Gitanjali Gems Ltd.pdf
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GEMS LIMITED
February 2008
Registered Office: 'Laxmi Tower', Office No. 6, B Wing, 1st Floor, Bandra Kurla Complex, Bandra (East), Mumbai - 400051
Corporate Presentation
2
Integrated Business Model
Company Overview
Large and Expanding Market
Visionary Management – Driving Growth
New Initiatives and Expansion Strategy
Agenda
Focus on Jewellery Retail
Exceptional Financial Performance
3
Established presenceOne of India’s largest integrated diamond and jewellery companiesEstablished in 1986Sightholder status with DTC through a promoter group companySophisticated and scalable diamond and jewellery manufacturing facilitiesApproximately 1,246 retail outlets in India and 143 outlets in the U.S.
Growing revenues and profitability
Revenues (Rs. bn) EBITDA margin (%)
Business Overview
Integrated business modelDiamond processingJewellery manufacturing Jewellery retailing in IndiaBranded jewelleryInternational jewellery retailing
Samuels and RogersGems & jewellery SEZs
Leading brandsAmong the first branded jewellery in IndiaLeading jewellery brands
Note: Exchange rate used for conversion US$ 1.0 = INR 39.750
14
24
35 34
05
10152025303540
FY 05 FY 06 FY 07 9M Dec-07
0%1%2%3%
4%5%6%7%
CAGR = 59%
4
Business Map
Pioneers of branded jewellery in IndiaBrands rated amongst best in IndiaStrong sales and distribution network including 112 distributors and ~1,250 outletsHigh value acquisitions in the U.S.
Developing 200 acre SEZ in HyderabadBack-end support through supply for retail operation frommanufacturing units Enhancement of manufacturing capacityHigh value creationPlans to develop more SEZs atPanvel, Nanden, Nashik, Nagpur,Aurangabad and CalcuttaGovernment incentives / tax benefits
Diamond Processing
Gitanjali Gems
Diamond and Jewellery Lifestyle Infrastructure
RetailManufacturing and
Wholesaling
India U.S. / International
5 state-of-the-art processingand manufacturing units4 decades of experienceSufficient production for internal and external use
5
End to End Process and Integrated Presence
Our operations are extensive and cover every step in the end to end process
Prestigious sight-holderpositionEnables quality supply atefficient prices
Branding and RetailingProcessingSourcing
Two modern processing facilities
Additional facilities commence post SEZ completion
Manufacturing
Three state–of-the-artfunctional facilitiesMore upcoming facilitiesin SEZ
SEZ completion will assist both processing and manufacturing functions of the company
Pioneers of branded jewellery in IndiaExcellent set of brandsExhaustive sales & distribution network
Presence across the entire value chain
Diamond Processing
Sourcing rough &
uncut diamonds
Exports
JewelleryManufacturing
Exports
JewelleryBranding Indian Retail
U.S. Retail
6
Moving up the Value Chain
Margin play
Gro
wth
Diamond Processing
Diamond Manufacturing &
Wholesale
Jewellery Retail
Retail Lifestyle
SEZ / Gitanjali
Infra-tech
New ventures have high growth and high margin potential
2-3% EBIDTA
4-5% EBIDTA
10-12% EBIDTA
Value creation through added revenues and added manufacturing facilities
High margins expected
7
Investment
Gro
wth
/ V
alue
Retail Lifestyle
U.S. Jewellery
Retail
Indian Jewellery
Retail
SEZ / Gitanjali
Infra-tech
Diamond Manufacturing &
Wholesale
Diamond Processing
Strong presence across the value chainSEZs will provide back end supportand create valueLifestyle expected to compliment retail jewellery operations
Strong and expanding Indian & U.S. retail operationsVast experience in diamond Processing & manufacturingSupply for Indian & International retail operations leveraged from company’s own manufacturing units
Diversifying into high growth / value space
Business Outlook
8
Investment Highlights
Strong retail presence in India and the U.S.
