Orosil Smiths India Ltd Management Discussions

GLOBAL ECONOMY

The global economy stands at a critical juncture amid evolving policy landscapes and heightened geopolitical tensions. While signs of stabilization were visible through much of 2024, renewed trade tensions and policy uncertainty are weighing on investor sentiment and economic activity, making the outlook increasingly uncertain.

According to the IMF World Economic Outlook (April 2025), ⁱglobal growth is projected to moderate to 2.8% in 2025 (PPP terms), down by 0.5 percentage points from earlier forecasts. Growth downgrades are broad-based, reflecting the impact of new trade measures, increased policy ambiguity, and weakening sentiment. Global inflation is expected to ease to 4.3%, while commodity prices remain volatile, with oil averaging $66.94 per barrel.¹

The risks to the global outlook remain skewed to the downside, driven by persistent trade tensions, tighter financial conditions, and geopolitical instability. These dynamics continue to challenge macroeconomic resilience and underscore the need for coordinated policy responses to restore confidence, reduce imbalances, and support sustainable growth. The risks to the global outlook remain skewed to the downside, driven by persistent trade tensions, tighter financial conditions, and geopolitical instability. These dynamics continue to challenge macroeconomic resilience and underscore the need for coordinated policy responses to restore confidence, reduce imbalances, and support sustainable growth.

INDIAN ECONOMY

India continues to demonstrate robust economic momentum, emerging as a key driver of global growth amid a challenging international environment. According to the IMF World Economic

Outlook (April 2025), Indias real GDP is projected to grow at 6.5% in FY 2023 24, 6.2% in FY 2024 25, and 6.3% in FY 2025 26, underscoring the economys resilience and strong domestic demand.

Inflation is expected to moderate, with consumer prices projected at 4.7% in FY 2023 24 and 4.2% in FY 2024 25, aligning with the Reserve Bank of Indias medium-term inflation target. The current account deficit is projected to remain manageable at 0.9% of GDP in FY 2024 25, reflecting stable external balances.

Unemployment is estimated at 4.9% through FY 2023 24 to FY 2025 26, indicating relative labour market stability. On a purchasing-power-parity (PPP) basis, Indias real GDP growth is forecast at 5.5% for FY 2024 25, contributing significantly to regional and global output.

India remains well-positioned within the emerging and developing Asia region, supported by favourable demographics, policy reforms, and a continued focus on infrastructure and digital transformation.

Industry Review: Indian Gems and Jewellery April December 2024 (Q3 FY2024-25)ⁱⁱ

Macroeconomic Context

The Indian gems and jewellery industry faced considerable pressure during April December 2024 due to a challenging global macroeconomic environment. Geopolitical tensions and supply chain disruptions disrupted trade flow and increased operational costs. Currency depreciation, especially the weakening of the Indian Rupee against the US Dollar, further raised the cost of importing raw materials. Additionally, persistent inflation and rising commodity prices impacted both production margins and consumer purchasing power.

Demand in key export markets like the US and Europe remained weak, influenced by economic slowdown and reduced discretionary spending. Regulatory changes, including revisions in import duties and tariff structures, also played a role in shaping trade performance. Collectively, these factors led to a subdued outlook for the industry during the review period.

Export Trends

During the April December 2024 period, gross exports saw a notable decline of 12.63%, dropping from US$23.98 billion in the previous year to US$20.95 billion. This downward trend was particularly pronounced in the third quarter (October December 2024), which recorded a 13.27% decrease overall. While October showed a modest recovery with an 8.46% increase, November and December experienced significant contractions of 24.12% and 25.15%, respectively, contributing to the overall slump. These fluctuations indicate volatility in trade performance, possibly influenced by broader economic challenges, global demand shifts, or supply chain disruptions.

Net exports also fell during the same period, shrinking by 11.24% to US$17.13 billion. This decline reflects a widening trade deficit or a slowdown in export-driven economic activities, which may have broader implications for domestic industries and international trade policies. The steep declines in November and December suggest seasonal or external factors exerting additional pressure on export growth, highlighting the need for strategic interventions to stabilize trade performance in the coming months.

Segment Performance Highlights:

The jewellery and gemstone export sector saw mixed trends during April December 2024. Cut and polished diamonds declined by 18.24%, while lab-grown diamonds fell 8.59%. Gold jewellery exports dropped 4.24%, driven by a 20.85% decrease in plain gold, though studded gold grew by 14.58%. Silver jewellery recorded the steepest drop at 37.84%, while platinum jewellery showed modest growth at 4.79%. Polished synthetic stones saw a 14.31% increase, reflecting growing demand for alternatives. Coloured gemstones and other categories also declined.

These shifts indicate changing consumer preferences and economic pressures affecting exports.

While traditional jewellery segments such as silver and plain gold struggled, studded gold and synthetic stones gained traction, signaling a growing interest in contemporary, high-value designs. These trends could influence industry strategies and export policies moving forward. Key Challenges:

The jewellery and gemstone export sector faces several key challenges impacting trade performance. Weak global demand has slowed exports, with economic uncertainties and fluctuating purchasing power affecting international buyers. Additionally, the depreciation of the rupee has led to rising costs for imported raw materials and production expenses, squeezing profit margins and making Indian exports less competitive in global markets.

