renaissance jewellery ltd share price Management discussions

ECONOMIC SCENARIO

GLOBAL ECONOMY

After seeing strong growth through 2021 and early 2022, global economic growth started facing challenges during the latter half of 2022 due to a deteriorating macroeconomic and geopolitical situation. While increase in input costs and supply chain disruptions was already creating headwinds, the war in Ukraine triggered a chain of events which led to an escalating energy crisis in Europe. Inflation in many leading economies led central banks to hike the interest rates in order to curb inflation and get these economies back on track. As per the April 2023 edition of IMF World Economic Outlook, global economic growth rate reduced to 3.4% in 2022 vs a rate of 6.1% in 2021.

Geographically, while western markets showed a marked slowdown in economic activity, emerging markets like India, China and the Middle East experienced a less severe impact on growth. USA, which is our key market, showed a growth of 3.7% in 2022 down from 5.7% during 2021. Higher inflation and interest rates were a major contributor, which also led to a fall in purchasing reflected by a low 12 month average Manufacturing Purchasing Managers Index (PMI) of 53.4, lower than 60.1 in 2021.

While tough macroeconomic conditions continue to impact global demand, the IMF has predicted bottoming out in global economies this year, with a projected growth rate of 2.8% through 2023 and then recovery in 2024 with a growth rate of 3%. The interest rate strategy undertaken by the Federal Open Markets Committee (FOMC) in the US is an important factor in the determining global growth scenario. In its June 2023 meeting, the FOMC left interest rates US unchanged with a forecast to make two increases during the latter half of the year. Control over inflation and corresponding easing in interest rate hikes should help spur global economic growth over the coming quarters. Other important factors likely to determine the course of the global economic growth over next two years are the outcome of the Russia Ukraine conflict and subsequent supply chain easing in Europe. The US economy in particular is expected to grow at 1.6% during 2023 and 1.1% during 2024.

Emerging markets comparatively are expected to emerge stronger and are expected to grow at a rate of 3.9% over 2023 and 4.2% over 2024.

India is regarded by many as a bright spot amidst a bleak global economic scenario and has become the fastest growing major economy. The confluence of an emerging middle class, favorable demographic trend, stable political scenario and strong investments in infrastructure is creating a steady macroeconomic environment in the country. As per OECD data, Indian GDP is expected to grow at a rate of 6% in 2023 and 7% in 2024, the highest rate of growth among major economies.

GLOBAL GEMS & JEWELLERY MARKET TO REACH $516 BILLION BY 2030

The size of the global gems and jewellery market was estimated at about USD 252 Bn in 2021 and is likely to reach USD 516 Bn by 2030, expanding at a CAGR of 8.3% during 2022-2030. The rising trend of wearing pieces of jewellery that matches the outfit, and fashion consciousness among youngsters is boosting the market.

While 2021 was a strong year for the jewellery and luxury goods industry, 2022 brought along a number of challenges across the global economy as discussed above. More specifically for the jewellery industry the challenges were more acute on account of high inputs costs in the form of diamonds and precious metals despite a slump in demand in western markets. These factors also led jewellery retailers to be cautious in replenishing inventory leading to tougher circumstances for jewellery players exporting to these markets.

DRIVERS OF GEMS AND JEWELLERY MARKET

In almost every culture around the world, wearing gems and jewellery is considered the depiction of wealth and social status. Gems and jewellery are used for styling clothes, accessories, smartphones, luxury watches, and other items to style unique looks and also depict social status, wealth, relationships, and prosperity.

Rising income levels in emerging regions around the world is another major driver anticipated to fuel the global gems and jewellery market in the coming years. Spending on buying jewellery, gems, and other ornaments in emerging economies such as China and India is rising due to increasing disposable income. Factors such as industrialization, globalization, urbanization, and changing lifestyles are powering the rising demand for jewellery in emerging regions.

US GEMS AND JEWELLERY MARKET

The American jewellery market is the largest jewellery market globally and encompasses a wide range of segments, including fine jewellery, fashion jewellery, luxury brands, and accessories. Few major pointers about this market are listed below:

Size and Scope

The industry comprises various players, including manufacturers, wholesalers, retailers, and e-commerce platforms. The Gems & Jewellery market in the U.S. is estimated at US $71.9 billion in the year 2021. The industry is expected to grow at a CAGR of 3.3% till 2030.