Sophisticated manufacturing facilities including upcoming Hyderabad SEZ
Presence across the entire value chain – Fully integrated operations
Significant focus on retail and distribution network to drive growth
Large, integrated diamond and jewellery player
Strong brand equity and broad product range
Diversifying into high growth/value areas such as SEZs and retail lifestyle
Visionary leadership and a deep management team
9
Integrated Business Model
Company Overview
Large and Expanding Market
Visionary Management – Driving Growth
New Initiatives and Expansion Strategy
Agenda
Focus on Jewellery Retail
Exceptional Financial Performance
10
Others5.0%Plain platinum
Jewellery6.2%
Plain Gold jewellery
41.6%
Diamond Jewellery
47.2%
Global Gems and Jewellery Industry
Global market for gems and jewellery pegged at US$ 145 billion
Diamond-studded jewellery contributes close to 50% of the total demand
Plain gold jewellery contributes over 40% of the total demand
United States alone represents over 45% of total worldwide diamond jewellery sales
The United States, Middle East, China, India, Japan, Italy and the United Kingdom constitute close to 75% of the global demand for jewellery
Jewellery manufacturing and Jewellery retailing constitute close to 75% of the Jewellery value chain
Value addition continues to be highest for the players with an integrated presence in the Jewellery value chain
Market share of various jewellery segments (2005)
Key world markets for jewellery (2005)
Source: GJEPC–KPMG report
US 31%
Turkey 3%
Middle East 9%UK 3%
Rest of the World 24%
Japan 8%
Italy 5%
India 8%
China 9%
11
Other3%
Rough Diamonds
3%
Gold Jewellery
30%
C&P Diamonds
64%
Others18%
U.S.A.40%
U.A.E.36%
U.K.3%
Hongkong3%
Others8%
Japan4%
Israel8%
U.S.A.27%
Hongkong31%
Belgium12%
U.A.E.10%
Other4%
Gold Bars19%
C&P Diamonds
14%
Rough Diamonds
63%
Indian Gems and Jewellery Exports
India, China, Israel and Belgium are the leading countries engaged in the global diamond cutting and polishing industry
India accounts for approximately 60% of the global polished diamonds in value terms, 80% in caratage and 90% in pieces
The gems and jewellery industry occupies a prominent position in Indian economy. Leading foreign exchange earner
US$ 17 billion of exports in FY 2007 - US$ 11 billion in diamonds
USA, Hong Kong, UAE and Belgium are the major export destinations
Exports of Gems and Jewellery (excluding Cut and Polished Diamonds) grew at 18% CAGR over FY 2005-2007
Superior craftsmanship and low-cost labour increases competitiveness
Exports of cut andpolished diamonds (2006-07)
Exports of Gems and Jewellery(excluding Cut and
Polished Diamonds) (2006-07)
India’s imports and exports of raw material and gems and jewellery (2006—07)
US$10.9 billion US$6.3 billionSource: GJEPC
Imports US$14.0 billion Exports US$17.2 billion
12
Indian Retail Jewellery Overview
India is one of the largest jewellery markets97% of jewellery sales are by “Family jewellers”
Change in the demographics and increased consumerism of Indian retail market
Organized retail is growing at a rapid pace across all sectors
Share of organized retail jewellery increasing rapidly: Expected to grow from US$ 350 million in 2006 to US$ 2.28 billion by 2010
Key elements for development of a successful brand
brand imageaesthetic designs marketing and promotiondistribution network
Yesterday Today
Unbranded, From Family Jeweller Branded
Jewellery for Investment Jewellery for Fashion
Gold Jewellery Diamond Studded Jewellery
Traditional Ethnic and Chunky designs
Fashionable, lightweight and innovative designs
Marriage and Festival Season as peak seasons
“Wearability” and Gifts spreading the demand
through the year
Jewellery sold on commodity basis with
labour charges
Jewellery being sold on a per piece basis
Increasing disposable income and discretionary spending by Indian consumers leading into a change in consumer behavior towards demand for branded and luxury products
13
U.S. Retail Jewellery Overview
Largest jewellery consumer country50% of worldwide diamond jewellery sales are made in the United StatesU.S. and Canadian retail jewellery accounted for approximately U.S.$ 66 billion of sales in 2006Diamond jewellery accounts for over 50% of total jewellery sales
Fragmented markets with number of independent regional and local jewellery retailers, as well as national jewellery chains
Jewellery retailers also include department stores, mass merchant discount stores, direct mail suppliers, online retailers and television home shopping programs
Representative list of jewellery retailers in the U.S.
