Case Studyon

Gitanjali – A Gem in India’s

Crown

INTRODUCTION India is a leading player in the global

gems and jewellery market

The gems and jewellery industry

occupies an important position in the

Indian economy. It is a leading foreign

exchange earner, as well as one of the

fastest growing industries in the country

The two major segments of the sector in

India are gold jewellery and diamonds.

Gold jewellery forms around 80 per

cent of the Indian jewellery market,

with the balance comprising

fabricated studded jewellery that

includes diamond studded as well

as gemstone studded jewellery.

The Indian gems and jewellery

industry is competitive in the world

market due to its low cost of

production and the availability of

skilled labor. In addition, the

industry has set up a worldwide

distribution network, of more than

3,000 offices for the promotion and

marketing of Indian diamonds.

• Diamond distribution was dominated by a few

major diamond mining companies worldwide

among which Diamond Trading Corporation

(DTC) was the largest diamond distributor. It

accounted for approximately 50 % of

worldwide diamond distribution.

• Though Indian exports in cut and polished

diamonds was growing, it was restricted to

lower-sized and lower-valued diamond

market. European manufacturers dominated

the higher-valued diamond market.

•India was among the largest

importer of gold in the world and its

sale was sensitive to income level

and price level. Also it was

dependent on the purchases based

on faith in the retailer.

•Tanishq and Gili were among the

earliest jewellery brands in India

and later there came a shift in

consumer preferences towards

diamond jewellery as it was

positioned as affordable and

contemporary.

Indian Retail Jewellery Overview

Yesterday Today

Unbranded Branded

Silver & Gold

jewellery

Gold & Diamond

jewellery

Investment Investment +

Fashion

Traditional design Fashionable &

innovative design

Marriage & festival

is peak season

Wearability and gifts

Jewellery sold on

commodity basis

with labor charges

Jewellery being sold

on a per piece basis

Conti…Major Players: Tanishq Jewellery

Vaibhav Gems Ltd.

Classic Diamond (India) Ltd.

Shrenuj & Company Ltd.

Goldiam international Ltd.

Su-raj Diamonds & Jewellery Ltd.

Rajesh Exports Pvt. Ltd

Gitanjali Gems Ltd

GITANJALI GEMS LTD.Business Overview

Established presence

The company is one of India’s largest integrated diamond and jewellery

companies Established in 1986. Sight holder status with DTC through a

promoter group company

Sophisticated and scalable diamond and jewellery manufacturing facilities

Approximately 1,246 retail outlets in India and 143 outlets in the U.S.

Leading brands

• Ramping up the retail chain

• Expanding stores in India

• Acquisitions including

,Samuels Rogers

-and Tri Star

• Plans to make further

inorganic growth

. . -in the U S & Far east

• Expanding manufacturing

capabilities to

address increasing demand

• Gitanjali Lifestyles to focus on

Manufacture and distribution

Of luxury and lifestyle products

• 200 Developing acres gems &

Jewellery

SEZ in Hyderabad

• Plans to develop more SEZs

focused on

gems & jewellery across India

• To partner for developing real

estate

infrastructure

Expansions Diversification

• Further integration within the jewellery value chain• Higher margins in retail business• Higher value addition

•Leverage its key strengths•Large opportunity for incremental revenue•Diversify business model

Generic Business Level Strategy

Michael Porter’s Five Force Model for Jewellery Industry

POTENTIAL NEW ENTRY

INDUSTRY COMPETITORS

RIVALRY AMONG EXISTING FIRMS

BUYERSSUPPLIER

SUBSTITUTES

Inter-Firm Rivalry High

• Two types of rivalry.

Inside India

• Large presence of unorganized

sector. 0.2 Million Gold jewelers

and over 8,000 Diamond jewelers

Outside India.

• International rivals Such as,

China

• Threat from producing nation

like S.A. & Russia.

Bargaining Power of Suppliers

Medium

• In jewellery industry the suppliers

are S.A., UAE, Australia, US, Congo,

Botswana, Russia, DTC.

• Few Alternatives of cutting &

polishing.

• Skilled labor

• Bargaining power of India is

enhanced because India is largest

consumer of gold jewellery.

