SJ Corporation Ltd Management Discussions.

(I) INDUSTRY STRUCTURE AND DEVELOPMENT:

The Gems & Jewellery ("G & J") sector is one of the very important sectors of the Indian economy with a significant share of the Gross Domestic Product ("GDP"). One of the fastest growing sectors, it is extremely export oriented and labour intensive. The Indian jewellery industry has been evolving over the past few years. Traditionally a gold dominated industry, it is now showing a greater acceptance towards diamond and other precious stones jewellery as well. The new age consumers, who are well travelled, prefer frequenting the modern retail formats like malls and departmental stores. A relatively higher affinity towards branded products coupled with higher disposable incomes and a preference for trusted fine quality products are also significant contributors to the growth of the branded jewellery segment. The branded retail jewellery market is growing at a robust rate and going forward, many domestic and international brands would capture substantial market size given number of factors like increased urbanizations and changing demographics. As a matter of ongoing practice, the masses still prefer to purchase jewellery from their tried and trusted jewellers but the constant exercise of ‘branding through advertising and other sales promotional activities has ensured steady inflow of new customers in this segment of organised retailing. Indias small and independent jewellers are starting to organize themselves and expand in size to share a common brand identity and marketing strategy.

Jewellery consumption in India has been traditionally driven by the strong cultural affinity for gold, with it being the preferred form of jewellery worn. Gold jewellery is an integral part of weddings in India, and is considered as a necessity, with wedding related demand accounting for substantial portion of overall jewellery demand, especially in the South. Jewellery demand has also been supported by the increasing appetite for gold jewellery from rural and non-urban markets. Gold has also served as a means of savings especially for the rural sector, owing to the lack of any major alternative investment options supported by its anti-inflationary characteristics. However, in the past few years the demand for diamond jewellery has also been showing an increasing trend, especially in the Metros and Tier I cities.

(II) OPPORTUNITIES AND THREATS :

Some of the opportunities for the retail jewellery industry are as follows: (a) Growing consciousness amongst customers for branded jewellery. (b) Limited penetration of organized jewellery in the country. (c) Increase in purchasing power of the customers in the Tier I & II locations. (d) Increasing demand for diamond jewellery, which is a high margin product as compared to the gold jewellery. (e) Favourable demographics leading to increasing demand for jewellery in the country. Some of the key challenges facing the retail jewellery industry are as follows: (a) Adapting to fast changing consumer preferences and buying patterns. (b) Volatility in the market prices of gold and diamonds. (c) Limited availability of high end retail space.

(III) CAUTIONARY STATEMENT:

Statement in this Managements Discussion and Analysis detailing the Companys objectives, projections, estimates, expectations or predictions are "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand-supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labor negotiations.