Distribution Channels

Jewellery is sold through various channels, including specialized jewellery stores, department stores, online retailers, and direct-to-consumer brands. Traditional brick-and-mortar stores still play an important role, although E-commerce has become a significant channel. Talking specifically about the diamond jewellery, Covid-19 pandemic has significantly expedited the inclination of consumers to buy it through online platforms, which emerged as a notable trend. While consumers already relied on the internet to gather information about purchasing diamonds prior to the pandemic, the lockdown restrictions further propelled the shift towards online purchasing. In 2021, the value of online sales for diamond jewellery in the US surged to 25%, with a corresponding volume increase of 31%. These figures reflect a substantial growth compared to 2015 when online sales accounted for 14% by value and 18% by volume.

Sustainable and Ethical Practices

Increasingly, consumers are seeking jewellery brands that prioritize sustainability, ethical sourcing of materials, and responsible manufacturing processes. This trend has led to a rise in demand for environmentally friendly and ethically produced jewellery.

E-COMMERCE ADOPTION IN US MARKET

Prior to 2021, the jewellery e-commerce market in the US was experiencing steady growth. According to a report by McKinsey & Company, the online jewellery market in the US grew at an average annual rate of 15% between 2013 and 2018. The pandemic had a significant impact on the penetration of e-commerce across various industries, including jewellery. The pandemic accelerated the shift towards online surge in demand during this period. Moving forward, it is reasonable to assume that the growth of jewellery e-commerce in the US will continue, albeit with potential fluctuations based on market conditions. The convenience and accessibility of online shopping, along with the increasing digitalization of retail, suggest a positive outlook for the industry. E-commerce and digitalization have had a significant impact on the American jewellery market, transforming the way consumers shop for jewellery and how businesses operate. Here are some key aspects to consider:

Growth of Online Sales

In 2021, around 25% of value of diamond jewellery purchase decisions were estimated to involve some level of online channel, whether to purchase jewellery online or research online followed by pure chase in the store and around 11% of the US engagement ring purchases were shopping as consumers sought safer and more convenient options. Online sales provide convenience, access to a wide range of products, and the ability to compare prices and read reviews. Jewellery e-commerce witnessed a made online, jewellery retailers have expanded their online presence through dedicated e-commerce websites, third-party marketplaces, and social media platforms, suppliers of lab grown diamonds and through our D2C platform

Direct-to-Consumer Brands

The rise of direct-to-consumer (DTC) brands has disrupted the traditional jewellery market. DTC brands leverage e-commerce platforms and digital marketing strategies to reach consumers directly, cutting out intermediaries and offering competitive prices. These brands often focus on transparency, customer engagement, sustainability and personalized experiences, resonating with younger, digitally savvy consumers.

Virtual fry-On and Augmented Reality

Technological advancements have enabled virtual try-on experiences, allowing consumers to visualize jewellery pieces on their own bodies without physically trying them on. Augmented reality (AR) applications and virtual reality (VR) technologies have become increasingly popular, providing an immersive shopping experience and enhancing consumer confidence when making online purchases.

Online Marketplaces

Online marketplaces, such as Amazon, eBay, and Etsy, have become popular platforms for jewellery sales. These marketplaces provide a vast selection of products, a trusted buying environment, and often offer competitive prices. Jewellery brands, both large and small, leverage these platforms to reach a broader customer base and expand their online sales channels.

Digital Marketing and Social Media

Jewellery brands have embraced digital marketing strategies and social media platforms to engage with consumers, build brand awareness, and drive sales. They utilize platforms like Instagram, Facebook and Pinterest to showcase their products, collaborate with influences, and run targeted advertising campaigns. Social media has become an influential channel for jewellery trends and customer inspiration.

Personalization and Customization

E-commerce and digitalization have made it easier for consumers to personalize and customize jewellery pieces. Online platforms often offer customization options, allowing customers to choose different metals, gemstones, and engraving options. This trend caters to the growing desire for unique, one-of-a-kind jewellery pieces.

Data Analytics and Customer Insights

E-commerce platforms and digital tools provide valuable data and insights for jewellery businesses. Retailers can analyze customer behavior, preferences, and purchase patterns to optimize their product offerings, marketing strategies, and pricing. This data-driven approach helps jewellery brands improve customer targeting and enhance the overall shopping experience.

