Gitanjali Gems Limited
Disclaimer •This presentation and the accompanying slides (the “Presentation”), which have been prepared by Gitanjali Gems Limited (the “Company”), have been prepared solely for information purposes and do not constitute any offer, recommendation or invitation to p purchase or subscribe for any securities, and shall not form the basis or be relied on in connection with any contract or binding f y , f y g commitment whatsoever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company. •This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Presentation is expressly excluded. •Certain matters discussed in this Presentation may contain statements regarding the Company’s market opportunity and business prospects that are individually and collectively forward‐looking statements. Such forward‐looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include but are not limited to the performance of the Indian economy and of the economies of various international and uncertainties include, but are not limited to, the performance of the Indian economy and of the economies of various international markets, the performance of the wind power industry in India and world‐wide, competition, the company’s ability to successfully implement its strategy, the Company’s future levels of growth and expansion, technological implementation, changes and advancements, changes in revenue, income or cash flows, the Company’s market preferences and its exposure to market risks, as well as other risks. The Company’s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Presentation. The Company assumes no obligation to update any forward‐looking information contained in this p y p y g p yf g f Presentation. Any forward‐looking statements and projections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third party statements and projections. •The distribution of this document in certain jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about and observe any such restrictions.
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Gitanjali Gems Limited Gitanjali Gems Limited – An overview
Gitanjali Gems – an overview an overview Established Presence • Over two decades of experience p in diamonds and studded jjewellery y • DTC Sight holder status through a promoter group company • Focused on Jewellery marketing and retailing to drive growth and margin
Integrated Business Model • Integrated Jewellery manufacturing & retailing model provides significant competitive advantage • India’s largest branded diamond jewellery retailer • Strategic presence in leading global diamond jewellery markets • Large L scale l retail t il expansion i with ith over 2400 P Points i t off S Sale l (P (PoS) S) in i IIndia di
Strong Manufacturing Base • State of the art facilities at nine locations for diamond processing & jewellery manufacturing • Advanced product development and design capabilities
Well Defined Diversification Strategy gy • Retail expansion through organic, inorganic and partnership routes • Foray into lifestyle products to leverage customer base and domain knowledge • Infrastructure development to unlock value from fixed assets
Gitanjali Gems – Key subsidiaries Key subsidiaries 1
2
Diamond & Jewellery Mfg & Wholesale
Branded B d d Jewellery
3
4
5
Indian Retail
IInternational t ti l Retail
Infratech
(Gili India Ltd.) I di Ltd )
Gitanjali Lifestyle Ltd Ltd.
Samuels Jewelers Inc (USA)
Gitanjali Infratech Ltd Ltd.
Nakshatra (Brightest Circle Jewellery)
Gitanjali Jewellery Retail Pvt. Ltd.
Rogers Ltd. Inc (USA)
Hyderabad Gems SEZ Ltd.
D’Damas D Damas
Shuddhi
D’damas Jewellery (India) Pvt. Ltd
MMTC Gitanjali Pvt. Ltd.
Asmi
Maya Lifestyle
(Asmi Jewellery India Pvt Ltd ) India Pvt. Ltd.) Maya Gold & Diya (Fantasy Jewellery Pvt. Ltd.)
(Salasar Retail Pvt. Ltd ) Ltd. )
Gili
Gitanjali Gems Ltd. Gitanjali Exports Corp. Ltd.
Gitanjali Group
Sangini Sa g (Spectrum Jewellery) Note: Key subsidiaries listed – Not exhaustive
Tristar Worldwide LLC (USA) Diamlink Inc (USA) Diamlink Jewellery Inc (USA) Jewellery Mkting Co. LLC (USA) C( S )
Capitalizing on Value Chain Advantage Value Chain Advantage Maximum Value Creation in downstream Exports Sourcing rough & uncut diamonds uncut diamonds
Sourcing
Diamond Processing
Exports Manufacturing Gold Jewellery Diamond Jewellery Diamond Jewellery
Processing
o DTC sight‐holder position through promoter concern
o Three modern diamond processing facilities
o Enables Enables quality quality supply at efficient prices
o Additi Additionall facilites f ilit commenced in SEZ
Manufacturing o Six state–of‐the‐art facilities for Jewellery Manufacturing
International Retail Jewellery Branding
Domestic Retail
Branding & Retailing Branding & Retailing o Pioneers of branded jewellery in India o Excellent set of Excellent set of brands o Exhaustive sales & distribution networks
Market Trends and Market Trends and Outlook
Changing preferences of Indian Customer Yesterday
Today
Unbranded, From U b d d F Family Jeweller
Branded
Gold Jewellery
Diamond Studded Jewelleryy
Jewellery for Investment
Jewellery for Fashion
Market Potential
INDIA
Traditional Ethnic and Chunky designs
Fashionable, light weight and innovative designs
Marriage and Festival Season as Festival Season as peak seasons
“Wearability” and Gifts and Gifts demand through the year
Emerging market
Jewellery being sold on a per p piece basis
World’s third largest diamond jewelry market, growing swiftly growing swiftly ($5bn by 2013)
Jewellery sold on y commodity basis with labour charges Source: Published Information
India has the 2 India has the 2nd largest largest population and the largest youth population in the world
Growing economy One of the fastest growing economies in the world with 6% growth over the last decade
Understanding Indian Jewellery Market Indian Jewellery •
One of fastest growing jewelry markets globally with an annual growth rate of ~16%.
