INDUSTRY REVIEW: INDIAN GEMS AND JEWELLERY INDUSTRY
Indias gems and jewellery export sector which is one of the largest in the world
contributed ~27% to global jewellery consumption in 2019. 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 will witness a sharp upswing to
top 800 tonnes in 2023.
From April-March 2023, Indias gems and jewellery exports were at US$ 37.95 billion. In
FY23, cut and polished diamonds accounted for the highest share of exports
(58.83%), followed by gold jewellery (25.14%) and silver jewellery (7.82%).
From April- March 2023, the exports of gold jewellery stood at US$ 9.42 billion.
Being amongst the fastest-growing economies in the world, India is emerging as the
preferred destination for the gems and jewellery industry. The ready availability of
highly skilled labour and strong support by the government will aid the growth of the
Indian gems and jewellery sector. India is the global leader in the cutting and polishing
of diamonds. Indias Gems and Jewellery sector has been a major foreign exchange generator
for the country. Cumulative FDI inflows in diamond and gold ornaments in India stood at
US$
1,213.05 million between April 2000-March 2022, according to the Department for
Promotion of Industry and Internal Trade (DPIIT). The Sector is globally recognized for
the craftsmanship and variety that it offers. In the coming years, growth in Gems &
Jewellery industry would be largely contributed by the development of large retailers /
brands. Established brands are guiding the organised market and are opening opportunities
to grow. Increasing penetration of organised players provide variety in terms of products
and designs. Online sale is expected to account for 1-2% of the fine jewellery segment
soon.
Industry Outlook
The Government of India has viewed the sector as a thrust area for export promotion,
considering its tremendous contribution and growth potential. The Government has
undertaken various measures recently to promote investment and upgrade technology and
skills to promote ‘Brand India in the international market. The Government has
permitted 100% FDI in the sector under the automatic route, wherein no prior approval from
the Reserve Bank or Government of India, is required. Having recently signed trade
agreements with UAE, India is poised to gain referential access for gem and jewellery
products in these important growth markets. Another key global outreach initiative is
GJEPCs first-everin-country International Gem & Jewellery Show (IGJS), an exclusive
show for international buyers in Jaipur. And with several new exciting projects in the
pipeline, the Councils untiring efforts will hopefully usher in another golden era of
global fascination with India-made jewellery. quotient and is considered much auspicious.
Now, InIndia, goldjewellerypersonifies the jewellery purchase is not only limited to
weddings and festivals. With growing Westernization and increasing disposable income, the
demand for fashion jewellery in precious metal and precious stones is growing, too. Also,
Women being primary consumers of jewellery, their increasing entry into the workforce and
disposable income would drive demand.
The rise in urbanization has resulted in changing consumer behavior related to
accessories, switching from wearing more pieces of jewelry to keeping it minimal and
sophisticated while maintaining the style statement. Such evolving factors have led to a
substantial demand for single-stoned stud earrings, pendants, and rings.
The gems and jewelry market is expected to register a CAGR of 5.2% during the forecast
period, over the next 5 years (2022-27).
The increase in cross-cultural designs is one of the latest trends gaining popularity
in the gems and jewelry market. The demand for jewelry inspired by Italian, European, and
Egyptian cultures is expected to drive the market studied over the forecast period.
Domestic Jewellery Industry updates demand:
India is the most preferred country in terms of gems and jewellery export. The Indian
Gems and jewellery sector is one of the largest in the world, contributing around 29% to
the global jewellery consumption and 7% to the countrys GDP.
The sector employs over 4.64 million employees and is home to over 3,00,000 gems and
jewellery players. India is the worlds second-largest gold consumer and the worlds
largest diamond cutting and polishing centre.
India is the worlds second largest gold consumer.
Indias gems and jewellery exports reached US$ 39.14 billion in 2021-22, a 54.13% rise
from the previous year. In FY22, cut and polished diamonds accounted for the highest share
of exports
(62.42%), followed by gold jewellery (23.57%) and silver jewellery (6.95%).
In April 2023, Indias overall gems and jewellery exports was at US$ 3.23 billion.
In April 2021, India imported gems & jewellery worth US$ 1.97 billion. According to
the Gem and Jewellery Export Promotion Council, gold bar imports stood at US$ 1,372
million and Gold jewellery stood at US$ 166.75 million between April-October 2021. Indias
gold demand stood at 797.30 tonnes in 2021 and is expected to be in a range of 800-850
tonnes by 2023.
In the fourth quarter of 2021, demand for gold rose by 93% over the same period a year
ago to
265 tonnes. The second quarter of 2021 has been 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. Revised SEZ act is
also expected to boost exports of gems and jewellery.
The Government of India is aiming at US$ 70 billion in jewellery export in the next
five years (until 2025), up from US$ 35 billion in 2020.
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.
According to a recent report by the World Gold Council (WGC), India will be the
fourth-largest gold recycling country in 2021, recycling 75 tonnes, or 6.5% of all gold
recycled globally. According to the WGC report, 11% of Indias gold supply originated from
‘old gold during the last five years, driven by changes in the gold price, future
gold price forecasts, and the wider economic outlook.