Its important to note that while e-commerce and digitalization have revolutionized the jewellery market, brick-and-mortar stores still hold value for customers who prefer a physical shopping experience or seek personalized assistance. Therefore, many jewellery businesses adopt an omni-channel approach, integrating online and offline channels to cater to diverse customer preferences.

LAB GROWN DIAMOND OPPORTUNITY

Lab-grown diamonds, which have the same physical and chemical properties as natural diamonds, are grown in a lab using technology that replicates the natural diamond growing process. The demand for Lab-grown diamonds has been steadily increasing from 2018 and is now expected to have reach almost 7% of the total diamond jewellery sales in the US by value. The share is even higher in terms of units, with almost 33% of loose diamonds sold in the US estimated to be lab-grown in February 2023. The growth of lab grown diamonds is being watched very closely by the gem and jewellery sector and India being a hub for polishing diamonds, has great potential to become a market leader in both the growing and polishing of lab grown diamonds. As we see increasing demand from our customers in the US, both B2B and D2C, we are well geared to take advantage of this opportunity through our strong sourcing alliances with suppliers of lab grown diamonds and through our D2C platform selling lab grown diamond engagement rings in the US market.

INDIA

Indias gems and jewellery export sector, which is one of the largest in the world, contributed -27% to the global jewellery consumption in 2019. The market size of the global gems and jewellery sector is likely to expand to US $103.06 billion between 2019 and 2023.

Indian Export Market

Apart from strong domestic consumption, India is also a strong player in the global gem and jewellery export market. Globally, India was the top exporter of diamonds with a share of 20.6% in 2020. The Government of India is aiming at US$ 70 billion in gem and jewellery export in the next five years, up from US$ 35 billion in 2020.

From April-October 2022, Indias gems and jewellery exports were at US $23.81 billion, a 1.21% rise compared to the previous years period. In FY22, cut and polished diamonds (62.42%), followed by gold jewellery (23.57%) and silver jewellery (6.95%). However, due to the weakness in western economies and U.S. in particular as discussed above, exports of gems and jewellery sector from India dropped by 4.63% compared to fiscal 2021.

Indian Domestic Market

In the coming years, growth in the gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organized market and are opening opportunities to grow. Increasing penetration of organized players provides variety in terms of products and designs.

With stricter framework around sale of jewellery in India such as Hallmarking, as well as changing preferences of Indian jewellery buyers, more of jewellery retail is expected to move from unorganized to organized players leading to significant growth opportunities for organized retailers over the coming few years. In-fact, chain stores have grown over the last 10-15 years, gaining 35% market share as of 2021. Chain stores, with national operations, focus on daily wear and fast-moving jewellery items (such as chains and rings) and these items account for 50-60% of their business. Chain stores are expected to expand, and their market share will surpass 40%.

RENAISSANCE - BUSINESS MODEL AND KEY STRENGTHS

STUDDED JEWELLERY BUSINESS MODEL

Renaissance Global Limited is a global branded jewellery player, that designs, manufactures and supplies branded jewellery across key global markets in USA, Canada, UK, Asia and Australia across both B2B and D2C channels. The product portfolio encompasses Branded Jewellery, Customer Brands & Plain Gold Jewellery segments.

Since its founding, Mr. Sumit Shah has led the Companys growth. The Company today has evolved into a comprehensive jewellery business, covering various markets and distribution channels.

Our B2B channel services a wide spectrum of retailers like specialty jewellers, department stores, online retailers and designer jewellery brands. These retail partners buy both generic products sold under their own brands as well as branded products from one of our licensed brands. Our customers approach us for a diverse range of products - from high end luxury jewellery such as engagement rings to extremely low cost items for daily use and gifting.

Under the studded jewellery umbrella, we run the following three verticals (refer below diagram):

Growth across all these areas is supported by investments in talent and specialized infrastructure which provides us with a strong business advantage. This includes, a state-of-the art in-house design and 3D rendering studio with a design staff of over 200 experienced designers, a fully integrated distribution facility spread across 56,000 sq. ft. in New York and specialized manufacturing facilities in India allowing complete customization and delivery within ultra-short lead times.

Some of these high potential initiatives under the Branded segment, especially within the D2C umbrella are high margin businesses requiring relatively less working capital and investments, which will help us improve our overall operating margins and meaningfully improve our return on capital as they grow.