•
Domestic market size estimated at ~US$22bn with gold jewellery accounting for nearly 80% of total
•
D i t d by Dominated b unorganized i d sector t players, l accounting ti for f nearly l 90% off market k t
•
Organized retailing of branded jewelry increasingly gaining share –
•
Growing at double the pace of the overall jewellery market.
Traditional and emerging demand drivers: – Festivals & Special occasions – half of market volume comprises wedding jewellery dominated by the unorganized segment and local designs – Changing buyer perception of jewellery now seen as a fashion accessory & not just an investment option
Focus on Branded Jewellery Focus on Branded Jewellery Retail
Retail business – driving aggressive growth aggressive growth Jewellery India
Over all 50%+ of total Jewellery revenues of Gitanjali come from domestic market
Branded jewellery sales through channel partners.
Own stores and franchise stores
Wholesale and private label jewellery sales
Brands across all market segments. Multiple distribution platforms and l tf d presence in malls and shop‐in‐shop formats
Expansion of single and multi brand store network across th the country. t
Increasing supply to family jewellers. Launching various i aggregation initiatives.
• ~60% of the organized mall space in the country within jewellery category belongs to the Gitanjali Group • 50‐60% of advertisement spend on jewellery PAN India is done by Gitanjali
International
USA 130 stores through acquisition of Samuels and Samuels and Rogers.
Middle East Stores in partnership with leading jewellery chains like Joy chains like Joy Alukkas
Exports to other international markets
Growth to continue through through inorganic route and margins through Indian manufacturing support
To grow further through partnership partnership route and owned stores.
Distribution of jewellery in Europe Russia Europe, Russia, Far East, Australia, Other Asian Countries
Strong retail Expansion Plans in India Plans in India Continuous retail expansion plan intact for next 3 years Number of Exclusive Distributors
Number of Outlets (SIS + Retailers)
Number of Exclusive Exclusive Stores Number of Franchisee Franchisee Stores
~230
CAGR 20%
2009 - 2010 Actual
~2000
CAGR 26%
2009 - 2010 Actual
~ 185
CAGR 18%
~ 400
2012 - 2013 Projected
~ 4000
2012 - 2013 Projected
~300
25% of all Points of Sales (2400 in all) in India were added in FY 2009‐10 Primary focus of expansion through Franchise and Primar foc s of e pansion thro gh Franchise and Shop‐In‐Shop routes Revenue Share with property owner preferred mode of expansion for Exclusive stores Flagship stores being set up to establish brand presence as enablers for Franchise and SIS networks p
2009 - 2010 Actual
~215
CAGR 32%
2009 - 2010 Actual
2012 - 2013 Projected
~ 500
2012 - 2013 Projected
Present retail network occupies about 1 mn sq feet PAN India
Multiple Channels for Sales Growth Sales Growth
Sales through exclusive Distributor Network
o Exclusive distributor network for each brand to sell to jewellery to sell to jewellery retailers across the country o Once delivered, the distributor assumes the responsibility of selling responsibility of selling the product o Commission paid depends on the brand and sale value of the final product final product
Sales through Franchise Partners
o Franchise network spread across India for spread across India for Exclusive Branded Outlets (EBO) as well as Multi Branded Outlets (MBO) o D Dedicated teams for di t d t f recruiting franchise and servicing the same for different retail formats e.g. Gitanjali Jewels, Gili
Sales to Department Stores and Reputed Jewellery Retailers
o Large jewellery stores, shopping malls and h ll department stores • Shoppers Stop • Globus • Westside W t id • Gold Souk o Directly serviced by the Gitanjali Group
Sales through Retail Stores owned/ managed by the Group