Bargaining Power of Buyers Low

Divided in two types

• 1. Domestic buyers &

2. Foreign buyers

• As investment (Demand increase)

• Bargaining power of Indian

exporter is high because Majority

of the world's rough diamond

production is cut and polished in

India.

Threat of Substitutes: Low

• Substitutes are Real assets,

Stock market, & Bank deposits

& mutual fund investment and

Other types of jewellery like

imitation jewellery, bagasra

jewellery, stone jewellery etc.

• Second preferred investment

behind bank deposits

• Status and standard of living

increase so demand is

increasing at high rate.

Barriers to entry Low to

Medium

• Low capital requirement

• Government subsidy

• EXIM policy & government’s

rules-regulations are high

• Skilled manpower is essential

• Advanced technology required

SWOT ANALYSIS OF GITANJALI JEWELLERY LTD.

Strengths

• Large integrated diamond & jewellery player and having an international presence.

• Pioneers of branded jewellery in India.

• Strong marketing & distribution network. Strong retail presence in India and in U.S. 112 distributors and 1246 outlets in India and 143 outlets in U.S.

• Strong brand equity and broad product range Such as, Gili, Asmi, Nakshatra, Sangini, D’damas, Vivaaha, Maya, Giantti, Desire, Samuels etc.

• Visionary leadership (Acquiring Nakshatra, Samuels, Rogers etc.)

• Expanding manufacturing capabilities in Mumbai and at special economic zone in Surat to address increasing demand.

• Net Worth is 3,460.37 million Rs. So we can say that it is financially very strong company.

• Sight holder status with DTC through a promoter group company.

• Highly skilled, qualified and motivated employee.

Weaknesses • There may be conflicts of

interest between them and certain of their Promoter group companies.

• As the major raw material requirements need to be imported, companies normally stock huge quantities of inventory resulting high inventory carrying costs.

• Technology is less improved compared to China and Thailand’s company.

Opportunities• New markets in Europe & Latin

America.• Growing demand in South Asian

& Far East countries.• Industry moving from a phase of

consolidation.• Expansion possibilities in

lifestyle and luxury products in India like watches, leather goods, Platinum jewellery because increasing disposable income of people.  

Threats• International Competition:-

China, Sri Lanka and Thailand's entry in small diamond jewellery.

• Increase in the price of Gold & Diamonds.

• Other local competitors. According to the data 97% jewellery sales are by family jewelers.

• Threat from producing nation like S.A. & Russia.

High priorityResistance from suppliers and decrease in availability of diamond .Fluctuation in prices of material.(gold,diamnd)

High priorityEmergence of new technologyDiamond processing and cutting.

Medium priorityChanging tastes of consumers.

High priorityChange in exim ratesAnd trade policies

Medium priorityDefragmented Indian market.

Low priority

Medium priorityExtinction of gold minesEconomic slowdown

Low priority Low priorityDisaster and mishaps

Priority – Impact Matrix

VALUE CHAINDiamond Polishing

Direct From Mines

Rough Distribution

Diamond Distribution

Jewellery Manufacturing

Jewellery Whole Selling Jewellery Branding

Jewellery Retailing

Shopping Experience

Finance

• The company’s operations running

across the whole value chain so

finance is the very much important

factor. Working capital

requirement is much more. The

company is having finance from

various sources like shares, bank

loan, and credit line. Infrastructure

• The company is having latest

technological manufacturing

plants. Its branded showrooms &

other outlets are having good

infrastructure. It is also having

plants in special economic zone at

various places

Procurement

• The company procures its raw

materials, machinery & other

ancillary things from recognized

sources. The company is having good

creditability with supplier. It has to

maintain its relations with different

sight holder for procurement of

diamond for jewellery making.Technology

• The company is using latest technology in processing means jewellery manufacturing & also in designing. The company is having business in so many countries so that it has to pay attention over the designing, manufacturing etc. with the high technology to satisfy buyer’s needs

. Human resources

• As of September 30, 2005, the Company had 410 full-time employees, of which approximately 117 employees were employed at its corporate offices in Mumbai. In addition, as of September 30, 2005, its subsidiaries, joint ventures and associate companies employed in the aggregate more than 740 employees, including 250 employees in its retail operations.

