After a successful turnaround in US operations, Gitanjali Gems, India’ s leading branded jewellery producer and retailer, plans to enter the rapidly growing Chinese market. The company is setting up a manufacturing base and looking for bargains in the European market, says Mehul Choksi, CMD, during an interaction with Dilip Kumar Jha. Edited excerpts :
Gitanjali Gems’ US operation turned profitable for the first time in four years. What is the road ahead?
Our US business contributes around 13 per cent or $250 million of our annual turnover. The core business, jewellery retailing, of US operations turned profitable for the first time in four years. The supply chain management, like in India, has however been profitable since we entered the US market with the acquisition of Samual Inc in 2006. American consumers are gradually coming to the market for buying jewellery. Going forward, business in America is likely to be one of our finest assets.
You acquired Italian jewellery chain Giantti last year. Any more acquisitions in the pipeline?
We need to see that economic growth in the Western markets is consistent before taking a call on expansion of the US business or acquiring another retail chain in emerging European markets, unless something very cheap comes our way. We are bargain buyers. We may consider opportunistic offers and not anything and everything open for sale. For Giantti, delivering results would take a few more months. But, I think, we are on the right track.
Gitanjali Group’s restructuring is long pend ing. Any plans?
The restructuring process is already on. We have merged many companies already in the last one month. Now, we are all set to finalise restructuring in the next one-and-a-half months.
You were also planning to get PE investors.
I cannot comment on PE investment at this moment as they (PE investors) are looking at the result of restructuring for the final valuation of the company. Along with restructuring, we have also given valuation of our brands. We will wait for any further such investment and will not decide in haste.
You were also talking about 25 per cent divestment in each of your jewellery brands. Will it happen now?
We are restructuring our company to evaluate the best possible options to unlock the value and raise funds. We will look at everything together, because the company has very rich property in the form of its brands. Each of our brands is aggressively selling in the market.
What are the factors that helped the growth process?
Today, jewellery is considered in India for lifestyle and investment. Jewellery retailing has gradually shifted from the traditional market to modern organised way of marketing. We, therefore, are opening more and more shops for our brand. Most important, the overall jewellery market has expanded between 12-15 per cent. Value additions compounded to about 30 per cent of our overall growth. We have grown a staggering 77.3 per cent and 44.9 per cent in net profit and sales at Rs 354.8 crore and Rs 9,456 crore respectively.
You have been in China for five years. What are your plans?
We supported some of the leading jewellery retail chains in China in the last five years. Now, we are planning to enter the Chinese market with our own manufacturing unit and retail chains. Gitanjali is in the process of setting up a manufacturing facility in China at an initial investment of Rs 200 crore. We are planning to adopt Indian models for retailing our business thereby setting up both franchisees and company stores. In China, duty differential is similar between locally produced and imported jewellery items.
How do you see the domestic jewellery market growing?
The domestic jewellery retail has seen a consistent growth of 15-20 per cent year-on-year. This year was special because of the increase in value of raw materials like diamond and gold. The industry will continue to grow at over 20 per cent in the next few years.
Your plans for the retail segment?
We are opening a mega retail store – Jewelsouk – at the international airport by August, spread over 12,000 sq ft of built-up area. The store will house all products from lifestyle to luxury items including jewellery. This is going to be one of our flagship stores under Gitanjali Lifestyle. Later, Jewelsouk will be expanded to all retail chains of Pantaloon Group and other department stores.