KEY STRENGTHS

A 360 Degree Jewellery Business

Our Company has gradually developed a strong foothold in diverse but complementary facets of the global jewellery industry through a deliberate organic and inorganic growth strategy. This diversified portfolio of business channels is a key strength and competitive advantage of our Company. It helps us stay resilient when times are tough in any specific business area, sales channel, and market or customer segment. It helps us leverage the learning of one business area to provide unique solutions in another. It also gives us a birds eye view of the overall jewellery landscape in our key markets which in turn helps us compete better and grow further. We believe that the scale of our operations is not easy to achieve in a short period of time, in an industry which still relies on trust and years of strong customer relations, which creates sizable barriers to new entrants. Our business depth signifies our strengths in product conceptualization, sales, manufacturing, distribution, capital allocation, cash flow management and above all, an ability to generate profitability and value for our stakeholders

Product Development

Product development is at the center of our business model. Experienced merchandisers at Renaissances sales offices and design studios product and eliminating the need for physical prototypes. This approach allows for a faster design-to-launch cycle and cost-effective processes for our websites as well.

Sustainable Manufacturing

Spread across Mumbai, Bhavnagar, and Dubai, the Companys manufacturing facilities cover a total area of 166,000 square feet and employ over 3,500 skilled workers. These factories craft everything from intricate plain gold jewellery to high-end engagement rings as well as everyday fashion jewellery across a variety of metals, diamond and gem qualities. An ERP solution helps in generating valuable insights to improve study current preferences of consumers based on interactions and data and conceptualize collections to meet their requirements. On an annual basis, the companys design team, consisting of more than 200 members, introduces over 15,000 designs. In total, the company maintains an active design bank of more than 100,000 designs. Recently, Renaissance has made significant investments in establishing state-of-the-art design and rendering studio. This studio employs 3D modeling and rendering to generate digital designs allowing merchants to visualize the end efficiency, reduce quality rejections and ensure on time delivery to its customers. The Companys efforts on this front have helped reduce its net working capital cycle from 239 days in FY 2021 to 176 days in FY 2023.

The Companys manufacturing operations also boast of being strong on the environmental and governance fronts. Our facilities are regularly audited under stringent global guidelines and this focus on sustainability and ethical practices has enabled the company to become a certified member of Responsible Jewellery Council (RJC) and Sedex Members Ethical Trade Audit (SMETA) compliant, both global benchmarks for ethical behavior and governance within the jewellery industry.

The Company is also certified as an ISO 14001 company, signifying our focus on the environmentally sustainable manufacturing.

Sales and Distribution Infrastructure

Our B2B distribution channel supplies jewellery to specialty jewellery retailers, including prominent names like the Signet group (Kays Jewelers, Zales), Fred Meyer, Helzberg Diamonds, as well as department store chains such as JC Penney, Kohls, storage, process and allocation, merchandising capabilities, sales, and after sale services. It employs a staff of over 75 in New York.

Brands

An anticipated acceleration in consumer preference for branded jewellery over unbranded options is expected in the upcoming years. During the past few years, Renaissance has successfully established a strong portfolio of brands, distributed through both B2B and D2C channels. The companys licensed brands include Enchanted Disney Fine Jewelry, Disney Jewels, Star Wars™ Fine Jew elry and Marvel from the Disney stable, as well as Hallmark Fine Jewelry, licensed from Hallmark

Macys, and Walmart. The company also serves as a trusted supplier to catalog, e-commerce, and television retailers such as Amazon, Argos, and Jewellery Television. In the Middle East, Renaissance supplies renowned retailers such as Damas, Joy Alukkas, Malabar and Jawhara. With a diversified customer base, our sales office in New York, London and Dubai help ensuring long standing business relationships and efficient business communication with our valued customers. Our state-of-the-art headquarters and distribution facility spread across 56,000 Sq. Ft in New York, USA acts as a strong backbone to service the growing D2C business with system-driven task distribu tion, automation in

Inc., and True Fans Fine Jewelry, licensed from NFL. Renaissance also offers in-house brands like Jewelili, Everyday Elegance and Irasva. In recent years, the company has launched dedicated D2C websites specifically targeting the USA and UK markets for most of these brands, resulting in promising outcomes. In addition, Renaissance owns the brand Irasva, which is focused on the Indian market and operates three retail stores located in Mumbai, Ahmedabad, and Hyderabad. To tap into the growing demand for diamond jewellery in India, the company is employing an omni-channel strategy, aiming for a gradual and controlled expansion.

