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Renaissance Global Ltd Management Discussions

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Apr 1, 2025|12:00:00 AM

Renaissance Global Ltd Share Price Management Discussions

MANAGEMENT DISCUSSION & ANALYSIS

GLOBAL ECONOMY

In 2023, the US economy exhibited moderate growth, fuelled by strong consumer spending and a resilient labour market. Despite high inflation, proactive monetary policies by the Federal Reserve contributed to stability. However, challenges persisted, including supply chain disruptions, geopolitical tensions, and inflationary pressures. Globally, emerging markets in Asia and Africa thrived due to industrialization and digital initiatives, while developed economies faced slower growth due to inflation and energy crises. Although global trade volumes improved, political instability, climate change, and economic disparities remained critical issues for sustainable and inclusive growth.

GEMS& JEWELLERY MARKET

The global gems and jewellery market in 2023 was characterized by steady growth and evolving consumer preferences. Valued at approximately USD -225 billion, the market experienced an annual growth rate of around -5%.This growth was fuelled by a combination of rising demand for luxury goods and the influence of social media an de-commerce.

The market is segmented into various product types including diamonds, gold, platinum, gemstones, and costume jewellery. Each segment catered to different consumer needs and preferences, ranging from bridal jewellery and daily wear to investment pieces. The distribution channels also diversified, with online retail, specialty stores, and department stores playing crucial roles. The rise of e-commerce, in particular, transformed the purchasing behaviour of consumers, offering them convenience and a wider array of choices.

In the United States, the gems and jewellery market was valued at approximately USD 63 billion in 2023, reflecting steady growth supported by consumer spending and the rise of e-commerce. According to a report, online jewellery sales in the US increased by 15% year-over-year, accounting for nearly 25% of total market sales. American consumers demonstrated an increased demand for personalized and sustainable jewellery, driven by a growing awareness of ethical sourcing and environmental impact.

Technological advancements also played a pivotal role in the markets evolution. The adoption of advanced technologies like block chain for supply chain transparency and the use of artificial intelligence (Al) for personalized shopping experiences enhanced the overall consumer journey.

However, the US market also faced several challenges. Economic uncertainty, driven by inflation and a potential slowdown in growth, impacted consumer spending habits. The persistent high inflation rates, although stabilizing, affected the purchasing power of consumers, leading to cautious spending behaviour. Inflation in the US was recorded at 6.5% in 2023, according to a report, affecting discretionary spending on luxury items like jewellery.- Additionally, supply chain disruptions-continued to pose challenges for the industry. The availability and pricing of raw materials, especially precious metals and gemstones, were affected by global supply chain issues, leading to increased production costs and potential delays in product availability.

SUSTAINABLE SPARKLE: LAB GROWN DIAMOND JEWELLERY

Lab grown diamonds are diamonds that are produced in a controlled technological environment. Unlike natural diamonds, which are formed over billions of years in the Earths mantle, lab grown diamonds are created using advanced technological processes that mimic the natural diamond formation. These processes typically involve high pressure and high temperature (HPHT) or chemical vapour deposition (CVD). The result is a diamond that is virtually identical to its natural counterpart in terms of physical, chemical, and optical properties. The popularity of lab grown diamonds has surged in recent years due to several factors. Lab grown diamonds are more affordable than natural diamonds with similar characteristics, making them an attractive option for consumers seeking high- quality jewellery at a lower cost.

The global lab grown diamonds market was valued at $24.0 billion in 2022, and is projected to reach $59.2 billion by 2032, growing at a CAGR of 9.6% from 2023 to 2032. Indias exports of polished LGDs are growing by about 55% yearly, making up roughly 6.2% of natural polished diamond exports.

India mainly uses the carbon vapour deposition (CVD) method for LGD production, followed by high pressure high temperature (HPHT). Research from Indias GJEPC suggests there are around 1,500 to 1,800 LGD reactors in India. By capacity, the below 2 carats segment in lab grown diamonds held the highest market share in 2022, accounting for more than two-thirdsof the global LGD market revenue togain popularity in thefuture.

