Naksh Precious Metals Ltd Management Discussions

Naksh Precious Metals Ltd. stands at the forefront of both the jewelry and base metals industries, renowned for its exceptional craftsmanship and comprehensive product range. As a prominent manufacturer and distributor, Naksh Precious Metals Ltd. excels in creating and supplying exquisite jewelry products crafted from gold, silver, and diamonds. Our extensive jewelry collection includes necklaces, bangles, rings, chains, earrings, and more, each meticulously designed to embody elegance and luxury.

In addition to our prowess in jewelry manufacturing, Naksh Precious Metals Ltd. is actively involved in the production and trading of base metals and steel products. Our offerings encompass a wide spectrum, ranging from roofing sheets, nails, nut bolts, squares and rounded pipes, springs, CRC and SRC coils, billets, angles, ball bearings, to essential metals like zinc and nickel. This diversified portfolio ensures that we cater comprehensively to the needs of diverse industries and markets.

INDUSTRY OVERVIEW

The Gems and Jewellery (“G&J”) industry is a broad-spectrum industry consisting of varied activities, like processing of rough diamonds to create cut & polished diamonds, manufacture of jewellery consisting of gold jewellery (with varied purities of 22 kt, 18kt & 14 kt), diamond & gemstones studded jewellery. 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 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.

THE GLOBAL ECONOMY

The global economy is expected to remain resilient in 2025, with a projected growth rate of 2.8% according to the United Nations World Economic Situation and Prospects (WESP) 2025 report, unchanged from 2024. This steady growth is attributed to the rebounding of Chinas economy, gradual unwinding of supply chains, and recent decline in energy and food prices. However, uncertainty looms large due to geopolitical conflicts, rising trade tensions, and elevated borrowing costs. The International Monetary Fund (IMF) projects global growth at 3.0% for 2025, while the Organisation for Economic Co-operation and Development (OECD) forecasts GDP growth of 3.3% in 2025 and 3.3% in 2026.

INDIAN ECONOMY

Indias economy is expected to maintain its growth momentum, with the International Monetary Fund (IMF) projecting a growth rate of 6.2% in 2025 and 6.3% in 2026. This makes India the fastest-growing major economy globally, driven by strong domestic consumption, infrastructure development, and growth-enhancing policies. The countrys GDP is estimated to reach $4,187.017 billion in 2025, making it the fourth-largest economy globally, surpassing Japan. India is also expected to become the third-largest economy by 2028, overtaking Germany with a GDP of $5,584.476 billion.

The IMFs projections highlight Indias resilience, with a growth outlook supported by firm private consumption, particularly in rural areas. The countrys economy is expected to expand significantly, with some forecasts suggesting it could become the second-largest economy in purchasing power parity (PPP) terms by 2038, with a projected GDP of $34.2 trillion. Indias growth trajectory is reinforced by structural reforms, resilient fundamentals, and a favorable demographic profile, with a median age of 28.8 years in 2025.

OPPURTUNITIES

The traditional demand for jewellery for special occasions like weddings and festivals continues to remain strong. India not only has a large population in absolute numbers but has a high percentage of population in the younger age group which ensures that a large number of marriages continue to happen every year. As per a rough estimate approximately 10 million marriages take place every year in India, which ensures a substantial expenditure on jewellery and related items.

In addition to the conventional purchases at the time of weddings and festivals, jewellery has also become a life style and fashion accessory, especially among the urban working-class women. The demand for jewellery is seen to be increasing amongst the younger generations also. Now even the conventional men accessories like cuff links, tie pins etc. are also becoming bejewelled. Further, rising quality awareness of customers has also provided a fillip to the organized retail segment, which is banking on its ‘reliability and ‘quality to compete against the highly fragmented unorganized jewellers.

THREATS

Raw materials play a major role in the Indian gems and jewellery industry. India imports nearly 90% of the raw materials, especially rough diamonds and gold bars. Therefore, the industry is vulnerable to any adverse regulations that may limit the raw material supply of diamond and gold jewellery. Excess imports can also cause worry for India when exports make fewer earnings in the foreign exchange.

Record high inflation, tightening of monetary policies and fear of recession are major concerns for the gems and jewellery sector. Persistent inflationary pressure and the rising cost of living have impacted consumer sentiment and reduced spending on luxury and jewellery products.

Indian gems and jewellery industry is highly fragmented and unorganized and is majorly dominated by small jewellery shops that are run by families for years. More customers prefer these shops as the price of jewellery is usually higher in the organised market.

