<dhhead>MANAGEMENT DISCUSSION &
ANALYSIS</dhhead>
Overview
This Management Discussion & Analysis Report presents the
key performance highlights of the year 2022-23 pertaining to the Companys business. The
Report has been prepared in compliance with the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015. This review should be
read in conjunction with the Companys financial statement, the schedules and notes
thereto and other information included elsewhere in this Annual Report. The Companys
financial statement has been prepared in accordance with Indian Accounting Standards (Ind
AS), complying with the requirements of the Companies Act, 2013 and the guidelines issued
by Securities and Exchange Board of India (SEBI).The Management accepts responsibility for
the integrity and objectivity of the Financial Statements. However, investors and readers
are cautioned that this discussion contains certain forward-looking Statements that
involve risks and uncertainties.
The Pandemic has left everyone affected globally one way or the
other. It has caused huge disruptions in terms of economic activity as well as the loss of
human lives. Nationwide shutdowns, economic slowdown have impacted various industries.
Gems & jewellery is one of those many industries that have suffered majorly due to it
as domestic demand and exports sharply crashed. One wave after the other is not letting
this industry recover properly.
Industry Structure and Developments Indian Economy
For FY 2022-23, the overall gem & jewellery exports grew
2.48% to Rs. 3,00,462.52 crores as compared Rs. 2,93,193.19 crores for the same period
previous year. In terms of US dollars, the overall gem & jewellery exports accounted
for $37,468.66 million as compared to $39,331.71 million for the same period last year.
For the period of April 2022 - March 2023, the overall gross
exports of Cut & Polished diamonds at Rs. 1,76,696.95 crores (US$ 22044.58 million)
declined 2.97% (declined 9.78% in terms of US dollar) compared to the same period in the
previous year which was Rs. 1,82,111.14 crores ($24,433.75 million).
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.
For the period of April 2022 - March 2023, provisional gross
export of total Gold Jewellery at Rs. 75,635.72 crores ($9,423.31 million) grew 11.13%
(3.22% in terms of US dollars) over the comparative figure of Rs. 68,062.41 crores ($
9,129.71 million) for previous year.
For the period of April 2022 - March 2023, provisional gross
export of Plain Gold Jewellery at Rs. 33,177.86 crores ($4,128.57 million) grew 17.22%
(8.74% in terms of US dollars) over the comparative figure of Rs. 28,303.37 crores
($3796.70 million) for previous year.
For the period of April 2022 - March 2023, provisional gross
export of all kinds of Studded Gold jewellery at Rs. 42,457.87 crores ($5,294.74 million)
grew 6.79% (declined 0.72% in terms of US dollars) over the comparative figure of Rs.
39,759.04 crores ($5,333.01 million) for previous year.
For the period of April 2022 - March 2023, provisional gross
export of Polished Lab Grown Diamonds at Rs. 13,466.42 crores ($1,679.98 million) grew
37.31% (27.85% in terms of US dollars) over the comparative figure of Rs. 9,807.56 crores
($1,313.98 million) for the previous year.
For the period of April 2022 - March 2023, provisional gross
export of Coloured Gemstones at Rs. 3,373.43 crores ($419.63 million) grew 45.44% (34.83%
in terms of US dollars) over the comparative figure of Rs. 2319.41 crores (US$ 311.21
million) for previous year.
Gems and Jewellery
The measures taken by the government to support the gems and
jewellery sector include a reduction in import duty on cut and polished diamonds from 7
per cent to 5 per cent and an extension of Emergency Credit Line Guarantee Scheme (ECLGS)
for MSMEs up to March 2023. Over 90 per cent of units in the gems and jewellery (G&J)
sector are MSMEs.
Acceptance of personal surety bonds in place of bank guarantee
for import of gold, replacement of SEZ Act with a new SEZ regime, and simplified
regulatory framework for e-commerce in the next few months will facilitate G&J exports
through e-commerce, ensuring that small retailers are able to ship their products overseas
are other important measures taken to support gems and jewellery sector.
