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 & gem stones 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
aRsordability.
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.
INDUSTRY DATA
During April 2022 – March 2023, G&J exports decreased by 2.94%
to US$ 38.08 billion as compared to exports of US$ 39.24 billion registered during April
2021 – March 2022.
During April 2022 – March 2023, Polished Lab Grown Diamonds
(+27.85%), Coloured Gemstones (+34.83%), Plain Gold Jewellery (+8.74%), Silver Jewellery
(+8.03%), Platinum Jewellery (+2.49%) witnessed a positive export growth rate as compared
to April 2021 – March 2022 while export of Cut & Polished Diamonds (-9.78%) and
Studded Gold Jewellery (-0.72%) have witnessed negative growth in the same period.
Amongst the top 10 export destinations for G&J products, USA, Hong
Kong, Israel, Thailand & UK have recorded negative growths during April 2022 –
March 2023 as compared to April 2021– March 2022. While, exports to other
destinations such as U.A.E., Belgium, Singapore, Switzerland and Netherlands have shown a
rise during the stated time period.
The G&J imports stood at US$ 25.90 billion in April 2022 –
March 2023 as against US$ 26.87 billion recorded in April 2021 – March 2022,
indicating recovery in supply of raw materials in G&J sector.
Imports of the silver bar have witnessed a negative import growth in
April 2022 – March 2023 over April 2021 – March 2022. It indicates the
diminished supply of raw materials for manufacturing finished gems and jewellery
commodities. Imports of Polished Lab Grown Diamonds, Coloured Gemstones and Silver
Jewellery have witnessed significant growth in April 2022 – March 2023 over April
2021 – March 2022.
SEGMENT WISE PERFORMANCE
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 part of the previous year. However,
in the absence of any export revenue during the year under review, the export segment has
ceased to qualify as operating segment for the reporting purpose. The entire revenue of
Rs2,359.46 crore during the year was from the domestic market.
OPPORTUNITIES AND THREATS
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 cuRs 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.
The jewellery sector of the country therefore continues to remain
poised for growth on account of Indias demographics and increasing urbanisation as
well as income levels.
Our Company has its own designer team as well as manufacturing
facilities and hence is able to create new designs and new varieties of jewellery items to
cater to changing customer demands and preferences. In addition instead of only wedding
jewellery which was the main stay till a few years ago, the Company has also increased the
range and variety of jewellery so that it can cater to all age groups, all price points
and all occasions.
The Company does not perceive any major or predictable threats except
that the retail jewellery is already a working capital intensive business and the demand
for jewellery is now increasing beyond the traditional gold jewellery. The working capital
cycle of gold jewellery is much smaller vis-a-vis that of diamond jewellery which now
constitutes an important part of any jewellers inventory. Though the diamond
jewellery has higher margins it also has a much longer cash conversion cycle vis-a-vis
gold and all of these factors have only increased the working capital intensity of the
jewellery business. In addition the gold prices have increased significantly in the past
three years which has further increased the working capital intensity/requirement of this
business.
OUTLOOK
The G&J market is anticipated to project robust growth in the
period FY 2022-27, with a CAGR of 8.34% on account of changing
lifestyle,risingdisposableincome,changingconsumerpreferences of branded jewellery products
and growing urbanization.
Indias jewellery industry growth is expected to be moderate to
around 5% YOY in FY 2024, largely due to a high base of FY 2023 and FY 2022 along with
expected volatility in gold prices. The G&J market is anticipated to grow in tandem
with the increase in the countrys GDP and rising disposable incomes. The 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.
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 G&J in the country are often associated with luxury gift items.
Thus, increasing instances of festival gifts exchanges and changing consumer preferences
toward celebration presents for their families and friends are also driving the growth of
the Indian G&J market. Surging demand for branded jewellery products and assurance of
the authentic and pure form of the luxury metal and gems in the jewellery is also
supporting the growth of the Indian G&J market.
The Government of India in order to encourage the growth of G&J
industry in India, has taken various measures. A few of them are as under:
Permitted 100% FDI under the automatic route in this sector;
Made sale of hallmarked jewellery compulsory;
Reduced custom duty on cut and polished diamond and colored gemstones
from 7.5% to 5% and NIL;
India has 10 Special Economic Zones for gems & jewellery.
These zones have more than 500 manufacturing units, which contribute
30% to the countrys total exports. Revised SEZ Act is also expected to boost exports
of gems and jewellery;
India has signed Free Trade Agreement with U.A.E. which will further
boost exports and is expected to reach the target of
US$ 52 billion; and
India has signed Economic Cooperation and Trade Agreement with
Australia.
