Sovereign Diamonds Ltd Management Discussions

Industry Structure and Developments:

* India:

India is poised to lead the global economic landscape, maintaining its position as the fastest-growing major economy. The economy is projected to grow by 6.4% for both 2025 and 2026, compared to 8.2% growth in FY 2023-24. At a time when global growth is expected to hover at 2.7% in 2025 and 2026, Indias remarkable performance highlights its resilience and growing significance in shaping the worlds economic trajectory. Indias continued resilience highlights its growing significance in the global economy, establishing its role as a key driver of economic stability and expansion.

* Gold:

India imports gold to meet the high demand from its jewellery industry and as a store of value, with imports rising during the festive and wedding seasons. However, imports of gold fell sharply, reaching their lowest levels in recent years due to weak demand amid high prices.

According to the World Gold Council, the consumption of the yellow metal is projected to be lower at 700-800 tonnes in FY 2025, moderating from the last nine years peak. Increasing prices of gold is dampening jewellery demand, even as investment demand rises, particularly in gold Exchange Traded Funds (ETF). Domestic gold prices have reached a record high of 84,399 rupees per 10 grams. Jewellery demand makes up 70% of Indias total gold demand.

* Domestic Jewellery Industry updates demand:

Market Size:

The Indian gems and jewellery market has been a prominent global player. It is a vital contributor to the Indian economy, accounting for 6-7% of the countrys GDP. India is recognised as a global hub for the jewellery market due to its cost-effective production and highly skilled workforce. As the 8th largest exporter, which contributes to 3.2% of exports, Indias gems and jewellery market is integral to the growth of the economy. The industry, estimated to be sized at USD 100 billion in FY 2024, is flourishing at an impressive compound annual growth rate (CAGR) of 8.93%, catalysed by an increase in disposable income among consumers and a deep-seated cultural significance that elevates the role of jewellery in social and economic spheres. Growth is anticipated to be driven by strong domestic and global demand, strategic initiatives and factors like rising disposable incomes, urbanisation, increasing demand for gold, diamonds and precious stones, cultural significance, evolving consumer preferences and festive season and the fast-growing wedding market in India.

* Opportunities and Threats & Risks and Concerns:

Opportunities:

Indias services sector is poised for robust growth, while manufacturing activity is also strengthening as a result of government initiatives to enhance logistics infrastructure and simplify tax systems. Supported by a stronger labour market, improved access to credit and lowering inflation, private consumption in India is expected to accelerate. With a steady growth outlook, India remains a crucial player in shaping the worlds economic future. Supported by rising private investments, healthier corporate balance sheets and favourable financing conditions, investment growth is likely to remain steady in India. Investment growth in India is likely to remain steady, bolstered by rising private investments, healthier corporate balance sheets and favourable financing conditions.

Threats & Risks and Concerns:

The industry faces several challenges in the aftermath of a tough macro-economic, geopolitical uncertainties, rising interest rates, demand slump in major consumer markets and issues related to rough diamond sourcing. The outbreak of geo-political tensions earlier between Russia & Ukraine and then between Israel & Hamas deeply impacted jewellery exports as the demand has been volatile in the overseas markets. Some of the key challenges are:

• Gold price volatility.

• Rising costs of raw materials such as diamonds and platinum.

• Heavy reliance on imports, making the sector highly sensitive to global economic fluctuations and geopolitical developments, influencing consumer purchasing behaviour Government.

• Regulations and increasing import duties, impacting the competitiveness and profitability of industry players.

• Discussion on financial performance with respect to operational performance:

• Total net sales for the year were Rs. 1,997.21 Lakhs as compared to Rs. 2,709.34 Lakhs in 2023-24.

• Total Profit / Loss before tax for the year was Rs. 12.73 Lakhs as compared to Profit Rs. 167.99 Lakhs in 2023-24.

• The Company has repayment of GECL facilities of Rs. 21.40 Lakhs.

• The Company has reduced its bank borrowing from Rs. 1113.79 Lakhs to Rs. 886 Lakhs in 2024-25

• Outlook:

The growing preference for lightweight fashion jewellery, especially among younger consumers, is driving significant expansion in this segment. With a focus on affordability, style and versatility, millennials and Gen Z shoppers are increasingly opting for contemporary designs suited for everyday wear and special occasions. This evolving trend presents a lucrative opportunity for the Indian gems and jewellery industry, encouraging brands to innovate and cater to the demand for modern, budget-friendly jewellery options.

• Internal Control Systems and their adequacy:

Your Company maintains an adequate and effective Internal Control System commensurate with its size and complexity. We believe that these internal control systems provide, amongst other things, a reasonable assurance that transactions are executed with Management authorization and that they are recorded in all material respects to permit preparation of financial statements in conformity with established accounting principles and that the assets of your Company are adequately safeguarded against significant misuse or loss

• Material developments in Human Resources / Industrial Relations front, including number of people employed:

• The Company places a strong emphasis on training and skill development initiatives to enhance employee capabilities and consistently engage its workforce. The Company regards its human resources as its most valuable asset and acknowledges their pivotal role in the Companys growth journey. The Company advocates for equal opportunities and encourages competitiveness to unlock the full potential of its workforce.

Key Financial Ratios:

Sr. No.	Ratio	Numerator	Denominator	FY 2024-25	FY 2023-24	Reasons for Variance
a)	Current Ratio	Current Assets	Current Liability	2.32	1.90	-
b)	Debt Equity Ratio	Borrowings + Interest Accrued	Total Equity	0.52	0.68
c)	Debt Service Coverge Ratio	Net Profit after Tax + Depreciation + Interest + Loss on Sale of Fixed Assets	Debt Service = Interest & Lease payments + Principal Repayments	0.06	0.11	Decrease in net profit after tax has resulted into decrease in Debt Service Coverage Ratio
d)	Return on Equity Ratio	Net Profit after Tax	Average Shareholders Equity	0.07%	8.52%	Decrease in net profit after tax has resulted into decrease in retrun on equity
e)	Inventory Turnover Ratio	Cost of Goods Sold or Sales	Average Inventory (Opening Inventory + Clsing Inventory)/2	1.16	1.51
f)	Trade Receivables Turnover Ratio	Net Credit Sales	Average Accounts Receivables	2.58	3.07
g)	Trade Payable Turnover	Net Credit Purchases	Average Trade Payables	9.33	8.15
h)	Net Capital Turnover Ratio	Net Sales	Working Capital	1.48	2.13	Decrease in revenue has resulted into decrease in Net capital Turnover ratio
i)	Net Profit Ratio	Net Profit	Net Sales	0.06%	5.09%	Decrease in net profit after tax has resulted into decrease in net profit ratio
j)	Return on Capital Employed	Earning before Interest and Taxes	Capital Employed	5.10%	10.55%	Decrease in earnings before interest and tax has resulted into decrease in return on capital employed
k)	Return on Investment / Networth	Net Profit after Tax	Total Equity	0.07%	8.17%	Decrease in net profit after tax has resulted into decrease in return on investment

Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof:

As noted above the return on networth has decreased from 8.17% to 0.07%. The same is explained in Business Operations Para of Boards Report.

	For and on behalf of the Board
	For Sovereign Diamonds Limited
Place: Mumbai	Ajay Gehani	Arundhati Mali
	Managing Director	Whole Time Director & CFO
Date: 12th August, 2025	DIN:00062989	DIN:08353618