Sagar Diamonds Ltd Management Discussions

Indian Economic Overview

Indias gold and diamond trade contributed ~7% to Indias Gross Domestic Product (GDP). The Gems & Jewellery sector has employs ~5 million. Based on its potential for growth and value addition, the Government declared the Gems & Jewellery sector as a focus area for export promotion.

The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote ‘Brand India in the international market. The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the Reserve Bank or the Government of India. The Indian Government also signed a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE) in March 2022, this will allow the Indian Gems & Jewellery industry to further boost exports. CEPA will provide the industry with duty-free access to the UAE market. Indias Gems Jewellery Export Promotion Council (GJEPC) aims to triple its exports to the UAE post the CEPA.

(Source: IBEF)

INDUSTRY OVERVIEW

Gems and Jewellery Industry review:

Gems and Jewellery comprises of the following sub-sectors:

• Diamonds

• Gemstones

• Pearl

• Gold, Silver and Platinum Jewellery

The Gems and Jewellery sector plays a significant role in the Indian economy, contributing around 7.5% of the countrys GDP and about 14% to Indias total merchandise exports, accounting for the third largest commodity share. The gem and jewellery sector employ over 5 million people.a global scale. In comparison, the Asia-Pacific region, Europe, South America, the Middle East, and Africa have a lower contribution.

The Government of India, along with all the stakeholders of gems and jewellery sector, is well committed towards aggressively promoting exports, identifying challenges and addressing them with necessary interventions, assisting exporters, especially SME units, and exploring new markets while consolidating existing ones. With strong growth prospects, the government of India has also declared the gems & jewellery sector as a focus area for export promotion. The Government has recently undertaken various measures to promote investments and to upgrade technology and skills to promote ‘Brand India in the international market. India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour.

Indian exports of gems & jewellery comprises various items such as cut and polished diamonds, silver and gold jewellery, gold medallions and coins, rough diamonds, coloured gemstones and others.

Industry Trend - Diamond Jewellery:

• Increasing demand for precious gem stones: Changing preferences of young people from gold to coloured gemstone, platinum and palladium jewellery.

• Multiple occasions for purchase: Women are buying diamond jewellery for occasions other than marriage.

• Focus on technology: Emergence of new manufacturing techniques.

• Changing demographics impacting demand: Bridal diamond jewellery is the foundation of industry, but product popular with millennial is helping to spur growth.

• Growth of lab created diamonds: Also known as synthetic diamonds, artificial diamonds, cultivated diamonds or cultured diamonds.

• Focus on Quality: Introduction of cumulative FDI (in $) in diamond and gold ornaments stricter quality norms and hallmarking.

Risk and Mitigation

Effective risk management is essential for any business, regardless of industry or size. At Sagar Diamonds Limited, the Company identifies and analyses potential risks to then implement controls that would help in mitigating those risks. Moreover, by regularly monitoring and reviewing the effectiveness of those controls, it strives to minimize the likelihood and impact of negative events that could otherwise harm its reputation, operations and financial performance. A well-designed and executed risk management program provides a competitive advantage by enhancing the Companys ability to navigate a rapidly changing business environment.

Cautionary Statement

Information in the Management Discussion and Analysis that describe the Companys aims, plans, or projections may be considered forward-looking under applicable securities laws and regulations. Actual outcomes may differ significantly from those stated in the statement. Strong competition, leading to price cuts, high volatility in prices of major inputs such as steel, cement, building materials and petroleum products, changes in Government regulations, tax laws, economic developments within the country and other factors such as litigation and labour relations are all important factors that could affect the Companys operations