode from Mumbai. This development represents a significant leap forward in simplifying international trade.

In April 2023, The Gem & Jewellery Export Promotion Council (GJEPC) commences the first- ever Lab-grown Diamond Buyer Seller Meet (BSM) in Surat. The event was inaugurated by Mr. Virendra Singh, ITS, Development Commissioner & Additional DGFT; Mr. Kirit Bhansali, Vice Chairman, GJEPC; Mr. Vijay Mangukiya, Regional Chairman, Gujarat; Mr. Smit Patel, Convener, Lab-grown diamonds committee, GJEPC; Mr. Sabyasachi Ray, ED, GJEPC along with others.

In February 2022, GJPEC organized a four-day Internal Jewellery Show Signature 2022, where 850 exhibitors participated and there were more than 400 international visitors, buyers, and delegations from the US, UAE, Egypt, Nepal, Uzbekistan, and Bangladesh.

In September 2021, Malabar Group invested Rs. 750 crore (US$ 100 million) in a gold refinery and jewellery unit in Hyderabad.

In May 2021, GJEPC and the Embassy of India, Morocco, co-hosted the ‘India Global Connect to better understand the present business climate in the gems and jewellery sector and seek trade prospects for manufacturers, exporters, and importers from both countries.

The GJEPC will organise its first International Gems and Jewellery Show (IGJS) outside the country, in Dubai, from August 14-16, 2021. It will also hold a five-day physical exhibition India International Jewellery Show (IIJS-2021) in Bengaluru from September 15-19, 2021, in the first such event outside Mumbai. GJPEC sources said that >250 buyers have registered and >95 stalls have been booked for Dubai IGJS 2021. There will be 150 booths having products such as plain gold, gold-studded jewellery, diamond-studded jewellery, silver jewellery, loose diamonds, and gemstones.

In June 2021, Tanishq launched antimicrobial jewellery in certain markets as a pilot project. Currently, the range is available in stores across Chennai and Lucknow, with further launches planned in Kolkata and Hyderabad followed by other key markets. Antimicrobial jewellery is being offered in categories such as chains and rings, which feature special-coated layers that self-disinfect the surface and impede any further microbial growth.

In June 2021, the World Gold Council and Gem and Jewellery Export Promotion Council signed an agreement to promote gold jewellery in India. Under the agreement terms, both partners will jointly fund a multi-media marketing campaign that would aim to increase awareness, relevance, and adoption of gold jewellery amongst Indian consumers, especially millennials and Gen Z.

In April 2021, Malabar Gold & Diamonds announced to invest Rs. 1,600 crore (US$ 214 million) in FY22 to launch 56 stores, of which 40 would be in India and 16 across global markets. In India, stores will be opened in Tamil Nadu, Telangana, Andhra Pradesh, Karnataka, Maharashtra, Delhi, West Bengal, Uttar Pradesh, Odisha, and Kerala. In July 2021, the company announced the hiring of >5,000 staff, across its retail operations, brand headquarters and regional offices in the country.

In March 2021, Joyalukkas collaborated with IBM Global Business Services to design, develop and deploy a new cloud-native e-commerce platform across 11 countries including India, the UAE, the US, the UK, Singapore, Malaysia, Bahrain, Qatar, Saudi Arabia, Kuwait, and Oman.

In February 2021, Reliance expanded its e-commerce arm, JioMart, to jewellery with silver coins of 5gm and 10 gm, and gold coins of 1gm, 5gm and 10gm.

Reliances in-house jewellery brand, Reliance Jewels, which has ~93 flagship showrooms and 110 shop-in-shops in 105 cities in the country, will fulfil the orders for the new segment.

Indias gems and jewellery export sector which is one of the largest in the world contributed 4.3% to global jewellery consumption in 2022. The market size of the global gems and jewellery sector is likely to expand to US$ 103.06 billion by 2023. Indias gems and jewellery exports are expected to reach US$ 100 billion by 2027. Globally, India was the top exporter of diamonds with a share of 33% in 2021. India is the second largest gold jewellery consumer in the world and Indias gold demand gold is expected to reach 800 - 900 tonnes in 2024.

According to the Gem and Jewellery Export Promotion Council (GJEPC), Indias gems and jewellery exports in the financial year 2023-2024 (FY24) were $32.02 billion, a 14.94% decline from the previous year. Imports were $20.2 billion, a 15.14% decline from the same period in FY23.

The total export of gold jewellery in 2023-24 was $11140.780 million, compared to US$9538.84 million in 2022-23, a growth of 16.97% and the export of cut and polished diamonds in 2023-24 was $15.96 billion, compared to $22.04 billion in 2023-24, a decline of 27.58% and the gross Imports of cut and polished diamonds in 2023-24 were $1911.0 million compared to $1307.83 million in 2022-23, a growth of 46.12%.