Volatility in gold and silver prices further complicates market stability, as sharp fluctuations create uncertainties for manufacturers, retailers, and buyers. Changing consumer preferences, particularly the shift toward lab-grown diamonds and alternative jewellery styles, require businesses to adapt their product offerings. Oversupply, especially in cut and polished diamonds (CPD) and lab-grown diamonds (LGDs), intensifies competition, leading to price pressures and reduced profit margins. As global markets adjust, exporters must navigate these challenges strategically to sustain growth and competitiveness.

Outlook:

While October saw a temporary recovery in exports, broader macroeconomic pressures continue to weigh on the jewellery and gemstone sector. Weak global demand remains a significant hurdle, as economic uncertainties and reduced discretionary spending impact international buyers. Rising costs, largely driven by rupee depreciation, further challenge competitiveness, making raw material imports more expensive and squeezing profit margins. Additionally, volatility in gold and silver prices complicates market stability, creating uncertainties for manufacturers and retailers.

Shifting consumer preferences add another layer of complexity, with growing demand for studded and designer jewellery reshaping traditional market dynamics. At the same time, oversupply in key segments such as cut and polished diamonds (CPD) and lab-grown diamonds (LGDs) intensifies competition, leading to price pressures. These factors indicate that the sector must continue to adapt through product innovation, strategic pricing, and market diversification to overcome ongoing challenges.

COMPANYS STRUCTURE

Orosil Smiths India Limited is engaged in the manufacturing and sale of silver jewellery, gold jewellery, and silver articles, catering to a diverse market. The company has established two distinct brands Kuhjohl and Sincere offering semi-precious and precious stones studded in gold and silver. As part of its strategic vision, the management is committed to strengthening its presence in the gold, silver, and jewellery sector while exploring various avenues for expansion and innovation. With the global economy gradually recovering, the industry has gained renewed momentum, providing opportunities for growth and advancement.

To enhance transparency and ensure product quality, the company has complied with the Hallmarking of Gold Jewellery and Gold Artefacts Order, 2020, mandated by the Ministry of

Consumer Affairs, Food and Public Distribution. Effective from June 16, 2021, jewellers must obtain registration with the Bureau of Indian Standards (BIS) to sell hallmarked gold jewellery. Orosil Smiths India Limited has successfully registered its hallmark, ORO (BIS Registration No. 8890028608), making it eligible to sell certified gold jewellery under this hallmark.

Expanding beyond jewellery, the company diversified into the textile sector by amending its Memorandum of Association during its Annual General Meeting on September 30, 2019. While the management continues to assess opportunities for entering this sector, the company has secured its trademark, mingALL, under Class 25, covering apparel, footwear, and headgear trading. This strategic move reflects Orosils commitment to exploring new markets while maintaining its core expertise in jewellery craftsmanship.

A. OPPORTUNITY AND THREATS

As Orosil Smiths India Limited navigates the evolving jewellery market, several factors present both growth potential and challenges. The companys focus on gold, silver, and gemstone jewellery along with diversification into textiles positions it strategically for expansion. However, external economic conditions, shifting consumer trends, and competitive pressures influence its ability to sustain long-term success. Below are the key opportunities and threats shaping Orosils trajectory in the jewellery sector.

Opportunities

1. Growing Demand for Studded and Designer Jewellery Shifting consumer preferences favor intricate, customized, and designer jewellery, offering Orosil an opportunity to expand its Kuhjohl and Sincere collections.

2. Expanding Global Markets With international markets recovering, there is potential to boost exports, especially in regions with strong demand for silver, gold, and gemstone jewellery.

3. Hallmarking Regulations Enhancing Trust Compliance with BIS hallmarking standards strengthens consumer confidence in Orosils gold jewellery, ensuring transparency and quality assurance.

4. E-commerce and Digital Expansion Online jewellery sales continue to grow, presenting opportunities to enhance Orosils digital presence and customer outreach.

5. Diversification into Textiles With the mingALL trademark for apparel, footwear, and headgear trading, Orosil can explore new revenue streams beyond jewellery.

Threats

1. Economic Uncertainty and Low Global Demand Persistent macroeconomic pressures and fluctuating consumer spending impact jewellery exports, creating unpredictability in sales.

2. Volatile Gold and Silver Prices Sharp fluctuations in precious metal prices affect production costs and profit margins, posing risks for manufacturers and retailers.

3. Increasing Competition and Oversupply Excess supply in cut and polished diamonds

(CPD) and lab-grown diamonds (LGDs) leads to price pressures and reduced profitability.

4. Regulatory Challenges and Compliance Costs Meeting stringent hallmarking and quality regulations requires investments in certifications and operational adjustments.

5. Changing Consumer Preferences Growing interest in alternative materials and synthetic gemstones shifts demand away from traditional jewellery offerings, requiring continuous product innovation.

To maintain its competitive edge, Orosil must strategically adapt to industry trends, leverage emerging opportunities, and mitigate potential risks through innovation and market expansion.

