PC Jeweller Ltd Management Discussions

INDUSTRY OVERVIEW

The Indian Gems and Jewellery (“G&J”) industry is a significant pillar of the national economy, contributing approximately 7% to the countrys GDP and around 15% of total merchandise exports. The sector is expected to grow steadily, driven by domestic consumption and international demand. India holds a prominent position globally, being the largest diamond-cutting and polishing hub, producing over 90% of the worlds polished diamonds.

G&J industry comprises of various segments including manufacturing, processing and trading of diamond, gold, silver, platinum and other traditional jewellery like kundan or polki, gemstones and other precious metals and ornaments. It encompasses a diverse array of products, from traditionally handcrafted jewellery to modern designer pieces, showcasing a blend of craftsmanship, culture, and innovation. Indias G&J market has been a prominent global player, contributing significantly to the countrys economy, driven by high domestic and international demand. Factors like cultural significance, growing disposable incomes, evolving consumer preferences and the wedding and festive season fuel market expansion.

The industrys growth is boosted by factors such as a surge in demand for branded jewellery, rising e-commerce penetration, urbanization, increasing Western influences and the emergence of millennials as significant consumers. The governments initiatives to liberalize policies, boost exports and encourage investments contribute to Indias G&J market growth. Trends include a preference for lightweight jewellery, the use of technology in design and marketing, sustainable and ethical practices, and a focus on customization to meet diverse consumer demands.

The global appetite for jewellery is anticipated to grow as more individuals seek luxury items. Jewellery offers various benefits, including reflecting fashion trends and styles, and improving ones appearance or that of others. Its appeal as a status symbol among higher-income groups has accelerated its consumption. The rising demand for contemporary designs and the in_ux of new designers are further driving market expansion.

While the sector holds immense potential, it faces challenges also such as gold price volatility, dependency on imports, and increasing competition from synthetic diamonds. Fluctuations in international demand and compliance with stringent regulatory norms also pose risks. However, these hurdles are being addressed through policy interventions, innovation, and diversification.

Government initiatives have been pivotal in nurturing the sectors growth trajectory. Measures such as revamping gold monetization schemes, reducing import / customs duties on precious metals, implementing mandatory hallmarking, and providing financial aid for establishing production centres and testing hubs have stimulated industry advancement. Emphasis on product diversification, cost-e_ective collaboration and the promotion of Lab-Grown Diamonds (“LGD”) illustrates a concerted effort to drive growth and innovation. LGDs are authentic diamonds produced in laboratories by replicating the natural diamond formation process that occurs beneath the earths surface. However, since they are not extracted through mining, LGDs mitigate the social and environmental impacts associated with mining activities. This makes LGDs environmentally sustainable and contributes to saving our natural resources.

Indias G&J market success is driven by multifaceted government support, innovation, stringent quality focus and strategic initiatives aimed at expanding its footprint, solidifying its position as a dominant player in the arena. These concerted efforts showcase Indias commitment to nurturing and expanding its G&J industry.

INDUSTRY DATA

The global gold jewellery market is likely to grow due to increasing consumer disposable income and the appeal of gold as a long-term investment. Gold is considered a haven and most investors turn to gold during market turmoil for safe investment.

The global jewellery market size was valued between USD 235 and USD 245 billion in CY 2023 and is projected to reach USD 247· USD 257 billion by 2028, exhibiting a CAGR of 5%. Annually, around 3,600 tons of gold is mined globally, around 1,200 tons of gold is recycled, and around 4,400 tons of gold is consumed for various purposes like jewellery fabrication, technology, investments, etc. Around 52% of the total gold demand comes from China and India.

The _ne jewellery segment in India constitutes ~90% of the overall jewellery market. It is further categorized into gold and non-gold categories, with non-gold encompassing diamond, platinum, silver and other materials. Projections indicate that the non-gold market is poised to expand at a CAGR of 18.80% from FY 2023 to FY 2028, reaching a market valuation of USD 19 billion.

