Mumbai: Jewellery retailer Gitanjali Gems Ltd, which owns brands such as Asmi, D’damas, Nakshatra and Gili, plans to double the number of its retail stores in India and overseas from 5,000 to 10,000 in the next two years, a top company executive said.
The expansion plan follows its efforts at consolidating its business over the past three years and changing its model to focus on diamond jewellery instead of gold and on exports as the domestic business environment remains challenging.
In 2011-12, gold and diamond fetched 60% and 40%, respectively, of Geetanjali’s revenue. By 2015-16, the contribution had reversed, with diamonds fetching 70% and gold 30%.
Moreover, India, which accounted for a majority of its revenue at 65% in 2011-12, now accounts for just 35%. Exports accounted for 65% of its revenue in 2015-16.
“The real highlight for the past three years was restructuring of the company, innovation in product lines, increasing capacities, moving from gold to diamonds and domestic to export,” said Mehul Choksi, chairman and managing director, Gitanjali Gems. He said the firm has increased its capacity to become the world’s largest manufacturing company in jewellery retail and simplified its operating structure to bring down costs.
Since 2012-13, Gitanjali has lost 60.61% of its market cap from Rs5,453.96 crore on 5 March 2013 to Rs333.43 crore on 5 April 2016. Its net profit declined from Rs591.69 crore to Rs133.24 crore and revenue dropped 5.21% from Rs16,418.50 crore to Rs13,984.49 crore in fiscal 2016. “It will take us another two years to surpass Rs17,000 crore in top line,” said Choksi.
In the last one year, it has also merged about 9-10 different subsidiaries to have four large companies. In June, it merged Gitanjali Exports Corp. Ltd, a wholly owned subsidiary, with itself. In July, it merged brands Asmi Jewellery India Ltd and Spectrum Jewellery Ltd under Nakshatra Brands Ltd, which will now represent its brands business of Asmi, Sangini, Nizam and Parineeta. The third company, Gili India Ltd, will look at the retail and lifestyle business, merging companies such as Maya Retail Ltd, Gitanjali Lifestyle Ltd and Gitanjali Jewellery Retail Ltd with itself. The fourth company, Aston Luxury Group, is the holding company for its international operations.
The company has also separated distribution and franchising and company-owned retail stores. Nakshatra Brands will be the front for the franchise business, whereas expansion of company-operated retail stores will happen under Gili. “This will bring down manpower costs and also allow us to look at channel-wise marketing rather than each brand doing separate franchising and marketing,” said Choksi.
The company has also moved out of the department store business under Maya which it started in 2009 and is focusing instead on extensions for brands such as Gili and Asmi, where it will look at launching its own clothing line, eyewear and pens in the next few months.
To be sure, the market still remains challenging. In 2015-16, the gold and diamond jewellery business was down by 10-15%. Even the first quarter of fiscal 2017 was depressed as jewellers went on a 45-day strike to protest against the levy of a 1% excise duty, said Sreedhar G.V., chairman, All India Gems and Jewellery Trade Federation.
However, for the quarter-ending June, Gitanjali’s net profit increased 297.98% to Rs57.31 crore from Rs14.40. Income from operations increased 30.41% to Rs3,710.43 from Rs2,845.10 a year ago.