Thangamayil Jewellery Ltd Management Discussions.

Indias Gold and Diamond Trade, one of the biggest sectors in the Indian economy and contributed 7.5% to Indias Gross Domestic Product (GDP) in January 2021 and 14% to Indias total merchandise exports. The gem and jewellery sector is likely to employ 8.23 million persons by 2022, from 5 million in 2020.

Based on its potential for growth and value addition, the Government declared the 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.

Despite having all the positive notes, the Indian government released its latest estimates of economic growth for the last nancial year that ended in March 2021. Indias Gross Domestic Product (GDP) contracted by 7.3% in 2020-21. This will have a direct e ect in the Gems and Jewellery business also by way of contraction in consumer demand, availability of raw materials at the competitive rates and e ect on the general price level and so on.

In the backdrop of COVID 19s rst shock wave in all the sectors of the economy, our country is slowly coming up to normalcy. But there remain so many challenges in supply chain management, which will take more time to correct its course.

When the country is slowly coming out of the rst wave, in March 2021, the second wave of Corona Virus had started in the northern and eastern parts of India and slowly spreading across all over the country. As of now the real impact of this second wave in the business as well as in the economy is not immediately known, but it is expected that it will have a major impact compared to the rst wave.

Market size

In FY 20-21, exports of gems & jewellery stood at US$ 21.89 billion. In February 2021, exports of gems & jewellery stood at US$ 2.64 billion.

In September 2020, the US was the largest country (at 44%) to import gems and jewellery (US$ 938.54 million) from India, followed

by Hong Kong (33%) and the UAE (13%).

In FY 20-21, imports of gems & jewellery (pearls, precious & semi-precious stones) are estimated at US$ 13.98 billion. Imports of gold jewellery recorded US$ 228.56 million from April 2020 to February 2021.


Cumulative FDI ino ws in diamond and gold ornaments in India stood at US$ 1,190.47 million between April 2000 and December 2020 according to the Department for Promotion of Industry and Internal Trade (DPIIT).

Some of the key developments in this industry are listed below:

v In February 2021, Reliance expanded its e-commerce arm, JioMart, to jewellery with silver coins of 5gm and10 gm, and gold coins of 1gm, 5gm and 10gm.

v Reliances in-house jewellery brand, Reliance Jewels, which has 93 agship showrooms and 110 shop-in-shops in 105 cities in

the country, will full the orders for the new segment.

v In November 2020, Platinum Guild International (PGI) launched their new Men of Platinum collection for men in leading retail stores across India.

v Jewellery players in India are re-evaluating the brick-and-mortar business model and planning to implement an omni channel approach with a focus on digital strategy to boost sales.

v According to the ‘Online Gold Market in India report by The World Gold Council, the online gold market in India, with relatively nascent at 1-2% (as of 2020), is witnessing a strong push from both digital players who view this market as an opportunity and large jewellers who view this market as a required addition to their brick-and-mortar model.

v Maximum development was driven by MSEs in gems & jewellery and textiles. In November 2020, the adoption of digital distribution platforms among manufacturers of gems and jewellery, manufacturing mostly non-precious, stone-studded jewellery, imitation jewellery and luxury fashion jewellery, more than quadrupled to 55% from 13% before the pandemic. The segments micro-enterprises recorded the highest boost of 41%, from the previous 13%.

Government Initiatives

v The government has reduced import duty for Gold & Silver (from 12.5% to 7.5%) and Platinum & Pallidum (from 12.5% to 10%) to

bring down the prices of precious metals in the local market.

v Indian Government made hallmarking mandatory for Gold Jewellery and Artefacts. A period of one year is provided for implementation i.e. till January 2021.

v In December 2020, the All India Gem and Jewellery Domestic Council (GJC) welcomed the decision to make hallmarking compulsory from June 2021 in a phased manner; urged the government to examine the key concerns of the industry for smooth implementation of the initiative.

v In December 2020, the Finance Ministry notied that the amendment under the Prevention of Money Laundering Act (PMLA), notifying dealers in precious metals and stones, will maintain records of cash transactions worth Rs. 10 lakh (US$ 13.61 thousand) or more cumulatively with a single customer.

Road Ahead

In the coming years, growth in the 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 ne jewellery segment by 2021 22. Also, the relaxation of restrictions of gold import is likely to provide a llip to the industry. The improvement in availability along with the reintroduction of low-cost gold metal loans and likely stabilisation of gold prices at lower levels is expected to drive volume growth for jewellers over the short to medium term. The demand for jewellery is expected to be signicantly supported by the recent positive developments in the industry.

