Thangamayil Jewellery Ltd Management Discussions

Macroeconomic Overview

India remains one of the fastest-growing major economies globally, with a robust nominal GDP growth rate averaging over 6.5% CAGR since 2015, despite temporary disruptions during the COVID-19 pandemic. According to the International Monetary Fund (IMF), Indias real GDP is projected to grow at approximately 7% in 2025 and maintain a 6.5% growth rate through 2028-outpacing both the United States and China.

The countrys demographic dividend is a significant driver of thisgrowth. With a population of 1.4 billion and a median age ofjust 28.2years, India boastsa vastandyouthful consumer base. The burgeoning middle-class now comprising over 173 million households has led to rising disposable incomes and a pronounced shift towards discretionary spending. Notably, per capita income has grown at a CAGR of 12.2% since 2020, reaching approximately USD 2,540 in 2025.

Urbanization, increasing female workforce participation, and greater financial independence among women are further fueling consumption. The share of women in higher education and the workforce has risen steadily, empowering a new generation of informed and digitally savvy consumers These macroeconomic trends collectively underpin the sustained growth of Indias retail and jewellery markets.

Indian Jewellery Market Structure and Growth Drivers

a) Market Size and Segmentation

Indias jewellery market is among the largest globally, valued at approximately USD 70 billion as of 2025. The sector is highly heterogeneous, encompassing gold, diamond, platinum, and other precious and semi precious jewellery. Traditionally dominated by gold jewellery, the market is witnessing increased demand for diamond and contemporary designs, especially among younger consumers.

The market remains largely fragmented, with organized retailers accounting for a growing share but still facing stiff competition from unorganized players, particularly in Tier 2 and Tier 3 cities and rural areas. As of 2025, nearly 50% of the retail market remains unorganized, representing a significant opportunity for branded players to expand their footprint.

b) Key Growth Drivers

• Rising Affluence and Discretionary Spending: As

household incomes rise, Jewellery is increasingly viewed not only as an investment but also as a lifestyle and fashion accessory. The discretionary retail segment is projected to grow at a CAGR of 10-12% through 2028, outpacing the broader retail market.

• Cultural Significance: Jewellery remains integral to Indian culture, with strong demand during weddings, festivals, and auspicious occasions. This cultural affinity provides a stable base of demand, even during economic slowdowns.

• Western influence on fashion: The growing influence of western fashion trends has sparked a surge in demand for studded jewellery accessories. As consumers seek to emulate the glamour and sophistication associated with Western styles, there is a heightened interest in Incorporating diamond jewellery into clothing items. This trend reflects a broader cultural shift towards luxury and self-expression, driving the popularity of studded garments in the fashion landscape.

• Women as Key Consumers: The increasing financial independence and decision-making power of women, who now constitute nearly half of higher education enrolments and a growing share of the workforce, is reshaping purchase patterns. Women account for 43% of Indias online shoppers, a figure that is expected to rise further.

• Favorable government regulation: A favorable regulatory environment facilitating investments and boosting consumer trust which includes:

a. Eased FDI policy wherein India allows 100% Foreign Direct Investment in jewellery sector enhancing foreign investment, technological advancements, and competitiveness.

b. Mandatory BIS marking for gold jewellery ensures quality checks and enhances consumer confidence in product authenticity and purity.

c. Establishment of jewellery parks and the Surat Diamond Bourse streamlines and modernises the jewellery market, fostering growth, innovation, and collaboration.

c Ei/o-ving Consume^1- Preferences

Consumers are Increasingly seeking personalized, contemporary designs and ethical sourcing. There is a growing preference for certified, branded jewellery, especially among urban millennials and Gen Z. The demand for lightweight, daily-wear jewellery is rising, complementing the traditional focus on heavy, occasion-based pieces.

Industry Trends and Competitive Landscape Shift from Unorganized tc Organized Rets. The traditional jewellery value chain in India has been characterized by fragmented supply chains, limited transparency, and inconsistent quality. However, rising consumer awareness, regulatory reforms (such as mandatory hallmarking), and the push for GST compliance are accelerating the shift towards organized retail. Branded players are gaining market share by offering standardized quality, transparent pricing, and superior customer experiences.

b) Digital Transformation and Ommchannel Growth

The pandemic catalyzed digital adoption across the sector, with online channels now playing a pivotal role in product discovery and purchase. E-commerce in Indias jewellery sector is projected to grow at a CAGR of 19-21% through 2028, with digital-first and omnichannel brands leading the way. Social media, influencer marketing, and virtual try-on technologies are enhancing the online shopping experience and expanding reach to younger audiences.

c) Sustainability and Ethical Sourcing

Consumersare increasingly conscious of the environmental and social impact of their purchases. There is rising demand for responsibly sourced materials and transparent supply chains. Leading jewellery brands are responding by adopting sustainable practices, including recycled gold, conflict-free diamonds, and eco-friendly packaging.

d) Competitive Dynamics

The competitive landscape is evolving rapidly, with established national brands, regional players, and digital- first entrants vying for market share. Leading organized retailers are investing in store expansion, digital capabilities, and customer relationship management to differentiate themselves. The consolidation trend is expected to continue, with larger players acquiring or partnering with smaller, niche brands to broaden their offerings.

