Rajesh Exports hunts for gold

Manufacturer-exporter of gold jewelry Rajesh Exports, in a bid to up its margins is intensifying its integration efforts. On the back-end, the company is close to acquiring gold mines in Australia. It also plans to reach out to customers by setting up a retail chain.

Next fiscal, the Rs 3,000 crore company aims to source at least 40 per cent of the 50 tonne or Rs 3,000 crore worth of its annual requirement from its mines.

It plans to roll out its retail stores across the four southern states (that account for 50 per cent of the Rs 75,000 crore domestic jewelry mart) over the next 18 months. Chairman Rajesh Mehta said the acquisition of mines will insulate the company from the fluctuating gold market.

While he did not to comment on the deal, observers said that an alliance will need an investment of Rs 50 crore. A buyout of a 10-tonne mine will cost Rs 150 crore, while a 30-year lease will need Rs 15 crore annually.

The company has reserves of Rs 125 crore but is still mulling bringing in more equity as it seeks to cap the debt component. In 1995, it raised Rs 10 crore from a 20 lakh share issue, representing 25 per cent of its equity.

As a result of the integration, the company's margins will improve to 4 per cent from 1 per cent now. In fact, the control over gold sourcing alone is expected to increase margins by 2 per cent. Currently, the company sources from mines in Australia and South Africa.

Mehta added that the company will either enter an alliance with a supplier or lease mines. Parleys are on to ink a deal where Rajesh Exports will hold a stake in the mine, while the supplier will use Rajesh Exports' capacity. "We are awaiting RBI clarification on gold imports," he said.