14
Integrated Business Model
Company Overview
Large and Expanding Market
Visionary Management – Driving Growth
New Initiatives and Expansion Strategy
Agenda
Focus on Jewellery Retail
Exceptional Financial Performance
15
Establishing Presence Across the Value Chain
Diamond - Import and Manufacturing
Jewellery Manufacturing – Domestic and Exports
Jewellery Retailing – Domestic and International
Leading Indian Jewellery Brands
Internationalization of business model
Access to large retail markets like USA
Expansion into relating of Lifestyle Products
Development of infrastructure for Gems and Jewellery sector - SEZs
Direct from Miners
Rough Distribution
Diamond Polishing
Diamond Distribution
Jewellery Manufacturing
Jewellery Wholesaling
Shopping Experience
Jewellery Retailing
Jewellery Branding
Jewellery manufacturing and retailing comprise almost 2/3rd of the value chain
16
Diamond Processing
Sight holder of Diamond Trading Company (DTC) through promoter group company
One of ~90 sightholders globally
Tri-Star, our subsidiary is a direct customer of BHP Billiton
Quality diamond sourcing at competitive prices
Two diamond manufacturing facilities located at Borivili in Mumbai and at Surat in Gujarat
Borivili facility spread over 40,000 square feet with modern diamond processing equipment and employs more than 1,200 people
Latest diamond processing machinery and trained labour
Diamonds exported to countries including the U.S., Europe, Hong Kong, Japan, China, Middle East and Thailand
Marking
Cleaving
Sawing
Cutting
Polishing
17
Strategic Acquisition of Tri-Star
Acquired a 70% stake in Tri-Star Worldwide LLC
Direct customer of BHP Billiton
Licensee of CanadaMark, a tracking system that records all CanadaMarkTM Diamonds in its database
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
Direct purchase of rough diamonds from the BHP Billiton
Source of ‘‘Mined in Canada’’ brand diamonds
18
Jewellery Manufacturing
Jewellery manufacturing for exports and for the Indian retail and wholesale market
Products include both diamond studded and other jewellery
Exports
Sophisticated facility at the SEEPZ at Andheri, Mumbai
Producing gold and platinum diamond studded jewellery
Domestic
Two jewellery manufacturing facilities in Andheri, Mumbai
Small facilities in an SEZ in Surat, Gujarat
Designing
Model and mould making
Waxing and wax setting
Casting
Sprue grinding
Filling
Polishing
Metal setting
Rhodium polish
19
Integrated Business Model
Company Overview
Large and Expanding Market
Visionary Management – Driving Growth
New Initiatives and Expansion Strategy
Agenda
Focus on Jewellery Retail
Exceptional Financial Performance
20
6%
7%
8%
9%
14%
22%
27%
29%
62%
69%
0 20 40 60 80
Vivaha
Moksh
D'Damas
TBZ
Gili
Agni
Sangini
Asmi
Nakshatra
Tanishq
Jewellery Retailing in India
Strong retail and distribution network with pan-India presence
112 distributors
Approximately 1,246 outlets, including outlets in host stores10 exclusive stores
28 franchisee stores
One of the first companies to introduce branded jewellery
Over 12 branded jewellery lines (including sub brands), targeted at different customer profiles
Gili and Nakshatra - “Superbrands” in 2004 by ICSC
Continue to grow retail operations and expand market penetration for branded jewellery
Strong Brand Recall
Source: The Solitaire – TNS Survey 2005
21
Easy Elegance Diamond studded branded jewellery at reasonable prices Pan-India retail presence with approximately 150 outlets Awarded Superbrand status in 2004 by ICSC
The Fire Within Was originally introduced by DTC
Premium work wear collection
The Enchanting Enigma
Includes entire range including bridal jewellery Awarded Superbrand status in 2004 by ICSC
Partners for Life Brand focus on couples Covers entire product range including bridal jewellery
The Art of Beauty Designs combine international quality and Indian values
The Art of the Different
Gold jewellery brand under D’Damas Offers contemporary and modern designs in gold jewellery
The Wedding Collection
Plain gold as well as diamond jewellery for weddings
Pure. Proud. Precious Gold jewellery aimed at Indian wedding market and other similar events
Giantti Unique International Allure
High-end jewellery brand
Lifestyle Redefined Offers branded jewellery, watches and other lifestyle accessories
Source of “Mined in Canada” branded diamonds
Canadia branded diamond jewellery sold by retailers in the U.S., Canada, U.K. and Australia
Leading Brands addressing diverse consumer segments
22
Exclusive distributor network for each brand to sell to jewellery retailers across the country
Once delivered, the distributor assumes the responsibility of selling the product
Commission paid depends on the brand and sale value of the final product
Sales through exclusive Distributor Network
Large jewellery stores,
shopping malls and
department stores
Shoppers Stop
Globus
Westside
Gold Souk
Directly serviced by the
Gitanjali Group
Sales to Department Stores and Reputed Jewellery Retailers
The retail operations of the
group are classified into three
different formats
Retail Stores owned by
the group
Shop in shop outlets in
department stores
Franchisee stores
Sales through Retail Stores owned/managed by the Group
Multi Channel Distribution Network
23
Retail Expansion in the U.S. – Acquisition of Samuels
Expansion into the US – the world’s leading diamond jewellery market ~50% of world market, according to the International Diamond Exchange
Vertical integration with control over the entire value chain
Samuels expected to source a significant portion of its jewellery products from Gitanjali
Access to established systems and processesEstablished retail infrastructureExperienced personnel
Advantage of 116-year heritage and leading market position
Platform for further retail expansion in the U.S.