o The retail operations of the group are classified the group are classified into three different formats • Retail Stores owned by the group
• Shop in shop outlets in department stores • Franchisee stores
Future Outlook: Emerging Retail Strategy Emerging Retail Strategy Emerging Retail Concept
Extension of retail and marketing expertise to leverage successful Indian and international brands to complement its product categories with other lifestyle products
Concept Overview
Opportunity of mid‐ sized organized retail i d i d t il venture in tier 2 and tier 3 cities
Critical Success Factors
Pull to drive in footfalls Advertising and marketing support Ad ti i d k ti t Competitive advantage for: Location Loyal customer segment Format (availability, accessibility, size, merchandising mix and layout) Presence of prominent brands Presence of prominent brands Experienced management team and trained staff
Existing 1 million sq ft retail space scalable up to 2 million sf ft stores in next 3 years Flexibility through various store sizes ranging from 1000 sq ft to 20,000 sq ft Located on high‐streets and in malls in upcoming towns and cities Product categories include jewelry, accessories, apparels, lifestyle products, cosmetics and perfumes Target customer segment are sec A and B Store layout and interiors designed by leading Indian design house and architects Revenue sharing model for national and international brands Opportunity in midsized segment with premium branded categories Tier 2 and tier 3 cities with significant demographics having discretionary income Ti 2 d ti 3 iti ith i ifi t d hi h i di ti i Organized retail as a whole expected to grow at 25‐30% in next 5 years Large branded players are likely to dominate all categories and formats
Franchise Model Franchise Model: Associated franchisees are from varied backgrounds and have different aspirations Gitanjali provides training and business know‐how tailored to industry Franchisee buys out stock along with partial credit Franchisee agreement typically for a period of 3‐6 years with performance guarantee clause A number of services and support to franchisee partners pp p Investment and ROI: Initial investment varies across brands and outlets starting from Rs. 30 mn upwards to Rs. 25 cr. 25 cr. Multiple product lines with different ranges maintained to offer choice to customers ROI for mature franchisee outlets can vary from 15% to 25% depending on format, location, investment and product categories
Network expansion through focused franchise portfolio
Rapid Expansion through Revenue Sharing Model Revenue Sharing Model • Revenue Sharing Model growing quickly in popularity • Win – Win arrangement for both developers and retailers • Benefits for Gitanjali Group • Scalability through lower initial investments Scalability through lower initial investments • Lower cost of operations • Expansion of retail network without proportionate fixed cost increase • Shared Risk and Reward • Performance based business model • Long term contracts for reliability and continuity of operations • Leveraging branding capability to secure assured footfalls
Strategy: Leveraging Branding Strength Branding Strength Opportunities
Strengths
Expansion into emerging markets
First mover advantage Fully integrated supply chain DTC Sight holder status providing reliable source of diamond supply
Branding Branding in Emerging Markets
Market access and brand support Unique design skills and Technology
Increased focus on branded jewellery in India jewellery in India Increased focus on non‐Metro market Expansion through revenue sharing and franchisee models h i df hi d l Foray into other luxury categories
Vast distribution and retail network
Challenges Large presence of unorganized sector Emergence of low cost and regional brands Sustaining high growth rate in supply and Increasing gold and diamond prices
Sustained Financial Performance