The G&J industry is a key contributor to Indias total exports. Indias G&J exports are valued at billions of dollars, showcasing its global dominance. This include several product segments, such as cut and polished diamonds, LGDs, rough diamonds, gold jewellery, gemstones, pearls, etc.

The key highlights of G&J trade trends during FY 2025 are as under:

i) Gross Exports

Gross exports of G&J declined by 11.20% to USD 28.67 billion as compared to previous year. Key reasons for decline in exports includes imposition of tari_ by US, weak global demand, inventory overhang and cautious buying due to price volatility and geopolitical uncertainty etc. Commodity-wise exports trends for some of the commodities are as under:

a. Cut and Polished Diamonds

Cut and polished diamonds exports declined by 16.75% to USD 13.29 billion as compared to previous year.

b. LGDs

Polished LGDs exports declined by 9.64% to USD 1.27 billion as compared to previous year.

c. Gold Jewellery

Gold jewellery exports rose by 1.23% to USD 11.37 billion as compared to previous year.

ii) Gross Imports

Gross imports of G&J declined by 11.68% to USD 19.71 billion as compared to previous year.

SEGMENT WISE PERFORMANCE

The Company is one of the prominent jewellery companies in the organised jewellery retail sector in India and is engaged in the business of trade, manufacture and sale of gold, diamond, gold and diamond studded jewellery as well as silver articles. As on March 31, 2025, the Company maintains a network of 52 showrooms including 3 franchisee showrooms under “PC Jeweller” brand located in 38 cities across India.

During the year, the Company was operating in domestic market only and its revenue from operations was 2,243.25 crore.

OPPORTUNITIES AND THREATS

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. 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.

G&J market is anticipated to project regular growth in the coming years in line with the growth in the GDP on account of changing lifestyle, rising disposable income, changing consumer preferences of branded jewellery products and growing urbanization. G&J industry is often associated with luxury gift items. Thus, increasing instances of festival gifts exchanges and changing consumer preferences towards celebration presents for their families and friends are also driving the growth of the Indian G&J market.

Organized players are gaining traction as the industry undergoes formalization. Increasing consumer preference for branded jewellery, quality assurance, and contemporary designs is driving this transition. Government initiatives, such as mandatory hallmarking for gold jewellery, the Gold Monetization Scheme and easing gold import restrictions, are bolstering the G&J sector.

The long-term demand prospects for the sector are supported by a growing working population, higher disposable income, easier access to credit and improved living standards. To cater to the changing consumer preferences and design trends, larger stores are offering more variety and a diverse range of jewellery. This continuous adaptation to consumer trends and behaviour is likely to further support the shift towards the organized jewellery segment.

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.

The gold jewellery sector has the potential to create a new business model, leveraging the rise in disposable income and increased buying power of customers who seek premium and personalized products. By adopting evolving e-commerce and social media-based business models, gold jewellery players can effectively engage with local suppliers and artisans, thereby reducing the barriers to entry in new markets. This presents opportunities for both regional players to expand nationwide and for pan India players to venture into international markets.

On the other hand, there are several threats also that could hamper the growth of G&J industry. There is a trend of increasing competition in G&J industry with existing players increasing their spread and reach beyond their traditional areas of operations. Also new companies are entering this field. The entry of new players as well as fast expansion of the existing players is expected to reduce the margins and increase the cost pressures, in the form of increasing rentals, advertisement requirements, etc. on this sector.

One of the key challenges to scaling up operations in the jewellery industry is the scarcity of skilled labour. To have access to a large talent pool, the supply of craftsmen / artisans that come through generations must be supplemented by new talents who have been professionally taught.

Further, in an era of high diamond, gold and silver prices, global marketing necessitates changing fashion in the G&J segment. According to the market demand, manufacturers can produce specific types of gems and jewellery products. However, because of the changing trend, demand for certain types of products begins to decline and eventually ceases. The manufacturers money is blocked in the older designs and this results in an inventory pile-up.