GROWING THE BRANDED JEWELLERY BUSINESS

One of Renaissances primary strategies for business growth involves a strong emphasis on enhancing its offerings in the branded jewellery sector. The companys ability to create collections centered around iconic brands and efficiently distribute them to reach a wide customer base grants a sustainable competitive edge. The branded segment offers improved pricing leverage and operates with lower capital intensity, resulting in higher margins and enhanced return ratios. By prioritizing the growth of this segment, Renaissance is positioned to improve its return ratios in the future.

STRENGTHENING THE DIRECT-TO-CONSUMER BUSINESS

In todays jewellery retail landscape, there is a global focus on adopting an omni-channel approach to drive sales and meet customer demands. The preference for online marketplaces over traditional brick-and-mortar stores has resulted in significant growth in online purchases. Recognizing this opportunity, Renaissance has strategically developed its Direct-To-Consumer (D2C) business over the past few years, establishing six successful D2C websites that have received positive feedback from consumers.

The journey into the D2C business began with the launch of the Enchanted Disney Fine Jewelry website in February 2020, which garnered an excellent response and encouraged Renaissance to expand further. Subsequently, the company introduced websites for Star Wars™ Fine Jewelry, Hallmark Fine Jewelry and Jewelili. In FY 2024, are expected to see two new websites being launched - jewellery based on National Football League (NFL) and the iconic Marvel characters. The D2C business has achieved a turnover of Rs 239 crores during FY 2023, which represents a 92% CAGR over Rs 65 crores reported in FY 2021.

Our recently acquired lab grown diamond engagement ring business is showing very promising growth and is expected to be a major growth driver of the Companys D2C strategy during the coming years. The platform offers a fully customizable model allowing customers to choose a diamond and setting of their choice, with the factory shipping the piece within a 7 to 10 days window of receiving the order. After incurring certain integration costs through 2022, this business turned profitable during Q4 of FY 2023 and is expected to contribute positively to the profitability of the D2C division. The D2C business presents attractive profit margins, with normal EBIDTA margins ranging from 18% to 20%. It requires significantly less working capital, leading to higher returns on capital employed. The growth in fully customization model will improve this further, with benefits of a negative working capital business.

Other key initiatives undertaken during the year to strengthen the D2C business are:

• Setting up of a Design and 3D rendering studio for the creation of a strong product pipeline and attractive content rendered using 3D modeling for the websites. This facility has state-of-the-art technology with best in class design and rendering quality. This centre also prints fully customized 3D designs created by customers on our websites on a real time basis and passes them on for manufacturing which helps us turnaround product within ultra-short lead times.

• Setting up of a Design and 3D rendering studio for the creation of a strong product pipeline and attractive content rendered using 3D modeling for the websites. This facility has state-of-the-art technology with best in class design and rendering quality. This centre also 3D prints fully customized designs created by customers on our websites on a real time basis and passes them on for manufacturing which helps us turnaround product within ultra-short lead times.

FOCUS ON SUSTAINABILITY

Renaissance recognizes its responsibility to conduct business in a socially and environmentally conscious manner, making a positive impact on the communities where it operates. In line with this commitment, the company established the Renaissance Foundation, dedicated to serving society and contributing to the areas of education, healthcare, humanitarian relief, and animal welfare.

As a testament to its responsible practices, Renaissance is a certified member of the Responsible Jewellery Council (RJC). Being an RJC member signifies the companys dedication to upholding the RJC Code of Practices, an internationally recognized standard for responsible business conduct in the Gems and Jewellery industry. The code addresses crucial areas such as human rights, labor rights, environmental impact, mining practices, and product disclosure throughout the jewellery Supply chain. Renaissance also collaborates with multi-stakeholder initiatives to ensure responsible sourcing and supply chain due diligence. Being part of the RJC places Renaissance in a favorable position to meet the growing consumer expectations regarding sustainability.

