MANAGEMENT DISCUSSION AND ANALYSIS REPORT
To,
SONA HI SONA JEWELLERS (GUJARAT) LIMITED,
AHMEDABAD
GLOBAL ECONOMY
Global economic activity is experiencing a broad-based and sharper-than-expected
slowdown, with inflation higher than seen in several decades. The cost-of-living crisis,
tightening financial conditions in most regions, Russias invasion of Ukraine, and the
lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to
slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the
weakest growth profile since 2001 except for the global financial crisis and the acute
phase of the COVID-19 pandemic. Global inflation is forecast to rise from 4.7 percent in
2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by
2024. Monetary policy should stay the course to restore price stability, and fiscal policy
should aim to alleviate the cost-of-living pressures while maintaining a sufficiently
tight stance aligned with monetary policy. Structural reforms can further support the
fight against inflation by improving productivity and easing supply constraints, while
multilateral cooperation is necessary for fast-tracking the green energy transition and
preventing fragmentation.
INDIAN ECONOMY
The Indian economy, however, appears to have moved on after its encounter with the
pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to
ascend to the pre-pandemic growth path in FY23. Yet in the current year, India has also
faced the challenge of reining in inflation that the European strife accentuated. Measures
taken by the government and RBI, along with the easing of global commodity prices, have
finally managed to bring retail inflation below the RBI upper tolerance target in November
2022. However, the challenge of the depreciating rupee, although better performing than
most other currencies, persists with the likelihood of further increases in policy rates
by the US Fed. The widening of the CAD may also continue as global commodity prices remain
elevated and the growth momentum of the Indian economy remains strong. The loss of export
stimulus is further possible as the slowing world growth and trade shrinks the global
market size in the second half of the current year. Despite these, agencies worldwide
continue to project India as the fastest-growing major economy at 6.57.0 per cent in FY23.
These optimistic growth forecasts stem in part from the resilience of the Indian economy
seen in the rebound of private consumption seamlessly replacing the export stimuli as the
leading driver of growth. The uptick in private consumption has also given a boost to
production activity resulting in an increase in capacity utilisation across sectors.
INDIA - GEMS & JEWELLERY
For the FY 2022-23, the overall gem & jewellery exports grew 2.48% to Rs. 300462.52
crores as compared Rs. 293193.19 crores for the same period previous year. In terms of US
dollars, the overall gem & jewellery exports accounted for US$ 37468.66 million as
compared US$ 39331.71 million for the same period last year.
Based on its potential for growth and value addition, the Government declared gems and
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 Government of India.
Based on its potential for growth and value addition, the Government declared gems and
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.
India is deemed to be the hub of the global jewellery market because of its low costs
and availability of high-skilled labour. India is the worlds largest cutting and
polishing centre for diamonds, with the cutting and polishing industry being well
supported by Government policies. Moreover, India exports 75 per cent of the worlds
polished diamonds as per statistics from the Gem and Jewellery Export Promotion Council
(GJEPC). Indias Gems and Jewellery sector has been contributing in a big way to the
countrys foreign exchange earnings (FEEs). Government has viewed this sector as a thrust
area for export promotion. The Indian Government presently allows 100 per cent Foreign
Direct Investment (FDI) in the sector through the automatic route.
MARKET SIZE
The Gems and Jewellery industry contributes around 7% to the countrys overall GDP and
employs over 5 million people. The industry was estimated at INR 5.63 trillion in 2020 and
expected to reach INR 6.64 trillion by 2023. The demand is growing at a CAGRof 5.60 per
cent till 2023.
Growth in exports is mainly due to revived import demand in the export market of the US
and fulfilment of orders received by numerous Indian exhibitors during the Virtual
Buyer-Seller Meets (VBSMs) conducted by GJEPC.
GOLD DEMAND
India is the largest consumer of gold in the world. Rising middle class population and
increasing income levels are key drivers behind the demand of gold and other jewellery in
India.
Based on its potential for growth and value addition, the Government declared gems and
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.
(Source: IBEF Report on Gems & Jewellery Sector)
OPPORTUNITIES & 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.
INDUSTRY 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 2022-23. Also, the relaxation of restrictions of
gold import is likely to provide a fillip to the industry. The improvement in availability
along with the re introduction 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.
(Source: IBEF Report on Gems & Jewellery 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, ffigher 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.
FINANCIAL PERFORMANCE
The Companys financial performance for the year ended on March 31, 2023 is as below:
| Particulars |
2022-23 |
2021-22 |
| Total Revenue |
58,39,93,925 |
769,842,156 |
| Total Expenditure |
58,04,74,241 |
768,574,000 |
| Profit/(Loss) Before Tax |
1,75,81,212 |
12,68,156 |
| Less: Current Tax |
(25,55,664) |
(3,58,506) |
| Deferred Tax |
73,604 |
(17,166) |
| Profit/(Loss) after Taxation |
1,50,99,152 |
8,92,484 |
| Balance carried to Balance Sheet |
1,50,99,152 |
8,92,484 |
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.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS FRONT
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
CAUTIONARY STATEMENT
Certain statements in the reports of the Board of Directors and Managements
discussions and analysis may be forward looking statements within the meaning of
applicable securities laws and regulations. Actual results could differ materially from
those expressed or implied since Companys operations are influence by many external and
internal factors beyond the control of the Company. The Company assumes no responsibility
to publicly amend, modify or revise any of these statements on the basis of any subsequent
developments, information or events.
|
By the order of Board, |
| Registered office: |
Sona Hi Sona Jewellers (Gujarat) Limited |
| 7, Millenium Plaza, Opp. Swaminarayan, |
|
| Mandir, Mansi Cross Road, Vastrapur, |
|
| Ahmedabad - 380015 |
Vijay C. Shah |
Alpa V. Shah |
|
Managing Director |
Wholetime Director |
|
DIN:02895347 |
DIN: 02887435 |
+91-9892691696