Strong Revenue Growth FY 2009 10 FY 2009‐10 In Rs. Crores
•
Rapid expansion
Revenue CAGR 16%
– Total Total revenue grew by 28% to revenue grew by 28% to Rs.6,527 crores
•
Jewelry and retailing lead with faster sales growth – Jewelry segment revenue grew by 35%, accounting for 56% of total revenue – Diamond segment revenue grew by Diamond segment revenue grew by 21%
•
Indian market gaining significance with growing retail footprint – India revenues grew by 38% to Rs.2,605 crores – Exports and overseas revenues grew by 22% to Rs.3,923 crores by 22% to Rs.3,923 crores
6,527.63 5,088.88
4,831.74
2,891.30
2,394.98
2,668.09
3 628 44 3,628.44 2,692.76 2,163.64
‐
7.90
1.13
FY 2007‐08 FY 2007 08 Others
FY 2008‐09 FY 2008 09 Jewelry
FY 2009‐10 FY 2009 10 Diamonds 19
Quarterly performance Q4 FY 2009 10 Q4 FY 2009‐10 In Rs. Crores
•
Growth impacted by market weakness in Q4 FY 2009‐10 weakness in Q4 FY 2009‐10 – Total revenue grew by 9.4% to Rs.1,602 crores – Jewelry segment revenue grew by 16%, accounting for 58% of total revenue – Diamond segment revenue grew by 1%, accounting for 42% of total revenue
•
1,601.50
1 467 55 1,467.55
929.13
801.64
Volatility in gold prices had an impact on India demand for jewelry – IIndia revenues grew by 2.6% to di b 2 6% Rs.623 crores, reflecting market weakness – Exports and overseas revenues grew by 14% to Rs.982 crores
665 90 665.90
672 37 672.37
Q4 FY09 Q4 FY09
Q4 FY10 Q4 FY10 Diamonds
Jewelry 20
EBIT Growth Q4 FY 2009 10 Q4 FY 2009‐10 In Rs. Crores
• •
EBIT grew by 55% to Rs.395.79 crores EBIT / Sales ratio improved to 6 06% in FY EBIT / Sales ratio improved to 6.06% in FY 2009‐10 as compared to 4.94% in FY 2008‐09 –
–
•
Return from Jewelry segment (before adjustment) reduced to 7 5% in FY 2009‐ adjustment) reduced to 7.5% in FY 2009 10 from 8.1% in FY 2008‐09 due to gold price volatility Return on Diamond segment (before adjustment) improved to 3.2% in FY 2009‐ 10 from 2.6% in FY 2008‐09
Control over manpower and operating costs contributed to improvement in operational improvement in operational performance
Healthy EBIT growth 395.79 28.45
251.60
272.45 219 40 219.40
102 31 102.31
71.55 ‐15.81 ‐23.54
‐7.41
FY 2009
FY 2010
Diamonds
Jewelry
Others
Unallocable 21
Geographic performance summary •
Revenue contribution from India growing faster than that from international business international business – Growth of 38.3% in India vs 22.4% overseas – Will provide the bedrock of future growth
•
Jewelry sales in India grew by 61.3% over FY 2008 Jewelry sales in India grew by 61 3% over FY 2008‐09 09 providing major providing major contribution to revenue growth – Strong growth as a result of retail channel expansion and branding efforts In Rs. Crores
Business
FY 2009‐10 India
FY 2008‐09 Overseas
Diamonds
740.4
2,150.9
Growth over FY09
1.8%
28.9%
1,864.6
1,771.7
61.3%
15.2%
2,605.0
3,922.6
Jewelry Growth over FY09 Total
India
Overseas 727.0
1,667.9
1,156.0
1,537.7
1,883.0
3,205.6 22
Profit & Loss account FY 2009 10 FY 2009‐10 In Rs. Crores
Particulars
FY 2009‐10 (Audited)
FY 2008‐09 (Audited)
Total
Total
Sales
6,527.6
5,088.9
Raw material cost
5,525.3
4,238.3
Gross Profit Gross Profit
1,002.4
850.6
Gross profit margin
15.4%
16.7%
Manpower costs
209.1
216.6
2.6
2.24
Operating expenses
354.1
346.4
EBITDA
441.7
289.9
EBITDA margin EBITDA margin
6.8%
5.7%
Depreciation
44.5
33.6
397.17
256.3
6 1% 6.1%
5 0% 5.0%
Other operating income
EBIT EBIT margin EBIT margin
23
Profit & Loss account FY 2009 10 (contd.) FY 2009‐10 ( d) In Rs. Crores
Particulars EBIT
FY 2009‐10 (Audited)
FY 2008‐09 (Audited)
Total
Total 397.17
256.3
EBIT margin
6.1%
5.0%
I t Interest t
172 4 172.4
97 8 97.8
‐‐
‐‐
224.7
158.5
23 2 23.2
3 18 3.18
‐‐
‐‐
1.4
4.7
200 2 200.2
150 6 150.6
EPS (Rs.10 FV)
23.7
17.7
Diluted EPS
20.4
15.3
Exceptional items PBT Taxes (net of DTA) Taxes (net of DTA) Share in Associates’ PAT Minority share in (Profit) / Losses PAT
24