Opportunities and Threats
In the coming years, growth in Gems and Jewellery sector would
be largely contributed by the development of large retailers/brands. Also, the relaxation
of restrictions of gold import is likely to provide a fillip to the industry.
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.
In Union Budget 2022-23, the finance minister also proposed a
cut in import duty on seeds used to make lab-grown diamonds with a view to boosting
domestic manufacturing. Gem and Jewellery export Promotion Council (GJEPC) chairman Vipul
Shah lauded the government for its recommendations to promote indigenous manufacturing in
the emerging Lab-Grown Diamond (LGD) sector by providing Research Grants to IIT for 5
years.
The Gems and Jewellery Export Promotion Council (GJEPC) has very
high expectations from the Union Budget 202324. It feels that if their demands are met it
will boost the industry and create more employment. The GJEPC regional chairman Vijay
Manguki told IANS that the council has submitted a memorandum to the Union Finance
Ministry demanding reduction in import duty on cut and polished diamonds; the present duty
is 5 per cent, it needs to be brought down to 2.5 %. The same benefit should be extended
to polished gemstones also.
The demand for jewellery is expected to be significantly
supported by the recent positive developments in the industry.
The jewellery sector in the country continues to remain poised
for growth on account of its demographics as well as increasing urbanisation and income
levels. The demand for jewellery is also expanding beyond the traditional
marriage functions to a life style and fashion accessory as
well. However, at the same time the traditional demand for jewellery continues to remain
strong. The sector is witnessing changes in customer preferences due to adoption of
western lifestyle and their demand for new designs and varieties in jewellery. Further,
rising quality awareness of customers has also provided a fillip to the organized retail
segment, which is banking on its reliability and quality to compete against the highly
fragmented unorganized jewellers.
Demand for gems and jewellery in India is predominantly
concentrated in the southern region. South India gems and jewellery market is likely to
register growth over the course of next five years, primarily owing to the presence of a
large number of market players and aggressive marketing strategies adopted by companies.
Moreover, increasing brand consciousness along with rising middle-class population in the
region is expected to aid the regions gems & jewellery market.
Gems and jewellery sector is facing various problems such as
dependence on imports, changing fashion, imbalance growth of products, manual way of
crafting, various problems regarding labourers, financial problems, procedural hardships
and unemployment etc.
The sector is witnessing changes in customer preferences due to
adoption of western lifestyle and their demand for new designs and varieties in jewellery.
Further, rising quality awareness of customers has also provided a fillip to the organized
retail segment, which is banking on its reliability and quality to compete against the
highly fragmented unorganized jewellers.
Competition which has always been a challenge is countered by
better quality and designs, branding, catering to changing customer demands/styles and
cost control measures. Increasing prices of raw materials have affected and can affect the
profit margins.
Performance
The Company operates into one segment only i.e Gems and
Jewellery and has generated net sales of Rs. 337.19 Lakhs.
Outlook
In the coming years, there will be a spurt in demand for Indian
jewellery in the global market and the growth in the gems & Jewellery sector would be
largely contributed by the development of large Manufacturers/brands due to the ongoing
structural changes together with strong macro-demographic trends. Regulatory changes
introduced by the Government of India over the last few years are likely to rise the
preference for branded jewellery and shift the scales in favour of the organized sector at
the cost of the unorganized sector. The demand for jewellery is expected to remain robust,
given Indian demographics and the consumers affinity towards gold for both wedding-related
purchases and as store of value. Overall, India is expected to play a more important role
in the global gems & jewellery sector, with significant investment seen in the
manufacturing units by the domestic players, foreign players, and private equity
investors.
The changes expected in the product-mix portfolio of the Company
auger well in the long run to improve the profits. It is expected that the positive impact
of polarization on the organized sector is likely to be visible operationally within a
couple of years that would go a long way in improving the margin and turnover for the
industry in general and the Company.
Plans to Modify/ Enhance the product Offering: The Management is
focusing to bring state of the art design portfolio to buyers and enhancing the product
offering to the customers, hence new product innovation is one of the integral plans of
the company.