Indias gems and jewellery export sector which is one of the largest in the world contributed 27% to the global jewellery consumption in 2019. The market size of the global gems and jewellery sector is likely to expand to US$ 103.06 billion between 2019 and 2023. Indias gems and jewellery exports are expected to reach US$ 100 billion by 2025.

According to Gem and Jewellery Export Promotion Council, between April 2020 and December 2020, gold bars accounted for 6.8% (US$ 678.77 million) and gold jewellery at 1.8% (US$ 181.49 million) of the total gems and jewellery imports in India. As per the World Gold Council (WGC), Indias gold demand stood at 446.4 tonnes in 2020.

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. The Government has made hallmarking mandatory for gold jewellery and artefacts and one year is provided for its implementation.

As per Union Budget 2021, the Gem and Jewellery Export Promotion Council has proposed a reduction in import duty on cut and polished diamonds to 2.5%, from the existing 7.5%, to double exports of gems & jewellery to US$ 70 billion by 2025.

Cumulative FDI ino ws in diamond and gold ornaments in India stood at US$ 1,190.47 million between April 2000 and December

2020 according to the Department for Promotion of Industry and Internal Trade (DPIIT)

Risk of loss of Positioning in the market place

Due to sti competition in the retail trade, there is a possibility that our market share from a particular place of operation or region may decline. A lot of new entrants to the retail trade su er from lack of knowledge of customers preference and on quality parameters and price war. Therefore, your company with its fuller penetration to rural market is well placed to participate in the rural success story of the country. In order to maintain/improve market share in the areas we operate in the light of sagging regressive demand trends, we have cautiously brought down the mark up value for our products moderately and also improved customer service through online and o ine mode. Providing product knowledge, the customers to buy a quality product in the market.


Monsoon failure has the potential to adversely a ect the companys business and earnings particularly in south Tamil Nadu, where agricultural activities are dependent on monsoon. Rising ination and high interest rates are other areas of concern that would deplete the residual income of the people to be spent on discretionary items like gold ornaments.

Change in lifestyle

The disposable income of both middle class and upper middle class and change in life styles of people leads to shifting of consumer base to branded jewellery. Even though this will be a major risk factor for long term growth of the company, the change in peoples taste and preferences are ascertained through various sources and accordingly change in our product mix were done by well-equipped team.

Economic risk

Economic slowdown can a ect the demand and the sales for the company.

Mitigation: The Company has a diversied 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 and bank lending rates have declined. 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 o ers that at a reasonable price to reach people through communications via di erent 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 protabilit y and can impact future growth prospects.

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 signicantly 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 uc tuation.

Gold price uc tuation risks

Gold price uc tuation risk could arise on account of frequent changes in gold prices either up or downside momentum. It could have adverse impact on earnings. We are maintaining our inventory price hedging around 63:37 basis. This will help the company with any gold price uc tuation of gold price. Your Board will take appropriate action in managing the uc tuation impact in gold price movement from time to time to increase to 75:25basis.

Change in Government Policies

New government regulations pertaining to taxation and banking stringent norms will a ect the demand and supply chain.

Your company with help 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 a ect the operation of the Company.

Mitigation: The Company encourages new talent and provides 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 a ect protabilit y of the Company.

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

Compliance risk

Non-compliance 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.


The Company has in place adequate system of internal control. It has documented procedures covering all nancial 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 nancial r eporting. The Company has continued its e orts to align all its processes and controls with global best practices in these areas as well.

Some signicant features of the internal control systems are:

v Documenting Major Business Process including nancial reporting, Computer Controlling, Security Checks and Top Committee level Plans

v A comprehensive information security policy and continuous upgrades to IT system v Audit Committee of the Board of Directors, comprising independent directors, which is functional since October 2007, regularly reviews the audit plans, signicant audit ndings , adequacy of internal controls, compliance with Accounting Standards, as well as, reasons for changes in accounting policies and practices, if any.

v 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 e ciency and e ectiveness of operations and the key process risks

v Monthly meeting of the top management committee to review operations and plans in key business areas v Corporate policies on accounting and major processes. v Well-dened processes for formulating and reviewing annual and long term business plans. v Preparation and monitoring of annual budgets for all trading activities. v Having introduced and continually upgraded, improved and netuned state of the art Enterprise Resource Planning (ERP) since August 2008, supplier Relations Management and Customer Relations Management, to connect its di erent locations, dealers and vendors.

