Mehul Choksi | Growth is coming from small-town India

Mehul Choksi | Growth is coming from small-town India

New Delhi: Gitanjali Group, the Rs6,500 crore diamond jewellery company that pioneered the concept of branded stores in India, is looking for new retail formats. With over 15 leading brands, including Asmi, Nakshatra, D’Damas and Gili in its portfolio, the company’s chairman and managing director Mehul Choksi says he will continue creating brands wherever the need exists. The hands-on promoter spoke in an interview about where he sees growth coming from and experimenting with new formats. Edited excerpts:

Why are you diversifying from jewellery into other luxury product categories such as watches (Morellato and Chronotech) and apparel?

That’s just to give a new format to selling jewellery. We put our jewellery everywhere we sell our other brands. If you go to a departmental store with apparel and jewellery, it gives it a friendlier feel. There are many more formats we are looking at. Jewellery is the core business. I don’t expect revenue from other businesses to be more than 10%; 95% of my own investment will be in the jewellery business. In modern retail, we have 75% of the jewellery market.

What kind of new formats are you exploring?

We are rolling out another format with designers. The first project is with fashion designer J.J. Valaya. We are making him a jewellery designer. The range will be called JJ Valaya Fine Jewellery. This has been on my mind for a long time because designers play an important role in the life of a woman. Women believe that designers are gods who can make them look beautiful. I feel if they can advise on jewellery, it can be a big category.

When will you launch the new range?

In the next couple of months in the JJ Valaya stores. He has about 10 stores. It will also be launched in all the good boutiques in the country.

How many designers are you looking at?

Two or three, to begin with.

Why Valaya?

Bridal is the biggest category in jewellery—he is very good with bridal wear. Our philosophy is that whether it is a Rs500 jewellery piece or something worth Rs5 crore, the consumer should think about Gitanjali.

We have created brands across price points including those in pearl and steel. For these we are tying up with saree stores such as Nalli and Chhabra 555.

We are available in nearly 5,000 outlets today. But I feel I could do 20 times more.

Where is growth for jewellery coming from?

It’s coming from places like Berhampur and Bhubaneswar in Orissa, basically from all across India’s small towns.

But you have also got foreign luxury jewellery brands to India. Don’t they affect your business?

We have Tiffany, Rosato, Stefan Hafner. We will bring Damiani from Italy. These are completely on the luxury side and don’t affect our business. We believe in catering to all segments.

Do Indians accept foreign designs?

Absolutely. Did you expect Chanel dresses to sell in India? This year we have seen the highest growth in international womenswear brands.

How can you say that?

This year we added a few hundred extra parties with the Indian Premier League (laughs) and we sponsored some of those. I saw the trend in the IPL parties. It is a new culture. Two years ago, at a luxury conference in Paris, I advised Chanel and said that unless you come out with an Indian edition of your brand, it will never work. Chanel said this is absurd. We will follow what we are. And now I see this…

You have retail chains abroad. Are they making money?

Three years ago, we acquired the speciality retailer Samuels Jewelers and then (jewellery chain) Rogers in Ohio and clubbed the two under one company. The operation is still not profitable but we will break even soon. However, we are already making money on the value chain. Earlier, 100% merchandise at Samuels was outsourced. Today 85% is our own products.

We also have retail chains in China, Japan and West Asia. We are a global retail player. Of our Rs6,500 crore business (including exports), nearly 55% is jewellery. The rest is diamonds. We are basically a diamond company.

The return on diamonds is much lower than on gold. Is the diamond business still growing?

In diamonds, the margins are good for us. In gold, you pay 15-20% premium on raw material. In diamonds, you pay—maybe 50%. But if you knock that profit off, diamonds are still cashable.

Have gold prices helped in pushing diamond jewellery?

Very much so. In the last two years, for us the growth has been more than 50%, while the market has grown more than 25%. If I am not wrong, jewellery is the third largest category after oil and food at Rs300,000 crore.

Have you evaluated your brands? There are so many of them.

Last year we evaluated four of our brands. We were not very happy with the valuation, which was about Rs1,500 crore. I feel all our brands put together would be worth Rs5,000 crore. Sales-wise, each brand is growing at 50% a year.

But creating and managing so many brands is difficult.

It’s a new science. We make every (piece of) jewellery aspirational. We enter a space where we see an opportunity or a vacuum. For instance, if we see a gap in the kangan (bangle) category, we may launch a brand there. Gradually, each brand turns into a retail chain.

But what is the brand differentiator? Positioning or quality?

Each one has a character. It is positioning. The quality of the diamond is not what we go by. The declaration (of quality) is important. But quality can be a differentiator if we launch something very clean.

What was the effect of recession on the business?

Worldwide, retail saw de-growth of 10%. The wholesale business went down by 40-45%. This year, it has bounced back and there is great demand. The prices of diamonds have increased by 30-35% and the price of gold has increased by 40%.

What do you do in your free time?

I like the sea and take the yacht in Mumbai. I like to travel. I go to Italy three-four times a year. There is something about Italy—the food, clothing, styling. They are a cut above.