From April-January 2024, Indias gems and jewellery exports were at US$ 26.35 billion. In FY23, cut and polished diamonds accounted for the highest share of exports (49.78%), followed by gold jewellery (35.43%) and silver jewellery (5.17%).

In FY24, the exports of gold jewellery stood at US$ 26.35 billion whereas the imports of gold jewellery stood at US$ 17.85 billion.

During January 2024, the total gross exports of gold jewellery stood at US$ 437.91 million.

In January 2024, India imported gems & jewellery worth US$ 2.26 billion. According to the Gem and Jewellery Export Promotion Council, gold bar imports stood at US$ 444.44 million and Gold jewellery stood at US$ 272.93 million between April-January 2024.

Growth in exports is mainly due to revived import demand in the export market of the US and the fulfilment of orders received by numerous Indian exhibitors during the Virtual Buyer- Seller Meets (VBSMs) conducted by GJEPC. Furthermore, the tie-ups with different embassies and associations, along with various free trade agreements (FTA) with UAE, UK, etc. have helped in the growth of exports of the gems and jewellery sector.

In the fourth quarter of 2022, demand for gold stood at 219.7 tonnes. The second quarter of 2021 was better for businesses as establishments were better prepared for lockdowns compared with 2020. Total jewellery demand in terms of volume increased by 25% YoY to 55 tonnes in the second quarter of 2021.

India has 10 special economic zones (SEZ) for gems & jewellery. These zones have more than 500 manufacturing units, which contribute 30% to the countrys total exports. The Revised

SEZ Act is also expected to boost gems and jewellery exports.

The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the Reserve Bank or Government of India. The Government has made hallmarking mandatory for gold jewellery and artefacts and a period of one year is provided for its implementation.

In the Union Budget 2023-24, the government proposed to increase the import duty on silver dore, bars, and articles to 10% to align them with that of gold and platinum. As per the Union Budget 2021, the Gem and Jewellery Export Promotion Council proposed a reduction in import duty on cut and polished diamonds to 2.5%, from the existing 7.5%, to double exports of gems & jewellery to US$ 70 billion by 2025.

Cumulative FDI inflows in diamond and gold ornaments in India stood at US$ 1,270.63 million between April 2000-December 2023, according to the Department for Promotion of Industry and Internal Trade (DPIIT).

The most profound driver behind the Indian Gems and Jewelry Market is its deep-rooted cultural significance and tradition. Jewelry has been an integral part of Indian culture for centuries. It holds a special place in religious ceremonies, festivals, weddings, and other auspicious occasions. Traditional Indian jewelry, such as Kundan, Polki, Jadau, and temple jewelry, is celebrated for its craftsmanship and symbolic meaning.

The second significant driver is the rising disposable income and aspirational buying patterns among the Indian population. With the countrys economy steadily growing, a burgeoning middle class, and increasing urbanization, more people have access to higher incomes and aspire to invest in jewelry.

Indias Gems and Jewelry Market is not limited to domestic consumption; it plays a crucial role in global trade. The country is one of the worlds largest exporters of gems and jewelry, contributing significantly to foreign exchange earnings. Indian jewelry is highly regarded for its craftsmanship, intricate designs, and competitive pricing.

The export segment serves as a powerful driver of the domestic market. The international reputation of Indian jewelry increases its appeal among domestic consumers. This leads to a rise in the adoption of Western-style jewelry, with Indian brands incorporating global design trends and catering to a diverse clientele, both at home and abroad

The Indian gems and jewellery market faces some challenges, such as high import duties, fluctuating gold prices, lack of standardization, and competition from synthetic and imitation products. The high import duties on gold and other precious metals increase the cost of production and reduce the competitiveness of the industry. The fluctuating gold prices affect the demand and profitability of the industry, as consumers tend to postpone or cancel their purchases when the prices are high. The lack of standardization and certification of the products leads to quality issues and consumer distrust. The competition from synthetic and imitation products, such as lab-grown diamonds and artificial jewellery, poses a threat to the industry, as they offer lower prices and similar appearance to the natural products.

The Company is one of the leading jewellery companies in the organised jewellery retail sector in India. It is engaged in the business of trade, manufacture and sale of gold, diamond, precious stone, gold and diamond studded jewellery as well as silver articles. It offers wide range and variety of gold, diamond and silver jewellery with a focus on certified diamond jewellery to cater not only to wedding jewellery but party and daily wear also.

