Case Study on Gitanjali Gems

8/9/2019 Case Study on Gitanjali Gems

1/25

Case Study

onGitanjali A Gem in Indias

Crown

Submitted By:

Vinay Bhandari


2/25

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.


3/25

Diamond distribution was dominated by a few major diamond mining companiesworldwide 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 wasrestricted 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 purchasesbased 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.


4/25

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


5/25

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


6/25

GITANJALI GEMS LTD.

BusinessOv

erv

iewEstablished presence

The company is one of Indias 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


7/25

Ramping up the retail chain

Expanding stores in India

Acquisitions including Samuels, Rogers

and Tri-Star

Plans to make further inorganic growthin 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

Developing 200 acres gems & Jewellery

SEZ in HyderabadPlans 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


8/25

GenericBusinessLevel Strategy


9/25

MichaelPorters Five Force ModelforJewellery Industry

POTENTI

NEWENTRY

INDUSTRYCOMPETITORS

RIV RY MONG EXISTING

FIRMS

BUYERSSUPPLIER

SUBSTITUTES


10/25

Inter-Firm Rivalry High

Two types of rivalry.

Inside India

Large presence of unorganized sector. 0.2 MillionGold jewelers and over 8,000 Diamond jewelers

Outside India.

International rivals Such as, China

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


11/25

BargainingPowerofSuppliers 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.

BargainingPowerofBuyers 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 inI

ndia.


12/25

ThreatofSubstitutes: Low

Substitutes are Real assets, Stockmarket, & Bankdeposits & mutual

fund investment and Other types of jewellery like imitation

jewellery, bagasra jewellery, stone jewellery etc.

Second preferred investment behind bankdeposits

Status and standard of living increase so demand is increasing athigh rate.

Barrierstoentry Lowto Medium

Low capital requirement

Government subsidy

EXIM policy & governments rules-regulations are high

Skilled manpower is essential

Advanced technology required


13/25

SWOTANALYSIS OF GITANJALI JEWELLERYLTD.

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,Ddamas, 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.


14/25

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 inventorycarrying costs.

Technology is less improved compared to China and Thailands 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 disposableincome 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 byfamily jewelers.

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


15/25

High priority

Resistance from suppliers and

decrease in availability of

diamond .

Fluctuation in prices of

material.(gold,diamnd)

High priority

Emergence of new

technology

Diamond processing and

cutting.

Medium priority

Changing tastes of

consumers.

High priority

Change in exim rates

And trade policies

Medium priority

Defragmented Indian market.

Low priority

Medium priority

Extinction of gold mines

Economic slowdown

Low priority Low priority

Disaster and mishaps

Priority Impact Matrix


16/25

VALUE CHAIN

Diamond Polishing

Direct From Mines

Rough

Distribution

Diamond Distribution

Jewellery

Manufacturing

JewelleryWhole SellingJewelleryBranding

JewelleryRetailing

Shopping Experience


17/25

Finance

The companys operations running across the whole value chain so finance is

the very much important factor. Working capital requirement is much more. Thecompany 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.


18/25

Technology

The company is using latest technology in processing means

jewellery manufacturing & also in designing. The company ishaving business in so many countries so that it has to pay

attention over the designing, manufacturing etc. with the high

technology to satisfy buyers 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.


19/25

KEY SUCCESS FACTOR(KSF)Marketing & Distribution related factor:

Strong retail presence in India and the U.S.: The company is occupying good position inretail 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.

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.

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.


20/25

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


21/25

Current Scenario Of Gems and Jewellery Industry


22/25

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 totalmerchandise exports.

More than 100,000 skilled and unskilled labors being laid-off due to poor demand

from the US market. In fact, Indias 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.


23/25

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 companys diamond and jewelry segments contracting

during the period.

Gitanjalis 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, Gitanjalis net profit fell 6 percent

to INR 1.195 billion ($24.48 million). The companys 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).


24/25

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 countrys 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.


25/25

Thank You..

Documents

Case Study on Gitanjali Gems