B. SEGMENT WISE OR PRODUCT WISE PERFORMANCE

Orosil Smiths India Limited continues to operate in the jewellery sector, focusing on the manufacturing and sale of silver and gold jewellery. The companys flagship brands, Kuhjohl and Sincere, specialize in semi-precious and precious stones studded in gold and silver, catering to evolving consumer preferences.

In addition to its core jewellery business, the company is actively pursuing diversification into the textile sector. While operations in this segment had not commenced earlier, the management is now strategically moving forward to establish a presence in this space. To facilitate this expansion, the company has secured the mingALL trademark for trading apparel, footwear, and headgear. Furthermore, Orosil is developing an online web-store aimed at supporting emerging designers and entrepreneurs, providing them with a platform to showcase their talent and connect with potential customers. With the global economy recovering and digital commerce gaining traction, these initiatives position the company for sustained growth across multiple sectors.

C. RISKS AND CONCERNS

Orosil Smiths India Limited faces several industry-specific risks that could impact its operational and financial performance. Fluctuations in precious metal prices remain a critical challenge, as volatility in gold and silver markets can affect production costs and profitability. Additionally, the companys long operating cycle and high working capital requirements necessitate efficient financial management to ensure liquidity and smooth business operations. Securing retail store locations poses another hurdle, with rising commercial real estate costs and competitive market dynamics influencing expansion strategies. Moreover, a slowdown in Indias economic growth could reduce consumer spending, affecting jewellery demand and overall revenue.

To mitigate these risks, the company follows prudent risk management practices during strategic decision-making. Orosil continuously assesses market conditions, optimizes supply chain efficiency, and adapts its pricing strategies to minimize the impact of external fluctuations. While challenges are inherent in any industry, the company remains committed to leveraging available opportunities and strengthening its business resilience through proactive measures and cautious financial planning.

D. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Orosil Smiths India Limited has established a robust and efficient internal control system to safeguard its assets and ensure operational integrity. The companys framework is designed to protect against unauthorized use or disposition, maintaining stringent financial controls and governance practices. The Audit Committee and Independent Internal Auditors conduct regular assessments of operating systems and procedures, evaluating their efficiency and effectiveness. Based on the most recent internal audit, the Board of Directors affirms that Orosils internal controls over financial reporting remain adequate and effective as of March 31, 2025.

The company ensures that its internal control mechanisms align with the nature and scale of its business operations, providing a structured approach to risk management and compliance. Policies and procedural updates are implemented based on insights from internal auditors, ensuring continuous improvement and adaptability to changing industry dynamics. Through these measures, Orosil remains committed to maintaining transparency, operational excellence, and financial integrity.

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 280.73 Lakh (Previous Year: 50.49 Lakh). Profit after Tax (PAT) has been a profit of 61.07 Lakh as compared to a loss of 40.66 Lakh 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:

Particulars	FY 2025 ( )	FY 2024 ( )
Paid-up Share Capital	52,200,000	52,200,000
Other Equity	(2,99,15,581)	(3,59,85,397)
Net Worth	2,22,84,419	1,61,98,001
Profit after Tax	61,07,275	(40,66,486)

Significant changes in Key Financial Ratios:

Particulars	FY 2024-25	FY 2023-24	% Change from previous year	Reason for change
Debtors Ratio Turnover	NA	NA	NA	Not Required
Inventory Ratio (in times) Turnover	2.82	0.29	872.41	Improved sales velocity and better inventory utilization enhanced turnover efficiency.
Interest Ratio Coverage	NA	NA	NA	Not Required
Current Ratio (in times)	1.31	1.7	(22.94)	Slower growth in current assets
Debt-Equity Ratio	NA	NA	NA	Not Required
Operating Profit Margin (%)	3.37	(80.75)	95.83	Better cost control and reduced operating losses
Net Profit Margin (%)	21.76	(81)	102.76	Significant reduction in Deferred Tax Expense and improved Operational performance
Return on Capital Employed (%)	(4.38)	(16)	11.62	Losses reduced on account of improved cost controls and inventory management.

F. MATERIAL DEVELOPMENT IN HUMAN RESOURCES

During the financial year 2024 25, there were no significant developments in Human Resources and Industrial Relations within the company. Given the nature of Orosil Smiths India Limiteds business operations, the company does not require a large workforce. As of March 31, 2025, the company has five full-time employees, other than Directors. Additionally, services of consultants on a contractual basis were engaged as needed throughout the year to support specific business functions. Despite ongoing industry challenges, the industrial relations within the company have remained harmonious, ensuring a stable and collaborative work environment.

Orosil continues to recognize that its employees are its greatest asset and remains committed to fostering a performance-driven, competency-based culture that promotes accountability and responsibility. The company constantly adapts its work culture to address dynamic workforce requirements and evolving employee needs. The Board of Directors sincerely appreciates the contributions made by all employees, acknowledging their dedication and resilience in navigating an ever-changing business landscape.

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, etc. may further influence the Companys operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which it operates, changes in the Government regulations, tax laws and other statutes, any epidemic or pandemic, natural calamities over which we do not have any direct/indirect control.