Based on the geographical areas, the Company was having two operating segments i.e. domestic sales and export sales during the year. The revenue of Rs. 41,670.69/- Lakhs during the year was from the domestic market and revenue of Rs. 5.64/- Lakhs during the year was from the export sales.

India continues to remain worlds largest gold and silver consumer. India is also one of the worlds major silver importers and the worlds largest diamond cutting and polishing center.

Gold is a significant component of the countrys culture, serving as a symbol of wealth and prestige, a store of value and an essential factor of numerous celebrations. Gemstones are also making a big contribution to the shifting fashion trends, particularly among the elite and upper middle classes. Similarly, diamond jewellery is gaining popularity amongst all classes, especially the younger generation which finds it more suitable for daily wear, office wear as well as party wear. Silver jewellery is also looking at a resurgence amongst a certain class of consumers on account of its ethnic designs.

The jewelry market is expected to grow steadily and positively from 2024 to 2030 due to rising consumer demand, technological advancements, and changing consumer preferences. The global jewelry market is projected to reach $310.90 billion in 2024 and grow at a compound annual growth rate (CAGR) of 3.53% from 2024 to 2028. India is the worlds top revenue generator in the jewelry market, and its market is expected to reach $81.26 billion in 2024 and grow at a CAGR of 4.59% from 2024 to 2028.

Here are some factors that may contribute to the growth of the Indian jewelry industry:

Government initiatives: Such as mandatory hallmarking of gold, gold monetization scheme, and reduced import duty on gold and silver.

Growing middle class population.

Increasing women workforce.

Branded jewelry.

Surge in demand for traditional gold and gemstone designs.

Gold is a significant component of the countrys culture, serving as a symbol of wealth and prestige, a store of value and an essential factor of numerous celebrations. Gemstones are also making a big contribution to the shifting fashion trends, particularly among the elite and upper middle classes. Similarly, diamond jewellery is gaining popularity amongst all classes, especially the younger generation which finds it more suitable for daily wear, office wear as well as party wear. Silver jewellery is also looking at a resurgence amongst a certain class of consumers on account of its ethnic designs.

Company has put in place adequate internal control systems commensurate with its size of operations. Companys internal control systems include policies and procedures, IT systems, delegation of authority, segregation of duties, internal audit and review framework, etc. Company has laid down internal financial controls and systems with regard to adherence to Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information.

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 a 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.

Quality Control: Maintaining consistent quality standards is essential in the jewelry industry. Ensuring the authenticity of materials and the quality of craftsmanship is crucial for maintaining consumer trust.

Compliance risk: Those risks associated with the need to comply with Government Laws and regulations. They also apply to the need to act in a manner which stakeholders and customers expect. The Company being into Trade and manufacturing is clouded with much compliance for its operations and has been meticulous in its compliance regime.

Financial risk: Company is in the Gems and Jewellery business and fluctuation in price of commodity in international markets as well as fluctuation of dollar price may impact the entire industry and these are associated with financial structure of the company, its transactions and the financial system in place. Being in jewellery line, the risks of theft and loss is always looming large.

Bullion Risk: The volatility in the gold prices exposes the Company to bullion risk as gold forms approximately 30% to 50% of the cost of the finished product.

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (‘IND AS) specified under Section 133 of the Companies Act, 2013 and the applicable Rules, as amended from time to time and other applicable provisions.

Motisons Jewellers Limited one of the most renowned brands not only in Jaipur but throughout India. Under the Motisons brand, we operate four showrooms across Jaipur. Our jewellery business encompasses a wide range of products, including pieces made of gold, diamond, and kundan. We also offer jewellery crafted from earth, silver, platinum, precious and semi-precious stones and other metals. Additionally, our product line features gold and silver coins, utensils, and various artifacts. Our extensive product portfolio boasts over 300,000 batches of jewellery, including gold, diamond, and other pieces at various price points. With a focus on design and innovation, we excel in recognizing consumer preferences and market trends. Our strengths lie in the intricacy and quality of our designs.

During the year under review, the revenue from operations of the Company on standalone basis increased by 13.79% from Rs. 36,619.60 lakhs to Rs. 41,676.33 lakhs as compared to previous year, despite various adversities.

The summary of standalone financial performance of the Company as compared to previous year is as under: The financial performance of the Company for the Financial Year 2023-24 and 2022-23 are summarised below: (Amount in lacs)

Key financial ratios of the Company, changes therein as compared to previous financial year alongwith explanations for those ratios where change is 25% or more are as under:

The Company considers that its relationship with its employees is vital and ensures that employees feel valued and is endeavouring 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. As on March 31, 2023 the total employee strength of the Company was 165. The industrial relations within the Company have remained harmonious throughout the year.

References - Various industry reports and websites including GJEPC, IBEF etc.