Jewellery firms proving to be gem of stocks

Rising local demand for branded jewellery and overseas demand bring back the sheen.

Gems and jewellery stocks are glittering on the bourses once again. Over the past one week, major stocks listed on the Bombay Stock Exchange gained an average 11.23 per cent.

Rising demand for branded jewellery in the domestic market coupled with strong overseas demand have improved the prospects for the sector.

The top gainer was Flawless Diamond, which gained 38.44 per cent from Rs 21.02 to Rs 29.10 over the week. Other major gainers were Shyam Star Gems (29 per cent), Golkunds Diamonds and Jewellery (25 per cent) and Shrenuj & Co (22 per cent).

The Su-Raj Diamonds scrip went up above 8 per cent on Monday after it announced the opening of two new manufacturing units in Kochi and Kolkata, which will cater to the jewellery segment of the company. The company has overseas branches at New York, Tokyo, London, Bangkok, Hong Kong and Singapore.

The average appreciation in stock prices of this sector in the past one year is well above a staggering 250 per cent as of by end of August.

Interestingly, foreign institutional investor (FII) holdings in some companies have moved up high in the same period. FII holding in SB&T International has gone above 40 per cent, that in Vaibhav gems accounts for about 20 per cent, Rajesh Exports up to 11 per cent and Goldiam International up to 5 per cent.

While SB&T International scrip went up above 80 per cent, the Goldiam International scrip went up by about 200 per cent, Rajesh Exports went up about 350 per cent and Vaibhav Gems achieved an appreciation of about 770 per cent in the same period.

The major FIIs, which have invested in this sector are GMO capital, Goldman Sachs, Merril Lynch from US and Lloyd George from Hong Kong.

"FIIs are slowly shifting their focus to niche areas where India has a stronghold. The gem and jewellery sector is one which has an excellent growth rate, producing big revenue. Moreover, we have the necessary skilled man power to excel over this sector in the global scenario," said an analyst with a major broking firm.

Other major gainers in the sector were Golkunda Diamonds and Jewellery, up 564.25 per cent from Rs 4 to Rs 26.57, Silversmith India up 474 per cent form Rs 9.30 to Rs 53.35 per cent. Flawless Diamond, which went up 441 per cent from Rs 4 to Rs 21.63 during this period, has further appreciated 14 per cent in this week's trade.

Rajesh Exports, which has a presence in the US, Singapore, Malaysia and most of Middle East, including Dubai, is all set to foray into the retail sector. The company plans to open 100 retail outlets this year in south India.

According to Rajesh Mehta, chairman of Rajesh Exports, the Indian gem and jewellery segment is poised for an enormous growth in the near future.

"The high potential branded jewellery sector is looking forward to a giant market. We have launched a series of new products under the brand Shubh Jewellers both for the domestic and international market. We are the world's single largest manufaturer and expoter of gem and jewellery," he said.

The sector contributes to about 18 per cent of India's total exports. Exports have gone up from a meagre $28 million in the late sixties to $15 billion in 2004-2005. The industry had grown at an average of more than 30 per cent a year.

According to recent study by Mckinsey, the branded jewellery sector is expected to grow 40 per cent a year to Rs 10,000 crore by 2010.