In the United States, the demand for LGD jewellery is particularly strong. This growth is driven by increasing consumer awareness of the ethical and environmental benefits of LGDs, as well as their cost advantage over natural diamonds.

The European market presents a significant opportunity for the expansion of LGD jewellery offerings as this market is relatively untapped. Europe is known for its strong demand for high- quality, ethically sourced products, and LGDs align perfectly with these consumer preferences. Our Company is already working with leading retailers in the European market to begin testing LGD jewellery collections at select outlets and capitalize on the growth of this market in Europe.

India represents another promising market for the and is expected to grow with a highest CAGR of 9.9% till 2032. Most of the lab grown diamonds that are available in the market for jewellery production and industrial tools production are below 2 carats. 1 to 2 carat diamonds are highly popular for making engagement and wedding rings and are expected expansion of LGD Jewellery. The Indian market is characterized by a strong affinity for Jewellery, with diamonds holding a special place in the hearts of consumers. The increasing awareness of LGDs, coupled with their affordability, presents a unique opportunity for growth. The Company plans to offer LGD jewellery collections under a special brand housed under IRASVA, leveraging the established brand presence and marketing activities of IRASVA.

Despite their growing popularity in the US market, rapid capacity expansion by players in India is leading to supply of LGDs grown and polished in India outstripping demand, leading to significant fall in the prices of LGDs over the last 18 months. Our Company has made a conscious and strategic decision to refrain from entering the growing and polishing of lab-grown diamonds, focusing instead on creating brands around LGD jewellery in each key market. This choice has turned out to be beneficial for the Company, as we have been able to insulate ourselves from the volatility and price pressures that have impacted the lab-grown diamond market.

RESURGENCE OF B2B FINE JEWELLERY MANUFACTURING

The global jewellery manufacturing industry is experiencing a shift, with prominent & globally recognized brands looking for Original Equipment Manufacturers (OEMs) in India under their supply chain diversification strategy. This trend marks a crucial shift in the industrys dynamics and presents a remarkable opportunity for our Company to rejuvenate our B2B consumer brand division.

Brands, both established and emerging, can leverage the expertise of RGL for the production of their fine jewellery collections. This strategy enables brands to concentrate on their core strengths, such as design, marketing, and customer engagement, while capitalizing on the advanced manufacturing capabilities of RGL. RGLs commitment to quality craftsmanship, rigorous quality control, and experience of dealing with organized retailers since more than 25 years ensures that the jewellery produced adheres to the exacting standards set by their brand clients.

OUR BUSINESS MODEL

Renaissance Global Limited stands as a prominent global player in the branded jewellery industry. We design, manufacture, and supply jewellery to key markets in the USA, Canada, the UK, Asia, and Australia through both B2B and D2C channels, with a special focus on branded jewellery. Our business is divided across four main verticals - Customer Brands (Private Label), Plain Gold Jewellery segments, Licensed Brands and In-house Brands.

CUSTOMER BRANDS

A large share of our business comes from supplying jewellery to specialty jewellers, department stores, online retailers, and designer brands. These partners purchase both generic products for their own brands and branded products from our licensed collections. Our clientele demands a diverse range of products, from luxurious engagement rings to affordable items for daily use and gifting. While the US has been our primary market over the past two decades, our non-US sales are growing at a fast pace and should represent a larger share of our revenues in the coming 3 years. We are benefiting from our strong management capabilities, high quality manufacturing processes and stringent quality control standards as more European brands, both jewellery and fashion, are adding us as OEMs for their jewellery collections.

PLAIN GOLD DIVISION

This division mainly operates in the Middle East, where it designs, manufactures and sells fast moving 22kt, 21kt and 18kt non-studded gold jewellery to major retailers and wholesalers in the region. While this is a profitable division, it is working capital intensive and has low pricing power due to the commoditized nature of the business. Since the business is not completely aligned to the overall group strategy of focusing on high margin businesses with lower working capital requirements and strong differentiation, we are looking to divest this business. This move will help free up capital for other strategic initiatives at the group level and help us improve overall margins.