Renaissance is also audited and certified under SMETA (Sedex Members Ethical Trade Audit). SMETA is the most widely used format for social audits in the world, enabling businesses to assess their sites and suppliers to understand working conditions in their supply chain. SMETA assesses a site based on the organisations compliance to labour, health and safety, environment and business ethics criteria. Reference is made to a framework of human rights standards, the Ethical Trading Initiative (ETI) Base Code, local law, as well as additional elements.

Renaissance is also a ISO 14001 certified company, which signifies our commitment to operate an Environmental Management System in line with global best practices and effective reduction of environmental impact from our operations. Renaissance Global Limited has also a part of UN Womens Empowerment program wherein we have pledged to encourage economic and social conditions that provide equal opportunities for women and girls and bring broadest pool of talent to our endeavors. Finally, Renaissance Global Limited proudly supports the Ten Principles of the United Nations Global Compact, which encompass human rights, labor standards, environmental protection, and anti-corruption measures. The company has integrated the UN Global Compact and its principles into its strategy, culture, and day-to-day operations. Renaissance actively engages in collaborative projects that contribute to the broader development goals of the United Nations, particularly the Sustainable Development Goals.

Through the above initiatives, Renaissance strives to operate ethically, promote sustainable practices, and contribute to the well-being of society, aligning its business values with social responsibility.

KEY DEVELOPMENTS DURING FY2023:

Integration of Four Mine Inc.

• The Company, through its wholly owned step down subsidiary Renaissance FMI Inc acquired the assets of Four Mine Inc in 2023

• Four Mine Inc specialized in the sale of branded lab grown diamond engagement rings and this transaction will give

Renaissance a strong foothold in this space, apart from improving the operating margin of the business through supply chain efficiencies

• Four Mine has not only strengthened our foothold in the engagement ring and wedding band business, but also in the lab-grown diamond space. It has also brought about significant synergies across our other D2C segments. One such notable trend that we are seamlessly incorporating is a growing demand for customization. This trend has gained substantial momentum in the market with customers seeking unique and personalized pieces that reflect their individuality and style.

• Within a few quarters the company was able to successfully restructure the business and the same has started contributing to profitability from Q4FY23. Accordingly, we expect margins in the direct-to-consumer business to improve in the coming quarters.

Received the 49th Gem & Jewellery Award

• Have received the 49th Gem & Jewellery Award for the second largest, exporter of studded precious metal jewellery and the largest exporter of silver jewellery from India, from the Gem and Jewellery Export Promotion Council that signifies our continued leadership in this market DzC Grows at a CAGR of 92% over last two years

• The company achieved annual sales of Rs.239 crore in the D2C Segment, which is an impressive 92% compounded annual growth over the last two years. The margin from the D2C division has also improved sequentially over the quarters in FY23 on account of the acquired engagement ring business having turned profitable. The Company is on track to restore our operating margins in this segment back to its historic levels.

• Due to this low inventory and receivables model, we were able to decrease your working capital days to 176 in FY23, all the way from 239 in FY21.

The Company delivered a robust performance during the year. The growth was primarily driven by strong contribution from the high-margin branded jewellery business, on the back of a robust growth in the D2C segment. In FY23, our total income stood at Rs.2,243 crore up 1.5%. The branded jewellery segment is a key growth lever. The revenues in this segment marked a notable increase of 20% YoY in FY22 driven by a stellar performance by our D2C division after acquisition of Four Mine Inc business in 2022. Renaissance has undertaken several initiatives to further expand and strengthen this segment.

Revenue contribution from the plain gold segment also grew by 68% YoY in FY23. However in terms of volume (in kgs), the growth was 34% YoY.

During the period, revenue share of studded jewellery stood at 89%. Of the total studded jewellery revenues, branded jewellery business contributed 30% in FY23, in comparison with 25% in FY22. The D2C segment contributed 12% to Studded revenues in FY23, against 6% in FY22. This shows our continued progress towards our medium term goal of achieving 50% revenues from the branded segment and this in turn will significantly improve our operating margins and return on capital. On the profitability front, EBITDA stood at Rs. 168 crore in FY23 translating into margins of 7.5%. Improved contributions from high-margin segments of branded jewellery and direct to consumer business supported margins despite inflationary pressures. For FY23, Branded jewellery business reported 13% EBITDA margin, and D2C business registered 12.5% EBITDA margin, which is expected to increase with the progressive improvement in acquired engagement ring business. In FY23, PAT came in at Rs. 88 Crores. Our interest coverage ratio stands at a healthy 4.1 times, showing the strength of our financials.