Source: References - Various industry and media reports and websites including
GJEPC, CRISIL, CARE, DIPP, IBEF, internet etc.
COMPANYS STRUCTURE
Your Company is engaged in the manufacturing and sale of silver jewellery, gold
jewellery as well as plain and trading of Silver Articles. The Company launched two brands
by the name "Kuhjohl" and "Sincere" for semi-precious
and precious stones studded in gold and silver. Its been a tough year for all. The
management is planning to move forward in this business of Gold, silver and jewellery and
other various steps to take forward the business of the Company at greater heights.
However, the COVID-19 was an unprecedented situation that disrupted the Indian gems and
jewellery industry, like other industries world over, pushing its boundaries of
resilience. But, with the global economy gradually turning around again and gradually
opening for business, the industry got the required encouragement to grow further.
It was accepted by the Indian industry that with the pandemic, which had overtaken the
global business scenario, things will never be the same again. So, to bring back the
industry to working mode again, the workforce is brought back.
As per the Quality control order called the Hallmarking of Gold Jewellery and Gold
Artefacts Order, 2020, as amended, for mandatory hallmarking of gold
jewellery/artefacts, issued by the Ministry of Consumer Affairs, Food and Public
Distribution on 15 January, 2020, every jeweller who wants to sell hallmarked
jewellery with effect from 16th June, 2021, has to obtain a registration from Bureau of
Indian Standards. Mandatory hallmarking will ensure the purity of Gold and hence,
transparency can be maintained.
Accordingly, Our Company Orosil Smiths India Limited registered its Hallmark
named as "ORO" under Bureau of Indian Standards having
registration no. 8890028608 and is now eligible to sell the hallmarked jeweler
under the same hallmark. Also, the Company expanded its business in Textile area by
altering its Memorandum of Association its annual general meeting held on 30th
September, 2019. The management However, the management is still looking into potential
opportunities to commence business in this sector. The Company has also registered its
Trademark "mingALL" under class 25 for trading of Apparels, Footwear and
Headgear.
A. OPPORTUNITY AND THREATS
The gems and jewelry market is highly competitive with the presence of key players. Key
players are focusing on online distribution channels for the online marketing and branding
of their products to expand their geographical reach and increase their customer base.
Leading manufacturers in the gems and jewelry market are focusing on leveraging the
opportunities posed by the emerging markets of Asia-Pacific, like China and
India, to expand their revenue base because of the rising income levels and their
religious traditions, as they consider giving jewelry ornaments as auspicious. The key
brands are embarking on innovation and new product developments infused with the latest
technology to provide the luxury feeling and perfect craftsmanship to their product
offerings.
Opportunities
Growing Industry: In the coming years, growth in gems and jewellery sector would be
largely contributed by the development of large retailers/brands. Established brands are
guiding the organized market and are opening opportunities to grow. Increasing penetration
of organized players provides variety in terms of products and designs. India has well
established capabilities in manufacturing handmade jewellery and traditional as well as
modern designs because of low cost skilled labor.
As per Capita Income has increased, the demand for jewellery was also increased, as
jewellery is treated as a symbol of status. Customized service gives a unique identity to
the Company distinct from other players.
Increased Government Support & Policy: 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.
The Government has reduced custom duty on cut and polished diamond and colored
gemstones from 7.5% to 5% and NIL. Presenting the Budget for 2022-23 in the Lok Sabha,
Mrs. Sitharaman also announced that the government will facilitate export of jewellery
through e-commerce for which it will implement a "simplified regulatory
framework" this year. Also, the Gem and Jewellery Export Promotion Council (GJEPC)
undertakes direct promotional activities, including joint participation in international
jewellery shows, sending and hosting trade delegations, and sustained image-building
exercises.
Secure investment: Gold is considered as one of the best performing and most stable
assets across the globe, providing high returns over a long period of time.
E-Commerce: Rapid internet penetration and availability of multiple online
platforms has expanded the presence of e-commerce in India. Online jewellery buying has
gained immense popularity and have discovered a novel way to reach a wider public,
particularly in the pandemic-related disruptions and work-from-home era, supported by the
use of technology, flexible payment methods, and easy returns policies.
Online sales are expected to increase by 2022-23. Also, Your Company has wide range of
products to offer to its customers and it is providing the easy access through its
website.
Threats:
Frequent change in Trends and Customer Preferences: The Gems and Jewellery sector
is witnessing changes in consumer preferences due to adoption of western lifestyle.
Jewellery being a vital fashion and lifestyle statement, demands the players to be more
agile, and responsive to the constantly evolving trends and consumer preferences.
Unpredicted price movements and its impact on profit margin: The prices of the
precious metals are highly fluctuating, which in turns lead to unpredictable profit margin
on products.
Regulatory Framework: Changes in regulation and stringent compliance may cause
burden.
Liquidity Crisis: Due to COVID-19, the liquidity crisis was very high due to lower
sales and high operating expenses and the working capital cycle was badly affected.
Domination of Un-organized sector in Jewellery Industry: The un-organized sector
dominates the gems and jewellery industry in India and affects the profit margins
drastically. These players are mostly family jewellers having strong and long-standing
relationship with middle-class consumers.