Gradual improvement in W ki Working capital it l In Rs. Crores
•
Reduction in inventory holding period (as % of cost) i d( % f ) – Improvement in jewelry offtake from newly established stores – Will improve steadily as retail brands Will improve steadily as retail brands gain mass
•
Reduction in receivables holding period – Improvement in global liquidity scenario – Will improve steadily with increasing proportion of retail jewelry sales proportion of retail jewelry sales
•
Net operating working capital Inventories
31st March 2010
31st March 2009
2,079.4
1,975.8
37.6%
46.6%
135
168
3,250.8
2,759.6
49.8%
54.2%
179
195
Current liabilities
(1,364.5)
(1,671.9)
Payables / COGS
(24.7%)
(39.4%)
(89)
(142)
Inventories / COGS Inventory days Receivables Receivables / Sales Receivables days
Payables days Payables days
Payables holding period shortened – Consequence of improved cash flows Consequence of improved cash flows
25
Financial leverage •
Major part of leverage relates to working capital – Increase in proportion to sales growth Increase in proportion to sales growth
• •
NCDs placed in May 2009 to finance core working capital FCCBs (issued in 2006) maturing Nov 2011 for finance acquisitions and capex Debt facility As at 31 March 2010 As at 31 March 2009 st
Working capital loans
st
2,082.7
1,659.2
NCD
125.0
‐‐
FCCB
331.6
374.7
8.9
12.8
2,548.1
2,046.6
238.6
297.2
Net debt (A‐B)
2,309.5
1,749.4
N t Net worth th
2 216 5 2,216.5
2 077 5 2,077.5
1.04
0.84
Other loans Gross debt (A) Cash and cash equivalents (B)
Net debt / Equity ratio
26
Gitanjali Group: Key Management Team Key Management Team Mr. Mehul Choksi Chairman and Managing Director o Founded Gitanjali Gems in 1986 o Has been a visionary in identifying and executing various initiatives including branding and retailing o IInstrumental in launching several successful t t li l hi l f l brands o Pioneer in corporatising the jewellery industry in India Priti P iti M. Choksi M Ch k i Maunfacturing
Nehal Modi N h l M di International Business
Nishit Mehta Ni hit M ht International Business
S il V Sunil Varma Group CFO
Deepak Gandhi D k G dhi Samuels & Rogers
Kaushik Shah CFO: Jewellery Division
Rahul Vira CEO: Gili
Amrish Masalia CEO: Nakshatra
Santosh Srivastava CEO: Gitanjali Jewellery Retail
R.K. Menon CEO: D’Damas
Pankaj Shah CEO: Asmi
Jaison S. Panakkal CEO – Fantasy
Shekhar Wadke COO: Asmi – B2C
Sailesh Goyal President: Gitanjali Infratech
Devashish Dutta CEO: Gitanjali Lifestyle
Sharad Mehta Diamond Manufacturing
Vikram Singh Jewellery Manufacturing
Sudhir Mehta Sourcing & Manufacturing
Nirav Adalja President: Gitanjali Lifestyle
Jaydeep Banarjee COO: MGPL
Aditya Shastri Advertising & Marketing
C. Subramaniam Gr. President: HR
R. Rao Head: Legal
Sanjay Banarjee President: Luxury Business
Pankhuri Warange Company Secretary
Nishit Dave Sr. VP: Investor Relations
P. K. Dutta Gitanjali Ventures DMCC
Anand Kumar Sr. VP: Corp. Finance
Abhishek Gupta Corporate Strategy
Niyat Parekh CEO: Diya
Infratech and Real Estate
Unlocking hidden value Hyderabad SEZ: World Class Manufacturing Capacity
Upcoming Infratech Projects Upcoming Infratech
Borivali, Mumbai ,
~330,000 sq ft of Residential P j tt b l Project to be launch in FY 2010‐11. h i FY 2010 11
Hyderabad Gems SEZ Andhra SEZ, Andhra Pradesh
Rental Facilities of ~200,000 sq ft to be leased in FY 2010‐11.
Andheri MIDC, Mumbai
Commercial Premises ~100,000 sq ft to be developed in FY 2010‐11 ft to be developed in FY 2010 11 for rental and outright sale.
Gitanjali Infratech will unlock values from opportunistic investments in Infratech Gitanjali Infratech will unlock values from opportunistic investments in Infratech in the Financial Year in the Financial Year 2010‐11 and continue to expand in the next 3 years.
THANK YOU
Corporate Office: g Towers, 1st Floor, 6,B Wing, Laxmi Bandra Kurla Complex, Mumbai 400 051.
Investor contact:
[email protected] www.gitanjaligroup.com