Risks and Concerns
The nature of the Companys business exposes it to several
inherent risks and concerns. The Company strives to closely monitor the risks and to
mitigate them by adopting suitable, pragmatic strategies.
a) Bullion Risk: The volatility in the gold prices exposes the
Company to bullion risk as gold forms approximately 30% to 50% of the cost of the finished
product.
b) Raw Material Supplies Risk: Though India plays a dominant
role in the Gems & Jewellery industry in terms of processing and consumption, mining
of gold and diamond is amongst the lowest in the world. India imports gold and rough
diamonds along with other precious metals.
c) Geography Risk: Dependence on any geographic location makes
the Companys business in that region vulnerable to the economic slowdown therein. While
USA continues to be our prime export destination.
Business risks exist for any enterprise having national and
international exposure. Tavernier Resources Limited also faces certain risks, the key ones
being - a longer than anticipated delay in economic revival, decreased sales volume,
competition, unfavorable exchange rate fluctuations, emergence of inflationary conditions,
unexpected changes in regulatory framework and the overall economic climate and government
regulations. The Company is well aware of these risks and challenges and has put in place
mechanisms to ensure that they are managed and mitigated with adequate timely actions. As
the Company is dealing in very high-value goods/items, it is always exposed to operational
risks. The Company, therefore, always ensures that its entire inventory, from raw
materials to finished goods is insured at all times, at the manufacturing facilities.
Internal Control Systems and their Adequacy
The company has set up an internal control system that functions
at various levels of the organization. The system ensures compliance with the respective
laws & regulations, efficiency of operations, optimum utilization of resources,
disclosure and adequate reporting of financial transactions, proper administration at all
levels of the organization.
Discussion on Financial Performance with Respect to
Operational Performance
During the financial year 2022-23 under review, the Net Sales of
diamonds/precious stones decreased from Rs. 446.85 Lakhs in F.Y. 2021-22 to Rs. 337.19
Lakhs in F.Y. 2022-23, whereas the Company has incurred a loss of Rs. 11.77 Lakhs as
against profit of Rs.10.93 Lakhs in the previous financial year.
Changes in Key Financial Ratios
Sr Particulars |
style=font-family:Arial>March 31,2023 |
March 31, 2022 |
Change % |
1. Inventory Turnover (Days) |
- |
- |
0% |
2. Debtors Turnover (Days) |
- |
- |
0% |
3. Current Ratio |
1.40 |
1.03 |
37% |
4. Interest Coverage Ratio |
0.63 |
1.36 |
-74% |
5. Debt Equity |
0.57 |
0.53 |
4% |
6. Net Debt Equity |
0.57 |
0.53 |
4% |
7. EBITDA Margin |
(0.03) |
0.03 |
-6% |
8. Net Profit Margin |
(0.03) |
0.02 |
-6% |
9. Return on average Net worth |
(0.02) |
0.02 |
-4% |
10. Debt Service Coverage Ratio |
0.61 |
1.38 |
-0.77% |
11. Long term Debt to Working Capital Ratio |
3.98 |
4.07 |
-9% |
12. Bad Debt to Account Receivable Ratio |
- |
- |
0% |
13. Current Liability Ratio |
0.04 |
0.04 |
0% |
14. Total debt to Total Assets Ratio |
0.35 |
0.32 |
3% |
Material developments in Human Resources / Industrial
Relations front, including number of people employed.
The Company considers its human resources as amongst its most
valuable assets and continues to place emphasis on their development. It has been
Companys constant endeavour to impart requisite training and thereby develop and hone the
skills and talent of its personnel and enable them to realize their potential.
The overall Industrial Relations in the Company have been quite
peaceful and cordial.
Cautionary statement
Statements in the Management Discussion and Analysis describing
Companys objective, projections, estimates and expectations may be “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, among others, economic conditions affecting demand/supply and price conditions in
the domestic and overseas markets in which the Company operates, changes in Government
regulations, tax laws, statutes and other incidental factors.
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