RISKS AND CONCERNS
Relatively long operating cycle and working capital intensive nature of
the business is an inherent characteristic of the G&J industry. There have been a
regular increase in the gold prices since September 2020, which is increasing the working
capital requirements of the industry.
The sales of the Company had suRsered in FY 2020-21 and FY 2021-22 on
account of Covid-19 pandemic and lockdowns induced by it. Although the market has
recovered thereafter but the Companys operations have suRsered on account of
liquidity constraints caused due to its accounts turned Non Performing Asset ("NPA")
with its bankers in June 2021. However, the classification of its accounts as NPA by the
Lenders is being contested by the Company in various legal forums and the matter is
currently sub judice. Subsequently, ten of the consortium bankers have moved Debt Recovery
Tribunal ("DRT"), Delhi seeking recovery of their outstanding dues. The
Company is responding to the same and the matter is currently sub-judice.
The Company in addition to replying suitably to the Banks, has also
approached the High Court of Delhi against State Bank of India ("SBI")
stating that there is a non-compliance of the Principle of Natural Justice in as much as
the Company was not given any opportunity to explain its case after January 2, 2023 and
unilateral decision has been taken by SBI. The Honble Court has accepted the
Companys prayer and issued a notice to SBI, which has been accepted by their learned
counsel. The Company has also filed counter claims for Rs 10,034 crores, Rs 16,759 crores
and Rs 2,956 crores against SBI, Union Bank (and seven other banks) and against
Indian Bank respectively, before DRT.
Though there is no certainty either on the time frame or the end result
of ongoing judicial process, the Company continues to remain confident about a positive
outcome of the same and is taking appropriate steps to ensure that its status as a going
concern remains intact in spite of the current adversities.
The Company is working on rationalizing its operations and taking
various cost effective measures including closing less profitable showrooms, cutting down
on redundant staff to meet its liquidity issues and working capital challenges. The
Companys designing and manufacturing capabilities and its pool of trained &
experienced staff continues to remain its strength.
Further, the reputation, trust as well as brand image created by the
Company in the years since inception results in continued confidence of the various
stakeholders even today.
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 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 are of the opinion
that the Company has adequate internal controls over financial reporting that are
operating effectively as of March 31, 2023.
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.
As on March 31, 2023 the Company has total of 81 showrooms across India
including 12 franchisee showrooms. During the year under review, the revenue from
operations of the Company on standalone basis increased by 50% from Rs1,574.05 crore to
Rs2,359.46 crore as compared to previous year, despite various adversities. The
Companys net loss also declined slightly to Rs339.11 crore against net loss of
Rs389.60 crore during previous year.
The summary of standalone financial performance of the Company as
compared to previous year is as under:
(Rsin crore except earnings per share)
Particulars |
2022-23 |
2021-22 |
| Revenue from operations |
2,359.46 |
1,574.05 |
| Other income |
147.85 |
59.51 |
| Total revenue |
2,507.31 |
1,633.56 |
| Total expenses |
2,752.15 |
2,141.71 |
| Profit/(loss) before tax |
(244.84) |
(508.15) |
| Tax expense |
94.27 |
(118.55) |
| Net profit/(loss) after tax |
(339.11) |
(389.60) |
| Total comprehensive income |
(338.65) |
(389.23) |
| Earnings per equity share (Rs) |
|
|
| -Basic |
(7.29) |
(8.37) |
| -Diluted |
(7.29) |
(8.37) |
KEY FINANCIAL RATIOS
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:
Key Ratios |
Units |
2022-23 |
2021-22 |
% Change Explanations |
| Current Ratio |
Times |
1.56 |
1.67 |
(6.59) Not Applicable |
| Debt Equity Ratio |
Times |
1.02 |
0.85 |
20.00 |
| Debtors Turnover |
Times |
1.67 |
1.19 |
40.34 The increase is due to increase in
turnover as |
Inventory Turnover |
Times |
0.42 |
0.28 |
50.00 compared to previous
year and the debtor as well as inventory levels remaining stable vis a vis the comparable
figures of the previous year. |
| Interest Coverage Ratio |
Times |
0.50 |
(0.16) |
412.50 The increase is on account of
increase in the EBID. |
| Operating Profit Margin |
% |
10.46 |
(4.50) |
332.44 The increase in the margins is on
account of the |
Net Profit Margin |
% |
(14.37) |
(24.75) |
41.94 change in the product
mix of the jewellery sold as well as increase in the turnover. |
| Return on Net Worth |
% |
(9.57) |
(10.03) |
4.59 Not Applicable |
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, conducive and productive environment to enhance their productivity. As on
March 31, 2023 the total employee strength of the Company was 1,443. The industrial
relations within the Company have remained harmonious throughout the year.
References - Various industry reports and websites including GJEPC,
IBEF etc.
+91-9892691696