LICENSED BRANDS

We sell our Licensed Brands through retailers as well as our own websites. These brands includes Enchanted Disney Fine Jewelry, Hallmark Fine- Jewelry, Disney Jewels, Star Wars™ Fine Jewelry, Marvel, True Fans Fine Jewelry, House of the Dragon, Harry Potter and DC Comics expanding our portfolio of beloved and iconic brand collaborations.

Licensed brands provide us with differentiation at the market place and in jewellery showcases. Customers are delighted to purchase jewellery that has a meaning or significance attached to it compared to just a generic design. This could be in the form of one of their favorite childhood characters, a special emotion or a famous sports person or team. Investing in this differentiation offer us the chance to earn a higher margin compared to generic private label jewellery. Sales through D2C platforms also help leverage the omni-channel advantage and reguire lesser investment in working capital, thus making this a high return proposition.

IN-HOUSE BRANDS

We have brands across two main geographies:

USA

We offer lab-grown diamond engagement rings and jewellery, featuring an innovative online customization model that ensures custom pieces are delivered in a short time frame. This recently acguired business is exhibiting promising growth and reflects our commitment to sustainable and ethical practices. Additionally, we market everyday fashion jewellery under the brands Jewelili and Everyday Elegance, primarily through online marketplaces, thereby reaching a broad consumer base.

India

Focused on the Indian market, our Irasva brand offers designer retail jewellery with stores in Mumbai, Ahmedabad and Hyderabad. Irasva epitomizes our dedication to blending traditional craftsmanship with contemporary designs, catering to the evolving tastes of Indian consumers.

KEY STRENGTHS

PRODUCT DEVELOPMENT

We have a strong and experienced team of merchants and product development specialists. Annually, our design team, comprising over 200 members, introduces more than 15,000 new designs, maintaining an active design bank of over 100,000 designs. We have strong technological infrastructure to support the product development process which include latest 3D modelling and design software, 3D prototyping machines, high quality rendering infrastructure and an experienced model making team.

MANUFACTURING

Our manufacturing facilities, spanning Mumbai, Bhavnagar, and Dubai, cover 172,000 sguare feet and employ over 3,500 skilled workers. Each location and factory has its own strength, focusing on a particular type of product or market. Overall, we have a capacity to churn out over 3 million pieces each year.

SALES AND DISTRIBUTION

Our B2B distribution network supplies Jewellery to a variety of retailers, including renowned names like the Signet group (Kay Jewelers, Zales), Fred Meyer, Helzberg Diamonds, JC Penney, Kohls, Macys, and Walmart. We also serve catalog, e-commerce, and television retailers such as Amazon, Argos, and Jewellery Television. Our sales offices in New York, London, and Dubai ensure strong business relationships and efficient communication with our valued customers. Our New York headguarters and distribution facility, spread over 56,000 sq. ft., supportsourgrowing D2Cbusiness.

BRANDS

LICENSED BRANDS:

Enchanted Disney Fine Jewelry, is a collection of diamond, gold and gemstone jewellery inspired by the romance of your favorite Disney fairy tales. The collection celebrates Happily Ever After with jewellery inspired by Disney Princesses, Villains and all the other loving characters. The brand is the perfect marriage of the romance of Disney and the lasting beauty of fine jewellery. The timelessly elegant designs subtly evoke the love, adventure, happiness, and magic of the fairy tales loved by millions.

This brand is accessible through prominent jewellery retailers and specialty stores in USA and distributed through our direct-to-consumer (D2C) website.

