Goes slow on six other SEZs.
Gitanjali Gems (GGL), an integrated diamond jewellery manufacturer, has scrapped its plan to set up a special economic zone (SEZ) in Nanded, Maharashtra, because of the project’s unviability.
The company has also decided to go slow on six (three each in Maharashtra and Gujarat) other SEZs projects in view of lower demand for jewellery items across the world.
Confirming the development, Mehul Choksi, chairman of the BSE-listed jewellery maker, said, “It being away from both the major domestic consumption centre and the sea and air ports, the SEZ project in Nanded would not be viable. Therefore, we decided not to go ahead with this project.”
GGL that sells jewellery under four leading brands in India including Gili, Nakshatra, Asmi and D’Damas, in January 2008, had announced to set up five SEZs including one in Nanded. Other two projects in Maharashtra at Nasik and Nagpur have also been put on the backburner.
Another three SEZ projects in Gujarat at Ahmedabad, Surat and Vadodara are also going slow. However, GGL is in talks with the Gujarat government for land acquisition, which Choksi hopes to be cleared within 2-3 months.
“We have developed 500,000 square feet of area under Hyderabad SEZ in Phase - I at an investment of Rs 250 crore while Phase - II entailing an expenditure of another Rs 200 crore will build up an area of one million sq feet. Phase - II of our first SEZ is proposed to be completed in one-and-half- a-year,” Choksi added.
The first phase of Hyderabad SEZ has provided job to around 3,000 skilled and unskilled workers in the current slackening economic environment.
GGL’s SEZ at Panvel in Maharashtra is however on track, with the company already acquiring 40 acres of land.
Other than the land cost, which has quadrupled in the last two years, lower demand of gold and diamond jewellery in the international market is hitting GGL’s investment plan. We will take a call once the market picks up, said Choksi.
“Developing SEZ is still a good business vehicle to drive profitability growth in jewellery segment as cost of input in this zone becomes cheaper by up to 20-25 per cent compared to outside the zone. With a margin of up to 30 per cent depending upon the size and type of business, business in SEZ offers fat margin compared to units outside the economic zones.”
Exports of cut and polished diamonds coupled with sells of jewellery through its retail chains in the US contributes about 55 per cent of the annual sales of the company today from over 80 per cent two years ago. The US retail jewellery sales alone contributes about 13 per cent of the company’s sales which is estimated to decline 15 per cent this year on US economic meltdown.