However, the COVID-19 pandemic, the business of the Company has been impacted. The
Company is not able to fetch the work orders and requirements of the customers because of
unavailability of resources, resulting which the Company is not able to do business
properly during this period.
Jewellery consumption in India is influenced by region, income, and cultural beliefs,
and it differs widely across states. Customer service expectation also varies from one
region to other.
The Company in order to identify and mitigate risks to minimize its impact on business,
ensures that prudent risk management practices are followed during the decision-making
process. Moreover, any slowdown in the economic growth in India could cause the business
of the Company to suffer. The growth of industrial production has been variable.
Your Company is looking forward to the new opportunities in the Gems & Jewellery
and Textile Sector to expand and diversify the business into new areas and looking for a
bright future of the Company, subject to the stability of the Conditions.
B. SEGMENT –WISE OR PRODUCT WISE PERFORMANCE
The Company operates in only single segment. The Company is operating in two brands by
the name "Kuhjohl" and "Sincere" for semi-precious and
precious stones studded in gold and silver.
Currently, the Company operating in one segment only and has not yet started its
operations in Textile Sector. However, the management was looking for the potential
opportunity to grow in this segment. Now, we planned to start the business in this area
and for the same purpose the Company has registered a Trademark named "mingALL"
for trading of Apparels, Footwear and Headgear. Also, the Company is venturing to provide
an online web-store to the new entrant and designers to promote their designs and to
showcase their skills and talent, in order to bring them closer to their potential
customers, subject to keeping in view the effects of Covid-19 pandemic.
C. RISKS AND CONCERNS operating cycle, working capital requirements, The
fluctuation difficulties of securing retail store locations are the matter of concern for
the Company. Further, various restrictions imposed by the Government in respect to the
pandemic, the operations of the Company also closed substantially, resulting into adverse
effect on the business. Moreover, slowdown in the economic growth in India could cause the
business of the Company to suffer.
The Company in order to identify and mitigate risks to minimize its impact on business,
ensures that prudent risk management practices are followed during the decision-making
process. The Company expects to make full use of the opportunities available to it,
however, the challenges are inevitable in any industry. Your company is talking all
precautions to offset the associated risks.
D. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has maintained a proper and adequate system of internal controls. This
ensures that all Assets of the Company are safeguarded and protected against loss from
unauthorized use or disposition. The Audit Committee and Independent Internal Auditors
regularly review the operating systems and procedures for efficiency and effectiveness.
Based on the assessment carried out by Internal Auditor and the evaluation of the results
of the assessment, the Board of Directors are of the opinion that the Company has adequate
internal controls over financial reporting that are operating effectively as of March 31,
2023 .
Your Companys internal control systems do commensurate with the nature and size of its
business operations. The Companys Policy and process corrections are undertaken based on
inputs from the internal auditors.
E. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
During the year under review financial performance of your Company involves the Income
from operations which is 73.74 Lakhs (Previous Year: 93.73 Lakhs). Profit after Tax (PAT)
has been a loss of 34.55Lakhs as compared to a loss of 19.35 Lakhs in previous year. The
Company has no Bank Borrowings.
The Directors are making efforts to enhance the business activities and can only hope
to regain the business activities in future when situation became stable. But we expect
business loss to reduce, though it is too early to forecast the situation.
Details of any change in Return on Net Worth as compared to the immediately previous
financial year:
| Paid-up Share Capital Particulars |
FY2023 ( ) 52,200,000 |
FY2022 ( ) 52,200,000 |
| Other Equity |
(31918000) |
(28,579,154) |
Net Profit after Tax Worth |
(3455000) 20282000 |
23,620,846 (1,935,866) |
F. MATERIAL DEVELOPMENT IN HUMAN RESOURCES
There have been no material developments in Human Resource and Industrial Relations
front during the
FY23. Given the nature of business your Company is engaged in; it does not require
Human Resources at a large level. As on March 31, 2023 the Company had seven (6) full time
employees. The Company has engaged service of Consultants on contractual basis during the
year 2022-23, as and when required. The industrial relations within the Company have
remained harmonious throughout the year.
The Company acknowledges that its employees are its principal asset and believes in
building a strong performance and competency driven culture amongst its employees with
greater sense of accountability and responsibility. Adapting work culture to suit the
dynamic balancing of people requirements and employee needs is an ongoing process. During
the spread and continuance of Covid-19 keeping in view the safety of its employees, the
Company adopted work from home policy to the extent possible. The Board of Directors of
your company would like to place on record their sincere appreciation for the efforts and
contribution made by all the employees of the Company in the challenging environment.
CAUTIONARY STATEMENT:
Certain Statements in the Management Discussion & Analysis Report describing the
Companys view about the industry, expectations, objectives, etc. may be ‘forward
looking statements within the meaning of applicable laws and regulations. Actual results
may differ from those expressed or implied. Factors like changes in government
regulations, tax laws and other factors such as industrial relations and economic
developments or like current pandemic COVID-19, etc. may further influence the Companys
operations.
References - Various industry reports and websites including GJEPC, CRISIL, CARE,
DIPP, IBEF, internet etc.
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