FINE IF.WF1 RY

The Star Wars™ Fine Jewelry collection is inspired by the timeless Star Wars™ films and series such as The Mandalorian™, Boba Fett™ and Obi-Wan Kenobi™. The brand embodies an experiential purchasing approach, featuring captivating narratives behind each piece, an ultra-modern website design, and innovative packaging. This brand was primarily distributed through our D2C website till 2023. In 2024 it was launched as part of Wonder Fine Jewelry collection with 2 major US retailers and is reporting very promising numbers.

JEWELS COLLECTION

Disney Treasures features beloved Disney characters like Mickey Mouse, Minnie Mouse, Winnie the Pooh, 101 Dalmatians, and characters from The Lion King. Its launch through a prominent specialty jeweller in the US has been immensely successful, leading to its expansion to over 1,000 stores across North America.

FINE JEWELRY

Established in 1910, Hallmark has evolved from a greeting card company into a diverse consumer brand with widespread presence, facilitating approximately 6 billion brand interactions annually. Renaissances strategic approach aims to leverage this connection by offering Hallmark-branded jewellery that celebrates significant moments in consumers lives. These collections are available in over 2,000 retail locations across the United States and through our dedicated D2C website, adopting an omni-channel model that has proven effective in enhancing the reach and impact of the Hallmark brand.

JEWELRY

Marvel, a subsidiary of The Walt Disney Company, is a leading entertainment brand known for its expansive universe of superheroes. Founded in 1939, Marvel has created some of the most popular and influential characters in comic book history, including Spider-Man, Iron Man, Captain America, Thor, The Hulk, and The Avengers. Marvel was launched as part of Wonder Fine Jewelry collection along with Star Wars and Disney Jewels with 2 major US retailers and is doing well.

TRUE>^/v4A/S

TheTrue Fans Fine Jewelry collection, licensed from the NFL, represents each of the NFLs 32 clubs, as well as jewellery inspired by the Super Bowl and Pro Bowl games.This collection is distributed through one of the largest retail groups in the US, both in-store and online. It is also sold on renowned sports merchandise platform Fanatics and through our own D2C website.

Apart from the above brands which are already available in stores or online, we are currently working on developing collections for DC Comics and Harry Potter.

OWNED BRANDS:

IRASVA, a fine jewellery brand based in India, caters to the self-assured modern woman. With its gold and diamond jewellery offerings, IRASVA celebrates the contemporary woman, inspiring hertoembrace her individuality, feel beautiful, and express herself in every moment. The inaugural IRASVA store was launched in South Mumbai in May 2019. Presently, the company operates through outlets, located in Mumbai, Ahmedabad, and Hyderabad. The brands long-term vision involves establishing select outlets across India, employing an omni-channel approach, bridging the gap between affordable daily wear jewellery and elaborate bridal jewellery. The expansion strategy follows a meticulous approach, focusing on store-level profitability at each new location ratherthan rapid expansion.

JEWELILI

Jewelili offers a wide range of jewellery suitable for any and every occasion in ones life. The brand was launched with the aim of providing affordable fine jewellery, whether its for a birthday, anniversary, wedding, or any other celebratory moment. Jewelili is distributed through two primary channels: Amazon B2B Marketplace, catering to customers in the United States and through its dedicated direct- to-consumer (D2C) website, providing customers with a convenient and seamless online shopping experience.

In FY2022, Renaissance acguired Everyday Elegance, which specializes in crafting exguisite precious metal jewellery adorned with high-quality diamond alternative gemstones like cubic zirconia and moissanite. The jewellery designs within the collection embody timeless traditions. With a diverse portfolio of over 200 products, this company has established a strong presence on various e-commerce platforms, primarily on Amazon.com. The acquisition reinforces Renaissances commitment to expanding its reach within the global e-commerce marketplace.

SUSTAINABLE OPERATIONS

Our dedication to sustainability and ethical practices is demonstrated through adherence to rigorous global standards and regular audits. We hold certification from the Responsible Jewellery Council (RJC) and undergo Sedex Members Ethical Trade Audits (SMETA), both of which serve as global benchmarks for ethical conduct and governance in the jewelry industry. Renaissance is deeply committed to sustainability and has implemented a range of initiatives to reduce its environmental impact and promote sustainable practices. The Companys comprehensive Environmental Manage ment System (EMS) policy guides its efforts to progressively reduce its carbon footprint. Additionally, our ISO 14001 certification underscores our commitment to environmentally sustainable manufacturing processes.

