Shoora Designs Ltd Management Discussions

The gems and jewellery industry of India contributes 7% to Indias Gross Domestic Product (GDP). The industry employs more than five million skilled and semi-skilled workforces in the country. The sector contributes about 15.71% of Indias total merchandise exports, accounting for the third largest commodity share. During 2023-24 (until February 2024), the gems and jewellery exports to reach US$ 29.61 billion with a decline in growth of 15.31% from 2022- 23.

The Government of India, along with all the stakeholders of the gems and jewellery sector, is well committed to 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 and jewellery sector as a focus area for export promotion.

India majorly exports cut and polished diamonds, lab-grown synthetic diamonds, coloured gemstones, synthetic stone, plain and studded gold jewellery, silver and platinum jewellery, imitation jewellery and articles of gold, silver and others. Western Region is a key exporting hub for the gems and jewellery industry contributing almost 74.66% of the total exports in 2022-23. Surat, a city of Gujarat state in the western region of India has more than 450 organised jewellery manufacturers, importers, and exporters, making it the jewellery manufacturing hub of the world.

The Government of India (GoI) has taken various measures to promote investment for the growth of the sector, such as the gold monetization scheme revamp, reduction in import duty of gold, reduction in import duty on cut & polished diamonds from 7% to 5% and implementing mandatory hallmarking. Under various other schemes, about 90% of assistance is provided by the government of India for setting up common production/processing centres, design centres, and testing plug & play facilities. Marketing hubs/exhibition centres by associations are also receiving the Government of Indias assistance of up to 80% of the project cost. Additionally, the government provides funding support for lending collateral-free credit and offers credit guarantee cover up to ~ US$ 240 thousand (Rs. 2 crore) to MSMEs under the Credit Guarantee Scheme (CGS) facilitated by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Over 90% of units in the gems and jewellery sector are MSMEs.

The Government of India has recently laid out four steps to grow the gems and jewellery industry in the country. The focus is to be given to the creation of patented designs to increase value, diversification of the exported products, collaboration with other nations for cost-effective methods and promotion of lab-grown diamonds. In addition to this, the GJEPC (Gems Jewellery Export Promotion Council) arranges several trade shows, buyer-seller meets and expositions to increase the exposure of Indian goods.

OPPORTUNITIES AND THREATS

Demand for gold and diamond jewellery has been steadily rising, driven by a combination of factors, including expanding urbanisation, higher affluence, growing aspirations and burgeoning income levels. Gold jewellery has been a central part of the Indian culture, and is considered a store of value, a symbol of wealth and status and a fundamental part of several rituals and festivals. Gold has historically proved to be a safe haven and a stable asset-class, providing maximum returns over the long term, despite investing not leading to steady income generation. India is poised for robust economic growth and is home to one of the worlds youngest populations. Increasing aspirations and changing preferences of young demographics, coupled with rising disposable incomes, will propel demand for fashion jewellery.

The jewellery industry is highly capital intensive due to its long working capital and realisation cycle. A few recent incidents of Financial defaults have created a liquidity squeeze in the industry, prompting banks and financial institutions to reduce their exposure to industry players. This liquidity crunch has caused a blip in profitability and growth of the jewellery industry. The jewellery industry is susceptible to continuous changes in the regulatory framework and market conditions. Adverse economic factors, regulatory upheavals and unfavourable Government policies can lead to disruptions in the industry performance.

OUTLOOK

In the coming years, growth in gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1-2% of the fine jewellery segment by 2023-24. Also, the relaxation of restrictions of gold import is likely to provide a fillip to the industry. The improvement in availability along with the reintroduction of low-cost gold metal loans and likely stabilisation of gold prices at lower levels is expected to drive volume growth for jewellers over short to medium term. The demand for jewellery is expected to be significantly supported by the recent positive developments in the industry.