8th largest jewellery chain in the US
Established in 1891
Offers exclusive designer collections and a large selection of loose and mounted diamonds
Variety of brands such as ‘‘Samuels Jewelers’’, ‘‘Schubach Jewelers’’, ‘‘Samuels Diamonds’’ and ‘‘24 Karat Card’’
Primarily targeted at the middle and upper middle class consumers
Manages 97 retail stores across 18 states in the U.S.17 exclusive stores 80 shops in department stores
Aggregate price for 97% stake: approximately U.S.$12.0 million in cash and 1.55 million shares of Gitanjali Gems
24
Retail Expansion in the U.S. – Acquisition of Rogers
Established in 1920
Offers exclusive designer collections
Operates its stores under “Rogers Jewelers” and “Andrews Jewelers” brands
Primarily targeted at the middle and upper middle class consumers
Manages 46 retail stores across U.S.Primarily located in the mid-west region of the U.S.
Further retail expansion into the U.S.
Scaling up the U.S. operations to drive operating efficiencies
Further access to value chain synergies
Long heritage and leading market position
25
Integrated Business Model
Company Overview
Large and Expanding Market
Visionary Management – Driving Growth
New Initiatives and Expansion Strategy
Agenda
Focus on Jewellery Retail
Exceptional Financial Performance
26
Aggressive Expansion across the Value Chain
Ramping up the retail chainExpanding 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
Developing 200 acres gems & jewellery SEZ in Hyderabad
Plans to develop more SEZs focused on gems & jewelleryacross IndiaTo partner for developing real estate infrastructure
EXPANSIONEXPANSION DIVERSIFICATIONDIVERSIFICATION
Further integration within the jewellery value chain
Higher margins in retail business
Higher value addition
Leverage our key strengths
Large opportunity for incremental revenue
Diversify business model
27
Infrastructure Development for Gems & Jewellery Industry
Indian government encouraging the development of industry specific SEZs
Tax and other benefits to producers and developers
Attractive trade benefits available to the gems and jewellery industry in SEZs
Facilitating manufacturing and processing with tax exemptions
Gitanjali Gems to develop infrastructure projects to cater to the export production needs of gem and jewellery manufacturers
Leverage our expertise and experience in the industry to develop world class infrastructure
Partner with reputed developers for development of real estate
Location Type of SEZ
Area (hectares) Approval status
Hyderabad, Andhra Pradesh
Gems and jewellery
80.9 Formal approval received. Notified by the central government
Raigad, Maharashtra
Gems and jewellery
10.2 Formal approval received from central government
Nanded, Maharashtra
Gems and jewellery
50.0 In-principle approval received from state and central government
Aurangabad, Maharashtra
Gems and jewellery
50.0 In-principle approval received from state government
Nagpur, Maharashtra
Multi product
1,000.0 In-principle approval received from state government
Nashik, Maharashtra
Multi services
100.0 In-principle approval received from state and central government
Gitanjali Gems’ SEZ projects
28
Hyderabad SEZ: World Class Manufacturing Capacity
Gitanjali Gems has received notification for an exclusive 200-acre gem and jewellery SEZ in Hyderabad
Developing five world class diamond and jewellery manufacturing facilities
One facility expected to commence commercial production in December 2007
Four facilities expected to commence commercial production in calendar year 2008
Dedicated training centre at Hyderabad SEZ with present capacity to train up to 1,200 employees
10-year income tax holiday to developer and 5 year income tax breaks for all firms operating within the SEZ
Other tax benefits in respect of Central Sales Tax, Service Tax and Excise Duty
World class infrastructure to house domestic and international diamond and jewellery manufacturers
29
Expansion into Lifestyle Products
Increasing disposable income levels and globalization
Growing market for lifestyle and luxury products in India
Lifestyle products including watches, silverware, leather goods, writing instruments and jewellery
Leveraging our experience in distribution and consumer behaviour for luxury products