Renaissance Global Limited proudly supports the Ten Principles of the United Nations Global Compact, which cover human rights, labor standards, environmental protection, and anticorruption measures. These principles are deeply embedded in our Companys strategy, culture, and daily operations. We actively engage in collaborative projects that advance the United Nations Sustain able Development Goals (SDGs), contributing to broader development objectives. Moreover, the Renaissance Foundation is a vital part of our commitment to social responsibility.The foundation is dedicated to serving society through a variety of initiatives focused on education, healthcare, humanitarian relief, and animal welfare. Through these efforts, we strive to operate ethically, promote sustainable practices, and enhance societal wellbeing.

By integrating these principles and initiatives into our business model, Renaissance aligns its core values with a strong commitment to social respon - sibility, ensuring that we contribute positively to the communities and environments in which we operate.

FINANCIAL OVERVIEW

We are pleased to report that our company has demonstrated resilience in its performance over the past year, supported by strong contributions from our branded jewellery segment and Direct-to- Consumer (D2C) business. Our total income for the year stood at Rs.2,117 crore, compared to Rs.2,243 crore in FY23.

Our gross profit witnessed a notable increase of 6.1%, reaching T648.9 crore, up from T611.3 crore in the previous year. This improvement resulted in an expanded gross margin by a significant rise of 339 basis points from 27.3% in FY23to30.7%in FY24.The D2C segment itself exhibited robust growth, with revenue rising by 24.5% to Rs.187.4 crore, up from Rs.150.5 crore in FY23. This represents an impressive compound annual growth rate (CAGR) of 152% compared to FY22.

Companys India brand, IRASVA, has continued to flourish, demonstrating an extraordinary revenue growth of 38.6% for the year. In the US market, the owned brands have also performed admirably, with a revenue increase of 22.9%, reflecting the strength and appeal of our products in key international markets. The licensed brands segment has remained stable, achieving a revenue of Rs.437 crore with a modest growth of 3.38%.

An important driver of our D2C growth has been our strategic focus on lab-grown diamonds, which accounted for 48% of our D2C sales. This focus not only aligns with current market trends but also positions us well for future growth in this expanding segment. For FY24, our studded jewellery business represented 88% of ourtotal revenue, with branded jewellery contributing 33%. This distribution highlights our strong positioning in the high-value branded jewellery market.

Despite a marginal decline in our revenue, the EBITDA profitability remained stable at T168 crore, reflecting margins of 7.9% for FY24. EBITDA margins witnessed 44Bps growth YoY, as a result of focused margin improvement in the later half of the fiscal year. It also underscores the companys ability to maintain a steady & improving margin even in a challenging economic environment. PBT decreased by 9.9% to Rs.85.4 crore, and profit after tax (PAT) witnessed a decrease of 16.2% to Rs.73.6 crore.

In terms of the balance sheet, the company continues to maintain a healthy financial position. Net debt to equity ratio stands at a robust 0.28 as of March 2024. Our total net debt is T322 crore, while our cash and bank balances, including current investments, stood at Rs.188 crore.

Our current inventory levels are elevated as a result of a strong order book at the factory level, which we anticipate will support revenue growth in FY25. This strong order book positions us well for the coming year and reflects our on-going efforts to align production with market demand. On a like to like basis, Net working capital days have reduced from 239 days in FY21 to 219 days in FY24, indicating an improvement in the working capital cycle.