Lastly, in terms of balance sheet, the Net Debt to Equity ratio stands at a healthy 0.22 as of March 2023, which is a marked improvement from 0.30 in March 2022. Total net debt stands at Rs. 223 crore as on 31st March 2023, as against Rs. 280 Crores on 31st March 2022 and cash and Bank Balances and Current Investments stand healthy at Rs. 239 crore. Renaissance emphasizes on optimal resource utilization and efficient capital management. During FY23, the Company generated cash flow from operational activities of Rs. 159 Crores crores as against Rs. 66 Crores in FY22 on the back of prudent financial management. On a like to like basis, Net working capital days have reduced from 239 days in 2021 to 176 days in 2023, which is a significant improvement in the working capital cycle..

Key Financial Parameters (T Grores)	FY 2023	FY 2022
Net Revenue	2,236.56	2,189.81
EBITDA	168.07	200.49
% of Net Revenue	7.5%	9.2%
Depreciation	32.05	35.06
Interest Expenses	41.25	28.95
Other Income	6.12	18.92
PBT	94.77	136.47
% of Net Revenue	4%	6%
Tax	6.97	30.02
Profit After Tax	87.81	106.45
% of Net Revenue	4%	5%

OUTLOOK

Overall, the Company has reported a healthy performance during the fiscal despite macro challenges such as the inflation due to supply chain disruptions caused by the Russia - Ukraine conflict and recessionary sentiment in the US, UK and Europe.

Going forward, despite these challenges, Renaissance continues to see various growth opportunities across its key geographies in North America, Europe, and other international markets. The focus remains on strengthening its presence in these markets by growing the high-margin branded business segment in a sustainable manner. The inclusion of new marquee brands in the licensed portfolio segment will augment the branded segment, going forward. Over the last few years, the contribution from the branded segment has increased from 2% in FY18 to 27% in FY23. Looking forward, the strategic endeavor is to achieve over 50% sales from Branded Jewellery segment over the next 3 years. Renaissances core competencies, such as its partnerships with globally recognized brands, high expertise in product conceptualization and design, advanced industry know-how, and win-win partnerships with iconic brands, positions it well to leverage on the many growth opportunities in the high-potential global branded jewellery industry.

RISKS, THREATS AND CONCERNS

As is the case for any jewellery based business, the Companys success is dependent upon the general economic conditions, competitive conditions, and consumer attitudes. However, certain factors are specific to the Company and/or the markets in which it operates. The following "risk factors" are specific to the Company and the Industry it operates in.

Global economic conditions and consumer confidence

The Companys sales are sensitive to changes in economic conditions and consumer confidence. During periods of declining consumer confidence, discretionary purchases, such as jewellery, may decline, impacting the Companys sales and earnings. Changes in US trade policy and tariffs affecting India and China could also have adverse effects on the Company.

US dollar fluctuations

The Companys sales and raw material purchases are denominated in US dollars, while its production costs are in Indian Rupee. Any appreciation in the Indian Rupee can negatively impact production costs and profitability, have adverse effects on the Company.

Price Fluctuation and Available of Diamond and other Gemstones

The Company utilizes raw materials such as gold, silver, diamonds, and color stones. While the market price of gold and silver at the time of order affects customer pricing, diamond and color stone prices are usually fixed for a specific period. Significant increases in the cost or changes in the supply of these commodities can adversely affect the Companys business. Higher prices for diamonds or color stones can impact gross profit margins.

INTERNAL CONTROL

The Company has implemented internal control systems that are appropriate for its business operations in terms of nature, size, and complexity. These control systems are designed to ensure the accuracy of financial information, prevent unauthorized use of assets, and comply with applicable laws and regulations. To further enhance the effectiveness of its internal controls, the Company has engaged a reputable audit firm to conduct internal audits. This firm closely monitors the Companys operations and provides observations and recommendations to both the management and the Audit Committee. It is responsible for reviewing and strengthening control measures as needed. In addition, the Company has made investments in state-of-the-art information technology to secure and protect its sensitive data. This demonstrates the Companys commitment to safeguarding its information assets and maintaining data integrity.

By having robust internal control systems, conducting regular internal audits, and leveraging advanced technology, the Company strives to ensure the reliability and security of its financial information and 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.