US, UAE, Hong Kong, Belgium and Israel are key export destinations for the Indian G&J industry. Persistent high inflation rates and a slowdown in these economies will hurt the G&J exports from India.

OUTLOOK

The Indian jewellery retail sectors size in FY 2023 was close to USD 70 billion. Within this landscape, the organized retail accounted for about 37%, encompassing both national and regional players. The remainder of the jewellery retail sector continued to be dominated by the unorganized segment, comprising over 5,00,000 local goldsmiths and jewellers. Projections indicate that the jewellery retail market is poised for growth, expected to reach approximately USD 145 billion by FY 2028. This optimistic outlook is attributed to the expanding economy, increased disposable income, surge in consumer demand for gold, the upward trajectory of gold prices and a rising interest in other categories such as diamonds, other precious stones and costume jewellery.

The jewellery sector of the country continues to remain poised for growth on account of Indias demographics and increasing urbanisation as well as income levels. The Government of India in order to encourage the growth of G&J industry in India has also taken various measures from time to time.

The G&J market is anticipated to become more mature and sophisticated with product innovation like mens jewellery, light weight jewellery, silver jewellery etc. as well as compulsory hallmarking.

While revenue growth of jewellery retailers is expected to remain healthy, their profitability is projected to be moderate in the near term due to front-loaded operating expenses on new stores, higher advertising to drive store footfalls and increased discounting. The steep rise in gold prices in recent months could lead to a temporary liquidity squeeze from margin calls on gold metal loan funding.

Overall, the Company is well-positioned to achieve continued success in FY 2025-26, leveraging emerging market opportunities while effectively managing potential risks. The Companys strong market presence, focus on business development, increasing its brand presence, innovation and enhanced customer experience will drive its growth and strengthen its competitive advantage in the dynamic jewellery industry.

RISKS AND CONCERNS

The Indian G&J industry faces significant challenges in maintaining product relevance and competitiveness across various categories. Key restraints include the shift towards mass-produced, cost-e_ective alternatives that threaten traditional craftsmanship, seasonal fluctuations in demand, and changing consumer preferences. However, the Company launches new designs from time to time keeping in mind the customers preferences as well as cost considerations to meet these kind of challenges.

The availability of raw materials is crucial to the G&J business. In India, a significant percentage of raw materials are imported, as the domestic supply is limited. Geopolitical tensions and global economic slowdown can cause the supply disruptions. However, for meeting its raw material requirements, the Company in addition to purchases from trading houses, also purchases old gold from its customers and prepare new jewellery after recycling the same.

High and volatile gold prices significantly impact the working capital requirements of Indias G&J industry. As the gold prices rise, the cost of inventory increases substantially. This situation ties up substantial capital and creates financial and operational risks for jewellers. However, the Company worked on rationalizing its operations and taken various cost effective measures including closing less profitable showrooms, cutting down on redundant staff to meet its working capital requirements. Further, after the Company entered into a Joint Settlement Agreement with its Consortium Lenders on September 30, 2024, the Companys operations witnessed a complete turnaround during the year as the managements focus is back to the growth of the business. As a result, the Company recorded net profit of 575.09 crore during the year.

During the year, the Company also raised funds aggregating to

2,702.11 crore by way of preferential issue of Fully Convertible Warrants for repayment of the banks outstanding debts, working capital and general corporate purpose etc. The Company had reduced the banks outstanding debts by ~50% and the Company is confident to fully repay the remaining outstanding debts by the end of FY 2026 and become debt free.

The Company reiterates that despite few tough previous years, all its core strengths in the form of manufacturing and designing capabilities, manufacturing facilities, skilled staff, soft skills in the form of systems and procedures, customer policies, etc. remain intact and it continues to evaluate and improve all other aspects of its business operations as well. The reputation, trust as well as brand image created by the Company in the years since inception resulted in the continued confidence of the various stakeholders in the Company leading to robust growth in revenue from operations during the year.

