Case Study On Gitanjali

Company Profile
Established in 1966,by Mehul Choksi,the Gitanjali group

was one of the earliest diamond houses in India. The company was incorporated on August 21,1986,as a private limited company and subsequently converted into Gitanjali Gems Limited. Their operation including sourcing of rough diamonds from primary and secondary source suppliers in the international market, cutting and polishing the rough diamonds for exports to international markets and the manufacture and sale of diamond and other jewelry through retail operation in India as well as in international markets. Gitanjali is one of the largest and fastest growing jewellery businesses in the world. The product portfolio consists of diamonds, diamond and gold jewellery,and accessories across several brands of Gili, Asmi, DDamas, Maya,Diya, Sangini, and Nakshatra. Pioneer in B2B marketing of jewellery in India

 Having received over 50 national and council awards from the ministry

of commerce for outstanding exports,it becomes diamond exporting companies of India.

one of the largest

Sophisticated and scalable diamond and jewellery manufacturing facilities Operations span the globe, all the way from USA, UK, Belgium, Italy

and the Middle East to Thailand, South East Asia China, and Japan.
Offers jewellery in diverse styles: traditional, international classic, and

casual. For consumers of all age groups, tastes and budgets. With a growing hamper of brands, some already global, and each targeted to specific consumer and market segments.

 In under three decades, it became a DTC Sightholder, and one of

Indias largest manufacturers, retailers and exporters of diamonds and a global frontrunner.
Having brought diamonds and diamond-studded jewellery within reach

of consumers previously unable to afford them, the Group offers a wide variety of products in classic, ethnic and modern patterns, suitable for consumers at differing price brackets, in line with market demand in various markets, in India and abroad.
Star Trading House status from the Government of India for its export

performance
Nominated Agency status for direct import of gold First to produce the worlds smallest heart shaped diamond (0.03 carat) Developed around 25 patented facet patterns Uses CAD and CAM, the latest technology, for creating designs Received more than 50 awards for retail excellence, brand building, and

export performance

COMPANYS PERFORMANCE
Consolidated revenues grew 45% from Rs. 65,276.34 millions in 2009-

10 to Rs. 94,564.02 millions in 2010-11. The revenue growth has been the result of increased gold and diamond jewellery demand.
Gold and Diamond Jewellery segment revenues grew from Rs.

36,333.18 millions in 2009-10 to Rs. 50,149.69 millions in 2010-11. The Indian business grew 66% in 2010-11, and the international business grew by 9% during the year.
The diamond segment grew from Rs. 31,976.11 millions in 2009-10 to

Rs. 44,202.06 millions in 2010-11. The Indian business grew 3% in 2010-11, and the international business grew by 70% during the year.
Basic Earnings per share increased from Rs. 23.73 in 2009-10 to Rs.

41.81 in 2010-11.
The Reserves & Surplus grew from Rs. 21,122.47 millions in 2009-10 to

Rs. 24,447.81 millions in 2010-11.

Consolidated PAT grew 77% and PBT grew 71% during the year. PBT

grew from Rs. 2,247.39 millions in 2009-10 to Rs. 3,832.77 millions in 2010-11. PAT grew from Rs. 2,001.71 millions in 2009-10 to Rs. 3,548.11 millions in 2010-11.

Industry analysis

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.

 The Gems and Jewellery sector, being highly export oriented, is

a significant contributor to Indias foreign exchange earnings. Exports from this sector constituted around 17% of the total exports from India. India is also one of the largest consumers of gold in the world, as it accounts for more than 20% of the world gold consumption. The share of gold jewellery in India's net exports of gems and jewellery increased from merely 6.80% in 1990-91 to 16.50% in FY03 and to 32.47% in FY09 Contributed 16.67% to Indias total merchandise exports in 201011. USA was the largest consumer of retail diamond jewelry, accounting for approximately 48% of world diamond jewellery consumption.india was the largest supplier to the USA in the lower sized diamond segment. India is also the top supplier to japan,the second largest diamond