SEGMENT-WISE/PRODUCT-WISE PERFORMANCE

Indias gems and jewelry exports declined by 4.62% in April 2025, reaching $2,037.06 million. This decline is attributed to various factors, including the Trump-era tariffs and ongoing geopolitical tensions, such as the US-China trade war and the Russia-Ukraine conflict, which continue to disrupt global trade flows. Segment-wise, gold jewelry exports dropped by 5.41% to $684.51 million, while cut and polished diamonds declined by 6.12% to $1,108.74 million. Conversely, colored gemstone exports rose 11.95% to $27.76 million, and polished lab-grown diamond exports edged up 0.41% to $110.74 million.

The industry faces challenges from weak demand in key markets like the US and China, impacting cut and polished diamond exports. Additionally, rising gold prices have affected consumer buying trends, contributing to the decline in gold jewelry exports. Despite these challenges, there is hope for recovery, particularly if recent talks between the US and China lead to eased tariffs and stability in the market. The gems and jewelry sector is a significant contributor to Indias economy, accounting for 7% of the countrys GDP and employing over five million skilled and semi-skilled workers.

OUTLOOK

Indias economic outlook for 2025 remains positive, driven by strong fundamentals and strategic government initiatives. The International Monetary Fund (IMF) has projected Indias economic growth at 6.4% for both 2025 and 2026, solidifying its position as the worlds fastest-growing major economy. The Reserve Bank of India (RBI) has revised its real GDP growth forecast for FY25 to 7.2% from the previous 7%, driven by improved rural and urban demand, bolstered by monsoon predictions. Indias growth will be supported by firm private consumption, particularly in rural areas, and infrastructure development.

The governments ongoing focus on capital expenditure and fiscal consolidation will also contribute to the positive growth outlook. Headline inflation is expected to average 4.2% year-on-year in 2025, with food inflation projected at 4.6%. The RBIs monetary policy stance and proactive supply management measures have kept inflation largely within the tolerance band. With its strong economic fundamentals, massive demographic strengths, and multiple growth levers in place, India is poised to become the third-largest economy by 2027 in USD terms at market exchange rates.

RISKS MANAGEMENT:

The Company, like any other enterprise, is exposed to business risk which can be internal risks as well as external risks. Any unexpected changes in regulatory framework pertaining to fiscal benefits and other related issues can affect our operations and profitability. A key factor in determining a Companys capacity to the Company to take risks and manage them effectively and efficiently. However, the Company is well aware of the above risks and as part of business strategy has put in a mechanism to ensure that they are mitigated with timely action.

The Company has an elaborate Risk Management Framework, which is designed to enable risks to be identified, assessed and mitigated appropriately. The Board of Directors of the Company has entrusted to oversee implementation/ monitoring of Risk Management Plan and Policy; and continually obtaining reasonable assurance from management that all known and emerging risks have been identified and mitigated or managed. In the opinion of the Board of Directors, none of these risks affect and/or threaten the existence of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of operations. The comprehensive system enables efficient operations, optimal resource utilization, safeguard of assets and compliance with applicable laws and regulations. These control measures strengthen the Company and protect it from loss or unauthorized use of assets by way of adequate checks and balances. The Company authorizes records and reports all transactions.

The scope and authority of the Internal Audit function is well defined, and an independent firm of Chartered Accountants serves as the internal auditor to execute the internal audit function. The management and audit committee of the Board observe and then recommend corrective measures, based on such audits to improve operations.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Companys financial performance for the year ended March 31, 2025, is summarized below.

(Amount in Lakhs)

REVIEW OF OPERATIONS:

The turnover for the year was Rs. 235.14 Lakhs on standalone basis as compared to Rs. 49.34 Lakhs in the previous year. The Earnings before Interest, Depreciation and Tax was Rs. 49.05 Lakhs in previous year as compared Loss of Rs. 9.74 Lakhs in current year.

HUMAN RESOURCES:

Your Company considers its Human Resources as the key to achieve its objectives. Keeping this in view, your Company takes utmost care to attract and retain quality employees. The employees are sufficiently empowered, and such work environment propels them to achieve higher levels of performance. The unflinching commitment of the employees is the driving force behind the Companys vision. Your Company appreciates the spirit of its dedicated employees.

DETAILS ON SIGNIFICANT CHANGES

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking statements within the meaning of applicable laws and regulations and based on the fact that the Resolution Plan for the Company has been implemented. These statements have been based on current expectations and projections about future events. Wherever possible, all precautions have been taken to identify such statements by using words such as ‘anticipate, ‘estimate, ‘expect, ‘project, intend, ‘plan, ‘believe and words of similar substance in connection with any discussion of future performance. Such statements, however, involve known and unknown risks, significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other costs and may cause actual results to differ materially. There is no certainty that these forward-looking statements will be realized, although due care has been taken in making these assumptions. There is no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.