RISKS AND CONCERNS

The Indian economy is on a high growth trajectory, with several favourable macroeconomic indicators supporting the growth momentum. The jewellery industry is expected to benefit from the recent developments in the economy. Higher income in the hands of farmers and rural population, driven by normal monsoon forecast, will translate into robust spending and consumption, thus fuelling the demand for jewellery. Frequent regulatory changes and fluctuations in gold and commodity prices may pose a challenge to the Companys margins.

Presence of unorganised players and expansion of regional players results in intense competition in the jewellery industry.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has implemented proper system for safeguarding the operations/business of the company, through which the assets are verified and frauds, errors are reduced and accounts,

information connected to it are maintained such, so as to timely completion of the statements. The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information. The company gets internal audit and verification done at regular intervals. The requirement of having internal auditor compulsory by statue in case of listed and other classes of companies as prescribed shall further strengthen the internal control measures of company.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATION PERFORMANCE

During the year under review, total earnings has been ? 443.95 Lakhs as compared to ? 210.60 Lakhs in the previous year. Profit/Loss of the Company after tax stood at ? (3.56) Lakhs as compared to Profit of ? 11.30 Lakhs in the previous year.

HUMAN RESOURCE

Your Company has undertaken employees development initiatives, which have very positive impact on the morale and team spirit of the employees. The company has continued to give special attention to human resources and overall development.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR

Note - 25 - Accounting Ratios:

	(Amount In Lakhs)
Ratio	As at 31 March ,2024	As at 31 March ,2023	% change	Reason for Variance*
	1	1	(1-2)/(2)
A Current ratio (In times)
Current Assets	344.47	165.39		Due to inventory holding is high and receivable from debtors is increased.
Current Liabilities	10.86	10.38
Current ratio (In times)	31.72	15.93	99.06%
B Debt-Equity Ratio (in times)
T otal Debts	-	0.30		Due to company repaid its all the outstanding debts during the year
Share Holders Equity + RS	338.35	158.58
Debt-Equity Ratio	-	0.00	-100.00%
C Debt Service Coverage Ratio (in times)
Earning available for debt service	NA	NA
Interest + instalment
Debt Service Coverage Ratio,
D Return on Equity Ratio (in %)
Net After T ax	(3.56)	11.30		Due to Fresh Issue of Equity Share Average Share Holders equity increase since ROE decreased.
Average Share Holders Equity	248.47	81.57
Return on Equity Ratio,	-1.43%	13.85%	-110.36%
E Inventory Turnover Ratio (In times)
Cost of Goods Sold	410.75	163.94
Average Inventory	105.57	32.09
Inventory Turnover Ratio	3.89	5.11	-23.85%
F Trade Receivables turnover ratio (In times)
Net Credit Sales	443.71	210.59		Due to increase in Average receivable is more than credit sale.
Average Receivable	122.34	39.90
Trade Receivables turnover ratio,	3.63	5.28	-31.29%
G Trade payables turnover ratio (In times)
Credit Purchase	493.55	228.11		Due to increase in Credit Purchase more than decreased in Average Payable.
Average Payable	2.51	6.09
Trade payables turnover ratio (In times)	196.27	37.45	424.09%
H Net capital turnover ratio (In times)
Revenue from Operations	443.71	210.59
Net Working Capital	333.61	155.01
Net capital turnover ratio	1.33	1.36	-2.10%
I Net profit ratio (in %)
Net Profit	(3.56)	11.30		Due to Increase in direct expense, profit decreased and as net profit ratio
Revenue form Operation	443.71	210.59
Net profit ratio	-0.80%	5.36%	-114.97%
J Return on Capital employed (in %)
Earning Before Interest and T axes	1.09	15.50		Due to Fresh Issue of Share capital employed increased therefore ROCE declines.
Capital Employed	338.35	158.88
Return on Capital employed	0.32%	9.76%	-96.70%
K Return on investment (in %)
Income Generated from Investment Funds	NA	NA
Invested funds
Return on investment
* Reason for variance More than 25 %