 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 Unbranded Silver & Gold jewellery Investment Traditional design Today Branded Gold & Diamond jewellery Investment + Fashion Fashionable & innovative design

Marriage & festival is peak season Wearability and gifts

Jewellery sold on commodity basis Jewellery being sold on a per piece with labour charges basis

Michael Porters Five Force Model for Jewellery Industry

Inter-Firm Rivalry
Diamond jewelers
International rivals Such as, China

High

Two types of rivalry. (1) Inside India & (2) Outside India. Large presence of unorganized sector. 0.2 Million Gold jewelers and over 8,000

Threat from producing nation like S.A. & Russia. Competitors included independent jewelry stores, retail jewelry, online retailers

that sold jewelry, departmental stores, mass retailers, wholesale diamond traders.etc..
Some of the regional players included tribhvandas bhimji zavery

(mumbai),B.C Sen and P.C Chandra (kolkata),C Krishnanath Shetty (banglore).

Bargaining Power of Suppliers Medium

In jewellery industry the suppliers are S.A., UAE,

Australia, US, Congo, Botswana, Russia,.

Few Alternatives of cutting & polishing.

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

High capital requirement.

EXIM policy & governments rules-regulations are

high
Skilled manpower is essential Advanced technology required Long term relationships required to have access to

adequate supplies of rough diamonds.

ENVIRONMENTAL THREATS AND OPPORTUNITY PROFILE (ETOP)

Market Environment
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 111 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.

Technological Environment
The company is using latest technology in processing means jewellery

manufacturing & also in designing. Gitanjali has expertise in cutting, polishing the diamonds and in designing the jewelry (specifically in small design). Gitanjali Gems achieved achieved an international first by performing the heart cut for diamonds and making them available in affordable jewelry at prices between Rs.1000 and Rs.6,000.the cut for small diamond was developed by Gitanjali Lase House(GLH).
Sources Of Technology: High research and development facilities Reduce Quality problem.

Regulatory Environment
Since the diamond industry is one of the key contributors to the

foreign exchange of our country the government has played a very supportive role to this sector. Incentives like Diamond Dollar Account (DDA) and SEZ packages and lowering of import duties are some examples. The government is always trying to provide a helping hand for the promotion of the diamond industry. The government had also increased the pre-shipment export credit period (from 90 to 180 days) and post-shipment export credit period (from 180 to 270 days) to ease the longer inventory cycles faced by the sector. The government has time and again taken various measures such as: de-licensing gold imports; reducing the barriers to imported raw materials; lowering the customs and excise duties to facilitate imports and for enhancing the competitiveness of the sector.

Political Environment
Politics had no great role in the industry

political environment had not much impact on

the business of Gitanjali.

supplier Environment
Small numbers of diamond mining firms

controlled majority of the worlds rough diamond supply, any decision made by such firms to restrict the supply of rough diamond could adversely affect operation. Fluctuation in the prices of precious metals and semi precious stones.

Socio-cultural Environment
Worlds largest democracy.

Social factors can affect a business as tastes

and prferences can change.

Seasonal Demand: Festivals & Auspicious Days

Uses of jewelry: wealth, status

International Environment
The onset of global economic recession, and the

consequent slowdown in the global as well as the domestic economy, the sector had been severely affected. The raw materials required for manufacturing gems and jewellery are scarcely produced in India and hence, the sector heavily depends on imports. The manufacturers have to endure the risk of exchange rate and global commodity price volatility, which affects the profitability of the sector to a large extent. Exchange Rate Volatility

Opportunities and Threats

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 of supply from producing nations like S.A. & Russia.

CSFs
Probability Impact on business of impact
High Medium Low

High

Market,

International,

Regulatory,

Medium

Technological, Quality ___________

Socio-cultural, Economic,

___________

Low

Political