Signed a JV agreement with Netherlands based ARMO to form a 50:50 JV “Morellato India”for importing, wholesaling, distributing and manufacturing global luxury products
30
Integrated Business Model
Company Overview
Large and Expanding Market
Visionary Management – Driving Growth
New Initiatives and Expansion Strategy
Agenda
Focus on Jewellery Retail
Exceptional Financial Performance
31
Senior management team
Mehul ChoksiChairman and Managing Director
Founded Gitanjali Gems in 1986 Has been a visionary in identifying and executing various initiatives including branding and retailingInstrumental in launching several successful brands Pioneer in corporatising the jewellery industry in India
G. K. NairExecutive Director (Finance)
A Chartered Accountant by qualification, Mr. Nair has been associated with the Company since 1998He heads the finance division and oversees the finance and accounting functionsAlso responsible for shaping the corporate strategy and identifying global opportunities
Adrianus VoornExecutive Director (Manufacturing)
Mr. Voorn is a Dutch national. He is in charge of our manufacturing operationsHe is a mechanical engineer by qualification and has been a Director on the Board since 1999
Priti M. ChoksiHead, Jewellery Division
Dhruv DesaiGeneral Manager, Banking
Upen ShahVice President—Finance & Taxation
Neher ModiCEO, International Jewellery Business
Sudhir MehtaProcurement and Selling - Diamonds
Sharad MehtaManufacturing
Pankhuri WarangeCompany Secretary
Vikram SinghDesign & Production – Jewellery Exports
Shashank PathakLifestyle Retailing
Prashant RegeInfrastructure Development
Jagdeesh ShivdasaniDistribution
Rahul ViraBusiness Development - Retail
Shekhar WadkeCOO & Head – Desire
Gaurav MaryaHead - Lifestyle
Srikanth BadigaInfrastructure Development
David BarrCo-Chairman, Samuels
Randy McCulloughPresident & CEO, Samuels
Deepak GandhiInternational Jewellery Business
Visionary Leadership with Extensive Experience
32
Integrated Business Model
Company Overview
Large and Expanding Market
Visionary Management – Driving Growth
New Initiatives and Expansion Strategy
Agenda
Focus on Jewellery Retail
Exceptional Financial Performance
33
Financial Highlights: Strong Revenue and Earnings Growth
$345
$605
$872
$560
$847
FY05 FY06 FY07 9MFY07 9MFY08
Revenues on high growth trajectory
CAGR 59%
Sales (Net) (US$ million)
Growth 51%
Improving business mix leading to better margins
EBITDA Margin (%)
Improving business mix and operating leverage leading to strong earnings growth
EBITDA (US$ million) Net Profit (US$mm)
1.9%
4.4% 4.8%5.8% 6.1%
FY05 FY06 FY07 9MFY07 9MFY08
$6
$27
$42$32
$52
FY05 FY06 FY07 9MFY07 9MFY08
CAGR 156% Growth 60%
$3
$13
$23$20
$32
FY05 FY06 FY07 9MFY07 9MFY08
CAGR 201% Growth 62%
34
Shift In Business Mix – Driving Growth in Profitability
Jewellery15%
Diamond85%
Jewellery32%
Diamond68%
Diamond57%
Jewellery43%
Jewellery38%
Diamond62%
Jewellery54%
Diamond46%
Jewellery64%
Diamond36%
2006 2007
Sales Mix
Segment results
Overall EBITDAMargin 4.4% 4.8%
9M FY 2008
6.1%
Sales growth (Y/Y) 75% 44% 51.3%
35
Forward looking statements
This presentation may contain “forward looking statements” by Gitanjali Gems Limited (“Gitanjali Gems”) that are not historical in nature. These forward looking statements, which may include statements relating to future results of operations, financial condition, business prospects, plans and objectives, are based on the current beliefs, assumptions, expectations, estimates, and projections of the management of Gitanjali Gems about the business, industry and markets in which Gitanjali Gems operates. These statements are not guarantees of future performance, and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond Gitanjali Gems’ control and difficult to predict, that could cause actual results, performance or achievements to differ materially from those in the forward looking statements. Such statements are not, and should not be construed, as a representation as to future performance or achievements of Gitanjali Gems. In particular, such statements should not be regarded as a projection of future performance of Gitanjali Gems. It should be noted that the actual performance or achievements of Gitanjali Gems may vary significantly from such statements.
Thank YouGEMS LIMITED
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