KEY FINANCIAL PARAMETERS (in Rs. Crores) FY2024 FY 2023
Net Revenue 2,107.11 2,236.56
EBITDA 167.51 168.07
% of Net Revenue 7.9% 7.5%
Depreciation 30.22 32.05
Interest Expenses 51.89 41.25
Other Income 9.84 6.12
PBT 85.40 94.77
% of Net Revenue 4.1% 4.2%
Tax 11.80 6.97
Profit After Tax 73.60 87.81
%of Net Revenue 3.5% 3.9%

OUTLOOK

Renaissance Global Limited has demonstrated a robust performance during the fiscal year, despite macroeconomic challenges such as inflation due to supply chain disruptions from the Russia-Ukraine conflict and recessionary sentiments in the US, UK, and Europe. Moving forward, we see significant growth opportunities across our key geographies in North America, Europe, and other international markets. Companys focus remains on strengthening our presence in these regions by sustainably growing our high-margin branded business segment and lab-grown diamond jewellery. Company is currently experiencing a healthygrowth in our factory order book, which is meaningfully higher year-over-year.

Based on this growth and the anticipated strong performance from our Direct-to-Consumer (D2C) vertical, we expect strong growth in revenues from our studded business in FY25. The company is considering strategic options to exit the Plain Gold business as this move is anticipated to free up capital and deleverage the companys balance sheet, which could further enhance the blended margins.

The inclusion of new marguee brands in the licensed portfolio would further augment our branded segment. Over the last few years, the contribution from the branded segment has increased from 2% in FY18 to 33% in FY24. Companys strategic goal is to achieve over 50% of sales from the Branded Jewellery segment within the next three years.

Renaissances core competencies such as partner ships with globally recognized brands, expertise in product conceptualization and design, advanced industry know how, and mutually beneficial partner ships with iconic brands position well to capitalize on numerous growth opportunities in the high- potential global branded jewellery industry.

RISKS,THREATS, AND CONCERNS

The jewellery industry is inherently tied to broader economic trends, competitive landscapes, and consumer sentiment. For Renaissance Global Limited, several unigue factors amplify these risks. Below are the key risks specific to our Company and the industry in which we operate:

GLOBAL ECONOMIC CONDITIONS AND CONSUMERCONFIDENCE

Our sales are highly sensitive to fluctuations in economic conditions and consumer confidence. During economic downturns, discretionary spending on luxury items such as jewellery typically decreases, which can negatively impact our sales and profitability. Additionally, changes in U.S. trade policy and tariffs affecting India could further pressurize our business operations and financial performance.

FLUCTUATIONS INTHE US DOLLAR

Our sales and raw material purchases are primarily denominated in US dollars, while production costs are incurred in Indian Rupees, any appreciation of the Indian Rupee can adversely affect our production costs and profitability. Currency fluctuations present a significant risk to ourfinancial stability.

PRICE VOLATILITY AND AVAILABILITY OF DIAMONDS AND OTHER GEMSTONES

The company operations rely heavily on raw materials such as gold, silver, diamonds, and colored stones. While the prices of gold and silver are adjusted at the time of customer orders, diamond and colored stone prices are typically fixed for certain periods. Significant increases in the cost or changes in the supply of these essential materials can impact our gross profit margins and overall business operations.

INTERNAL CONTROLS

Renaissance Global Limited has instituted robust internal control systems that align with the nature, scale, and complexity of our business operations. These systems are designed to ensure the accuracy of our financial information, prevent unauthorized use of assets, and ensure compliance with applicable laws and regulations.

To enhance the effectiveness of these controls, the company has engaged a reputable audit firm to con duct regular internal audits. This firm rigorously- monitors our operations, providing insightful observations and recommendations to both management and the Audit Committee.Their role is critical in reviewing and strengthening our control measures as needed.

Furthermore, the company has made significant investments in advanced information technology to secure and protect sensitive data, underscoring our commitment to data integrity and security.

By maintaining robust internal controls, conducting regular audits, and leveraging cutting-edge technology, RGL strives to ensure the reliability and security of our financial information and overall business operations.

CAUTIONARY STATEMENT

Statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be "Forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the government regulations, tax laws and other statutes and other incidental factors.

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