Penta Gold Ltd Management Discussions.
1) INDUSTRY STRUCTURE AND DEVELOPMENTS:
Indias gems and jewellery sector is one of the largest in the world contributing 29 per cent to the global jewellery consumption. The market size of the sector is about US$ 75 billion as of 2018 and is estimated to reach US$ 100 billion by 2025. The sector is home to more than 300,000 gems and jewellery players, contributes about 7 per cent to Indias Gross Domestic Product (GDP) and employs over 4.64 million employees. Indias gems and jewellery sector contributes about 15 per cent to Indias total merchandise exports. The overall net exports of gems and jewellery stood at US$ 32.71 billion during FY 17-18 registering a compound annual growth rate (CAGR) of 5.83 per cent over FY04-05; whereas gems and jewellery imports increased at a CAGR of 7.97 per cent from US$ 11.63 billion in FY04-05 to US$ 31.52 billion in FY17-18. India is the worlds largest centre for cut and polished diamonds in the world and exports 75 per cent of the worlds polished diamonds.
Today, 14 out of 15 diamonds sold in the world are either polished or cut in India. India exported US$ 1.64 billion worth of cut and polished diamonds in FY19-20( As of April 19). It contributed 73.42 per cent of the total gems and jewellery export. India is the largest consumer of gold in the world. Rising middle class population and increasing income levels are the key drivers for the demand of gold and other jewellery in India. Gold demand in India rose 11 per cent year-on-year to 760.40 tonnes during January-December 2018. Also, the Government of India has permitted 100 per cent Foreign Direct Investment (FDI) in the sector under the automatic route.
As of January 2018, the Reserve Bank of India (RBI) has increased the scope of the gold-monetisation scheme by allowing charitable institutions and government entities to deposit gold, which is expected to boost deposits over the coming months. The Bureau of Indian Standards (BIS) has revised the standard on gold hallmarking in India from January 2018, to include a BIS mark, purity in carat and fitness as well as the units identification and the jewellers identification mark on gold jewellery. The move is aimed at ensuring a quality check on gold jewellery. Note: * - provisional figure.
2) OPPORTUNITIES, CHALLENGES AND THREATS:
Some of the opportunities for the retail jewellery industry are as follows:
(a) Increasing demand for diamond jewellery, which is a high margin product as compared to the gold jewellery.
(b) Limited penetration of organized jewellery in the country.
(c) Growing consciousness amongst customers for branded jewellery.
(d) Favourable demographics leading to increasing demand for jewellery in the country.
(e) Increase in purchasing power of the customers in the Tier I & II locations.
Some of the key challenges facing the retail jewellery industry are as follows:
(a) Limited availability of high end retail space.
(b) Adapting to fast changing consumer preferences and buying patterns.
(c) Volatility in the market prices of gold and diamonds.
3) RISKS AND CONCERNS:
As the Company is dealing in very high value goods / items, it is always exposed to operational risks. The Company therefore always ensures that its entire inventory, from raw material to finished goods is insured at all times, whether under transit, at showrooms or at the manufacturing facilities. Entire inventory is computerized and is available for tracking at all times. The Company has cash pick up arrangements with leading banks, with transit insurance. All of its showrooms have strong rooms for overnight safe custody of the inventory. In addition all the showrooms have CCTV vigilance and armed guards. The Company is exposed to price risk movements both in gold as well as its forex exposure. However, it has put rigorous systems and procedures in place to take care of these concerns. The Company has in place a comprehensive risk management framework that helps anticipate, identify and evaluate business risks and challenges across the Company and finding ways to mitigate the same. The Company has also put in place a strong team to take care of all the required compliances and hence mitigate any compliance risk.
4) SETTING UP A MANUFACTURING UNIT:
A manufacturing unit located at Gala No.407, 4th Floor, Bharat Indl Parkash Indl, Premises Tokrshi Jivraj Road Sewree, Mumbai, was established in the May, 2019. The said unit will be engaged in manufacturing of polished & processed pearls, cut and polished coloured gemstones, jewellery containing gold, silver, platinum, palladium, coloured gemstones, real or cultured pearls or synthetic/ imitation stones, cut and polished synthetic stones, costume/fashion jewellery, silver filigree jewellery & silver articles etc. and export the same in the capacity of a registered Manufacturer exporter.
5) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
The Company has adequate internal control procedures commensurate with its size and nature of the business. These business control procedures ensure efficient use and protection of the resources and compliance with the policies, procedures and statutes.
6) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
The salient parameters of the financial performance of the Company during the year under review are as under:
01-04-2018 To 31-03-2019
01-04-2017 To 31-03-2018
|1. Total Sales/Income||3698266.11||2410106.50|
|2. Net profit before depreciation & tax||50463.67||30543.63|
|4. Net Profit before Taxation||49507.00||29285.89|
|5. Provision for tax (incl. deferred taxes)||19653.04||12621.98|
|6. Net Profit after tax||29853.96||16663.92|
|7. Balance brought forward||84269.27||67605.35|
|9. Balance carried forward||114123.23||84269.27|
7) MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:
The Company believes in establishing and building a strong performance and competency driven culture amongst its employees with greater sense of accountability and responsibility. The Company has taken various steps for strengthening organizational competency through the involvement and development of employees as well as installing effective systems for improving their productivity and accountability at functional levels. The Company acknowledges that its principal asset is its employees. Ongoing in-house and external training is provided to the employees at all levels to update their knowledge and upgrade their skills and abilities. As on March 31, 2019, the Company had total 08 full time employees. The industrial relations have remained harmonious throughout the year.
8) DISCLOSURE OF ACCOUNTING TREATMENT:
The Company has followed all the treatments in the Financial Statements as per the prescribed Accounting Standards.
On behalf of the board
PENTA GOLD LIMITED
(Ketan M. Shroff)
Chairman & Managing Director
Mumbai, 15th July, 2019