Key Risks 3rd Challenges

• Economic Conditions: The jewellery industry is highly sensitive to the broader economic environment. Economic stability and growth typically lead to higher disposable incomes and increased consumer spending power, which boost jewellery sales. Conversely, economic downturns or recessions can lead to reduced discretionary spending, directly impacting jewellery demand. High interest rates raise the cost of borrowing for both jewellers and consumers, making it more expensive to finance operations and purchases, which in turn decreases demand. Furthermore, investors may shift their preferences to financial instruments with better returns, diminishing the appeal of gold and jewellery as investments.

• Increasing Gold and Diamond Prices: Gold prices, which fluctuate based on global market conditions and currency exchange rates, play a crucial role in the jewellery industry. An increase In gold prices significantly impacts the Indian jewellery market by reducing consumer demand, as higher prices lead to postponed or cancelled purchases, and consumers may opt for lighter or less expensive pieces. Jewellers face higher production costs, squeezing profit margins unless they increase prices, which can further reduce demand. Diamond demand is rising, particularly in emerging economies like India, where the growing middle class is driving an increased appetite for luxury goods. The high cost of mining and processing natural diamonds, coupled with their limited supply, has led to price increases.

Gold prices

• Regulatory Changes: The sector is subject to evolving regulations, including hallmarking, import duties, and GST compliance. Staying ahead of regulatory requirements is critical for sustained growth.

• Competition from Unorganized Sector: Despite the shift towards organized retail, unorganized jewellers remain formidable competitors, especially in rural and semi-urban markets.

• Counterfeit and Fraud Risks: Ensuring product authenticity and combating counterfeiting are ongoing challenges, necessitating investment in certification and customer education.

• Changing Consumer Preferences: Rapid shifts in consumer tastes, especially among younger demographics, require continuous innovation in design and marketing.

Opportunities 3nd Strategic Priorities

Expansion into Tier 2/3 Markets: With a large untapped customer base in non-metro cities, expanding retail presence and tailoring offerings to local preferences present significant growth opportunities.

Omnichannel Excellence: Investing in seamless integration of online and offline channels, personalized digital experiences, and data-driven marketing will be key to capturing the next generation of consumers.

Product Innovation: Developing lightweight, contemporary, and occasion-specific collections, as well as mens and childrens jewellery lines, can help diversify revenue streams.

Sustainability Initiatives: Embracing sustainable sourcing, ethical practices, and transparent supply chains will enhance brand reputation and appeal to socially conscious consumers.

Risk associated with business and mitigation plans

To mitigate the adverse impact, TMJL has spear headed certain tangible initiatives like adaption of technology to the tilt, high value product diversification like studded items, MRP. third party branded items in the portfolio etc. It has also directed its resources to improve efficiency & productive matrix to improve the performance on a sustainable basis.

The monsoon impact is limited to agricultural income based customers profile. There 3re two seasons for harvesting in Indian terrain, if one harvest failed, there is a likely hood that next one will give bountiful yields in agricultural activities. Other than the agri based customers, a lot of income is generated out of service sector engagement and also external remitters from natives employed outside the home town. For the reasons stated above. TMJL does not find it difficult to manage the vagaries of monsoon. This aspect is well captured in the last five year of growth in the company.

Fortunately for TMJL, being a regional player though the trend is shifting to other discretionary consumer spends, it has not affected the local demand for jewellery. State of Tamilnadu is the iargest consumer for goid In the entire country. Household savings is applied more on gold for traditional and cultural reasons besides time tested social compulsions connected with weddings. Going forward, shift can be made to less weight gold ornaments to take the heat out of ever increasing gold price impact on sales.

Economic risk

Economic slowdown can affect the demand and the sales for the company.

Mitigation: The Company has a diversified product portfolio that generates robust sales from either of the category to balance any uncertain circumstances. The present Indian economy is quite strong as commodity prices have been stable. Since jewellery industry is always associated with wedding and other traditional occasions and demand for jewellery remain constant.

Competition risk

Increasing competition from new entrants as well as existing ones.

Mitigation: The Company manufactures quality products and better services and offers that at a reasonable price to reach people through communications via different media. It undertakes extensive promotion and advertising to create value , positioning and recall for the power brands.

Margin risk

Lack of control over the cost, may lead to lower profitability and can impact future growth prospects.

Mitigation: The centralised procurement policy, by which our team anticipates stock requirement and make bulk purchases at the time when gold price is low. The economies of scale and correct procurement timing enable the company to significantly reduce the cost of the raw material. The company procures a certain quantum of gold on lease from banks and purchases gold on daily basis on the actual sale made by it. This strategy safeguards the company from gold price fluctuation.