Anti-fraud programme.

The Board takes responsibility for the total process of risk management in the organization. The Audit Committee reviews reports covering operational, nancial 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.


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 platform 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 rst 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 conned catalog) with the st ore price. The ornaments are real photographed pictures with exact product details and real time priced based on the market rate of gold and silver.


The Companys Human Resources philosophy is to establish and build 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 e ective 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 e ort 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 di er 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.


1. Net Revenue from Operations:

Particulars FY 2020-21 FY 2019-20 Change % of Change
Sale of Products 1,81,862 1,69,196 12,666 7%

Sales for the nancial y ear 20-21 have increased by7% when compared to the previous year in spite of covid -19 lockdown.

2. Other Income

Particulars FY 2020-21 FY 2019-20 Change % of Change
Other Operating Income 232 303 (71) (23%)

The other operating income represents interest on x ed deposits and other operating income for the year.

3. Gross Prot

Particulars FY 2020-21 FY 2019-20 Change % of Change
Revenue from Operations 1,81,862 1,69,196 12,666 7%
Less: Cost of Consumption 1,61,146 1,49,690 11,456 7%
Gross Prot 20,716 19,506 1,210 6%

Better Gold price realization, Silver & Diamond product realization contributed better this year.

4. Prot B efore Tax

Particulars FY 2020-21 FY 2019-20 Change % of Change
Prot bef ore Taxation 11,697 6,942 4,755 68%

During the year, the company achieved prot bef ore tax of 11,697 lakhs as against prot bef ore tax of Rs.6,942 lakhs due to

better gold price realisation.

5. Total Comprehensive Income ( After Taxation )

Particulars FY 2020-21 FY 2019-20 Change % of Change
Total Comprehensive Income After taxation 8,600 4,529 4,071 90%

For the year company achieved net prot af ter tax of 8,600 lakhs. This performance is on account of improvement in gross

prot mar gin, better return in diamonds & silver products, as well as increased gold price in the rst half of the y ear.


1) Equity Share Capital

The issued, subscribed and paid up capital as at March 31, 2021 stood at 1,371.96 lakhs. There was no fresh infusion of capital

during the year.

2) Other Equity

Other Equity stood at 28,420 lakhs as against 20,643 lakhs in the previous year.

3) Property, Plant and Equipment and Intangible Assets

During the year, we capitalized 561 Lakhs to our gross block comprising of 479 lakhs for Plant & Machinery, Furniture & Fittings

and other assets and balance of 82 lakhs for Computer Equipments including Software.

4) Inventories

Inventories amounted to 64,923 lakhs as at 31st March 2021 as against 56,393 lakhs as at the previous year end.

5) Trade Receivables

Trade Receivables amounted to 258 lakhs as at 31st March 2021 as against 13 lakhs as at 31st March 2020.

6) Cash and Cash equivalents

Cash and bank balances with banks amounts to 1,030 lakhs as against 199 lakhs in the previous year.

7) Bank Balance other than cash and cash equivalents

Bank balance other than Cash and cash equivalents with banks amounts to 663 lakhs as against 2,940 lakhs in the previous

year. The decrease is on account of reduction of gold metal facilities against x ed deposits.

8) Other Current Assets

Other current assets including advance to suppliers and margin money paid to hedging purpose amounting to 1,300 lakhs as

against Rs.2,612 lakhs in the previous year.

9) Current Liabilities

Current liabilities excluding provisions amounting to 40,686 lakhs ( previous year 43,147 lakhs) includes secured loan from banks, Current Maturities on long term loans and Trade creditors for raw materials and creditors for advertising and promotion spends, packing materials, advance received from customers and creditors for capital purchases.

10) Working Capital

The Company has a Working Capital (including cash and bank balances) of 27,541 lakhs as at 31st March 2021 as against

19,059 lakhs as at 31st March 2020. The increase in working capital is on account of internal accruals.

11) Debt Equity Ratio

Your Company has got Average Net Debt Equity ratio of 1.54 as at 31.3.2021 as against 2.11 as at 31.03.2020.

12) Current Ratio

Your Company is having current ratio 1:1.68 as at 31.3.2021 as against 1:1.44 as at 31.03.2020

13) Interest Coverage Ratio

Your Company is having interest coverage of 6.52 times as at 31.3.2021 as against 4.76 times as on 31.03.2020.

14) Inventory Turnover Ratio

Your Company has got inventory turnover ratio of 2.80 times as at 31.3.2021 as against 3.00 times as at 31.03.2020.