The Company like other industry players is also exposed to price risk movements both in gold as well as its forex exposure.

However, it has put adequate systems and procedures in place to take care of these concerns.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has effective internal control systems in place, which are reviewed by internal auditor of the Company and their reports are periodically reviewed by Audit Committee. The Company also undergoes a rigorous audit process along with other items for stock, cash etc. at stipulated intervals.

The Company has also put in place adequate internal financial controls with reference to the financial statements commensurate with the size and nature of operations of the Company. Based on the assessment carried out by an independent agency and evaluation of the results of the assessment, the Board of Directors of the Company is of the opinion that the Company has adequate internal controls over financial reporting that are operating effectively as of March 31, 2025.

FINANCIAL PERFORMANCE

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.

During the year under review, the Company registered strong growth in its business and operations and the revenue from operations on standalone basis increased to 2,243.25 crore as compared to 189.45 crore during the previous year. As a result of robust growth in revenue from operations, the Company recorded net profit of 575.09 crore as compared to loss of 649.27 crore during the previous year. The summary of standalone financial performance of the Company as compared to previous year is as under:

( in crore except earnings per share)

Particulars	2024-25	2023-24
Revenue from operations	2,243.25	189.45
Other income	127.82	43.85
Total revenue	2,371.07	233.30
Total expenses	1,922.95	882.57
Profit / (loss) before tax	448.12	(649.27)
Tax expense	(126.97)	-
Net profit / (loss) after tax	575.09	(649.27)
Total comprehensive income	575.44	(647.12)
Earnings per equity share ()
- Basic	1.13	(1.40)*
- Diluted	0.66	(1.40)*

* Restated in accordance with IND AS 33 due to split of face value of equity shares of the Company from 10/- each to 1/- each during the year under review.

KEY FINANCIAL RATIOS

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

Key Ratios	Units	2024-25	2023-24	% Change	Explanation
Current Ratio	Times	3.23	1.33	142.86	Refer Note 1 below
Debt Equity Ratio	Times	0.34	1.41	(75.89)	Refer Note 2 below
Debtors Turnover	Times	1.50	0.13	1,053.85	Refer Note 3 below
Inventory Turnover	Times	0.38	0.03	1,166.67
Interest Coverage Ratio	Times	9.74	(0.29)	3,458.62	Refer Note 4 below
Operating Profit Margin	%	22.26	(76.40)	129.14	Refer Note 5 below
Net Profit Margin	%	25.64	(342.71)	107.48	Refer Note 6 below
Return on Net Worth	%	9.34	(22.40)	141.70	Refer Note 7 below

Note 1: Current assets has increased by ~21% mainly due to increase in inventory and current liability has decreased by ~50% mainly due to significant reduction in current borrowings from banks, which has contributed to increase in this ratio.

Note 2: Total debt has decreased by ~50% and total equity has also increased by ~112% mainly due to allotment of equity shares, which has contributed to decrease in this ratio.

Note 3: Turnover has significantly increased by ~1084%, which has contributed to increase in this ratio.

Note 4: The increase in the ratio is due to increase in EBIT by ~445% as well as decrease in the finance cost by ~90%. Note 5: The change is due to increase in EBIT by ~445% caused by increase in turnover by ~1,084%.

Note 6: The increase is due to significant increase in turnover by ~1,084% which has resulted in increase in after tax profits by ~189% as compared to previous year.

Note 7: The increase is due to increase in after tax profits by ~189% as compared to previous year.

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HUMAN RESOURCES & INDUSTRIAL RELATIONS

The Company always recognises its employees as its principal asset and believes in establishing and building a strong performance and competency driven culture amongst its employees with greater sense of accountability and responsibility.

The Company ensures a safe, healthy, conducive and productive environment to enhance productivity of its employees. As on March 31, 2025 the total employee strength of the Company was 723. The industrial relations had remained harmonious throughout the year in the Company.

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