Gold price fluctuation risks

Gold price fluctuation risk could arise on account of frequent changes in gold prices either up or downside momentum. It could have adverse impact on earnings.

Mitigation: We are maintaining our inventory price hedging around 96:04basis. This will help the company with anygold price fluctuation. Your Board will take appropriate action in managing the fluctuation impact in gold price movement from time to time.

Change in Government Policies

New government regulations pertaining to taxation and banking stringent norms will affect the demand and supply chain. Your company with heip of well-experienced IT and managerial personnel, the implications of all these regulations are clearly analysed, interpreted and necessary compliance measures are undertaken.

Human Resources

Employee attrition may affect the operation of the Company.

Mitigation: The Company encourages new talent and prov<des specialised training to the sales force to ensure the roots are grounded well, improving the performance standards, improving incentive scheme to the employees and positively contribute towards growth of the company.

Seasonal Risk:

Sluggish sales of products due to seasonal changes may affect profitability of the Company.

Mitigation: The wide ranged designed product profile and customer needs product will help against the seasonal ups and downs.

Compliance risk

Non-compiiance of regulations may raise the operation risk for the Company.

Mitigation: The Company has a structured internal control system in place to ensure all statutory rules and regulations are met including changes in taxation and other regulatory framework.

Cost management

The Company is improving meticulously its focus on cost through a resourceful operating system, increase in the production Capacity and strengthening of manufacturing units and various sourcing points are being pursued to reduce manufacturing costs and also delivering quality product at lower price. Logistics facilities are strengthened. Synergy optimization in various cost components is achieved.

Internal control systems and their adequacy

The Company has in place adequate system of internal control. It has documented procedures covering all financial and operating functions. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls, monitoring of operations, protecting assets from unauthorized use or losses, compliances with regulations and for ensuring reliability of financial reporting. The Company has continued its efforts to align all its processes and controls with global best practices in these areas as well.

Some significant features of the internal control systems are:

• Documenting Major Business Process including financial reporting, Computer Controlling. Security Checks and Top Committee level Plans

• A comprehensive information security policy and continuous upgrades to IT system

• Audit Committee of the Board of Directors, comprising independent directors, which is functional since October 2007, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards, as well as, reasons for changes in accounting policies and practices, if any.

• A well established multi-disciplinary Internal Audit team, which reviews and reports to management and the Audit Committee about the compliance with internal controls and the efficiency and effectiveness of operations and the key process risks

• Monthly meeting of the top management committee to review operations and plans in key business areas

• Corporate policies on accounting and major processes.

• Well-defined processes for formulating and reviewing annual and long term business plans.

• Preparation and monitoring of annual budgets for all trading activities.

• Having introduced and continually upgraded, improved and fine tuned state of the art Enterprise Resource Planning (ERP) since August 2008, supplier Relations Management and Customer Relations Management, to connect its different locations, dealers and vendo

Anti-fraud programme

The Board takes responsibility for the total process of risk management in the organization. The Audit Committee reviews reports covering operational, financial and other business risk areas. Taking into Consideration the high risk associated with this business, the organization and management have taken necessary measures towards achieving an environment free of fraud. This is also facilitated by internal audit. The business risks are managed through cross functional involvement and intense communication across businesses. Results of the risk assessment and residual risks are presented to the senior management.

Information Technology

Thangamayil Jewellery Limited has a jewellery retail-based information technology savvy department deploying the best retail solutions in the market to enhance, develop, support and maintain our retail business activity across all our showrooms

Thangamayil has developed an information technology team to test and maintain our own solutions across the showrooms. As a base piatform for our ERP we used SAP Business One solution across the showrooms End to end application to meet the requirements of Jewellery retail business needs, right from purchase of ornament to sale of it, customer management and inventory handling.

Thangamayil jewellery E-commerce is a first of its kind in online jewellery retail segment with an in-store experience of selling 22kt gold ornaments, silver articles, diamond and platinum jewels. The in-store experience to a customer is to view more variety ornaments on every online visit {not a confined catalogue) with the store price. The ornaments are real photographed pictures with exact product details and real time priced based on the market rate of gold and silver.

Human resources & industrial relations

The Companys Human Resources philosophy is to establish and buiid a strong performance and competency driven culture with greater sense of accountability and responsibility. The Company has taken pragmatic steps for strengthening organizational competency through involvement and development of employees as well as installing effective systems for improving the productivity, equality and accountability at functional levels.

With the changing and turbulent business scenario, the Companys basic focus is to upgrade the skill and knowledge level of the existing human assets to the required level by providing appropriate leadership at all levels motivating them to face the hard facts of business, inculcating the attitude for speed of action and taking responsibilities.

In order to keep the employees skill, knowledge and business facilities updated, ongoing in house and external training is provided to the employees at all levels. The effort to rationalize and streamline the work force is a continuous process. The industrial relations scenario remained harmonious throughout the year.

Note: Forward looking statements embedded in the Management Discussion and Analysis above is based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Companys actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.