KEY SUCCESS FACTOR (KSF)

Marketing & Distribution related

factor:

Strong retail presence in India and the

U.S.: The company is occupying good

position in retail jewellery provider in

both India as well as U.S. Gitanjali has

a strong network of distribution. Here

Strong retail presence in India and in

US. It has 112 distributors and 1246

outlets in India and 143 outlets in US.

Strong brand equity and broad

product range: It is the pioneer of

branded jewellery in India. It brand

equity is too high.

Manufacturing related factor:

Sophisticated manufacturing

facilities including upcoming

Hyderabad SEZ: The company is

having good infrastructure facility

in various special economic zones.

Gitanjali has been achieved

economies of scale and learning

curve effects which is benefited in

low cost production because in

India skilled labor is available at

cheaper rate.

Significant focus on retail and

distribution network to drive growth:

It also keeps in mind distribution

network which provide the product to

end users. The company is having its

retail outlets also.

Technology Related factor:

• Gitanjali has expertise in cutting,

polishing the diamonds and in

designing the jewellery

(specifically in small design).

• Presence across the whole value

chain : The first & foremost

success factor for the company

is of its presence across the

entire value chain

Human Resource and Top

Management related factor:

• Visionary leadership and a deep

management team

• Strategic Acquisition of Tri-Star :

Manufacturer and global

distributor of Canadia® brand

diamonds and diamond jewellery

in various countries, such as

Australia, Canada, England,

Ireland, Northern Ireland, New

Zealand, Scotland, and the United

States

Current Scenario Of Gems and Jewellery Industry

• The industry registered exports worth US$ 15 billion in April-December 2008 (Provisional), compared to US$ 14.9 billion in the corresponding period of 2007, registering a growth of .59 per cent.

• Export of cut and polished diamonds grew from US$ 10.9 billion in 2006-07 to US$ 14.2 billion in 2007-08, witnessing a growth of nearly 68 per cent.

• The total gems and jewellery exports from India stood at US$ 20.8 billion in the financial year 2007-08, against US$ 17.1 billion in the previous year, witnessing a growth of 22.27 percent. The sector accounted for 13.41 per cent of India's total merchandise exports.

• More than 100,000 skilled and unskilled labors being laid-off due to poor demand from the US market. In fact, India’s jewellery sales to the US declined over 20 per cent even during the holiday season, i.e. Christmas and New Year.

• The domestic jewellery demand has also decreased by over 20 per cent.

• Positive government policies such as 100 per cent Foreign Direct Investment (FDI) in gems and jewellery through the automatic route, has further provided an impetus to the booming gems and jewellery industry.

Current Position of Gitanjali Jewelers

• Gitanjali Gems reported that consolidated net profits fell 42 percent to INR 291.52 million ($5.97 million) in the third fiscal quarter ending December 31, 2008 as a result of the company’s diamond and jewelry segments contracting during the period.

• Gitanjali’s third quarter net sales fell 11 percent to INR 11.109 billion ($227.55 million), as diamond revenues declined 19 percent to INR 5.366 billion ($109.98 million).

•

• The company noted a 17 percent decline in revenues at its India operations during the quarter and a 7.8 percent drop in revenues from the rest of the world.

• For the first nine months of the fiscal year, Gitanjali’s net profit fell 6 percent to INR 1.195 billion ($24.48 million). The company’s diamond business saw pre-tax profits fall 16 percent during the period, while its jewelry unit profits grew 27 percent. Group net sales rose 8.3 percent to INR 36.207 billion ($741.56 million).

Future Perspectives

• As per Research and Markets, the

gold processing industry in India

although, has around 15,000 players,

Only 80 players generate revenues

over US$ 5 million. Therefore, there

is high growth potential for Indian

gems and jewellery in the global

market.

• Furthermore, in spite of the fact that

India is not a major miner of

precious metals and stones, the

country’s inexpensive and skilled

workforce are one of the best in the

world for processing of diamonds,

which makes the country a favored

destination with the exporters.

• Additionally, there is a huge

potential in promoting traditional

Indian designs and styles. There is

a massive demand for hand-made

jewellery, especially in ethnic

Indian designs, from the sizeable

Indian emigrant population in the

Middle-East, South-East Asian

countries, the US and Canada

among others.

Thank You…..