Shree Ganesh Jewellery – Exports Build up

Shree Ganesh Jewellery – Exports Build up

Shree Ganesh Jewellery - Latest Results

(in Cr.)
Sep-11
Jun-11
FY10-11
Revenue
1,522.42
2,406.34
5,254.30
Net Profit
42.62
69.16
263.85
EPS
7.02
11.4
43.92
Cash EPS
8.03
12.07
44.47
OPM %
5.04
4.06
6.53
NPM %
2.8
2.87
5.02
Shree Ganesh Jewellery - Latest Results

Shree Ganesh Jewellery - Share Price Movement

 
 
 
Weekly H/L
93.8
87.55
Monthly H/L
121.5
85.5
52 Weeks H/L
286
85.5
 
( 28 Jun 11 )
( 20 Dec 11 )
Delivery / Var+ELM %
57.38
16.1
 
 
 
Shree Ganesh Jewellery - Share Price Movement

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Shree Ganesh Jewellery – Exports Build up

Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source
Shree Ganesh Jewellery – Exports Build up
Shree Ganesh Jewellery – Exports Build up | Source

Shree Ganesh Jewellery – Exports Build up


Poor results

Shree Ganesh Jewellery has produced poor results for the quarter ended 30.09.11 compared to the quarter ended 30.06.11. Both revenue and net profit have taken a beating. The shares of Shree Ganesh Jewellery are traded in the Indian stock market at Rs.92 now (BSE 06.01.12). The shares of the company are available in both NSE and BSE. Volumes are around 7700 per day. Six months back, the company’s shares were traded at a high of Rs.286. Now they have taken a heavy beating in the stock markets. Investors have burnt both their fingers and hands in this counter. Nilesh Parekh is the Chairman of the company.

Joint venture with Italian company

The company is engaged in the manufacture and exports of jewellery. It has formed a joint venture with an Italian company SALP-PSA. The joint venture has been styled as Oroitalia Sales Pvt Ltd. It will be manufacturing light weight gold jewellery. The joint venture will add strength to the global presence of Shree Ganesh Jewellery. The products manufactured by the joint venture company will be sold in retail in West Asia as well as in India, Singapore and Hong Kong. Possibility of exports to Italy is also there. The facility is being set up at the company’s integrated jewellery producing complex in Domjur in West Bengal at an investment cost of Rs.100 crore with a capacity of 10 tonnes. It will start production in about three month’s time. This is the first time an Italian company has entered into a joint venture partnership with an Indian company in jewellery business.

India is the largest consumer of gold

India is the largest consumer of gold in the world. It is one of the fastest growing markets for gold and diamond jewellery. If you value the jewels held by each and every household in India, you will come to the conclusion that India is the richest nation in the world, notwithstanding its image to the contrary. SALP is among the largest jewellery manufacturers of Europe and was set up in late seventies. Shree Ganesh Jewellery has agreed to give 60000 square feet of its land to the West Bengal State government on lease to set up a training institute. The company is not well placed as regards to its location in West Bengal. After the Singur episode, companies fear to set up manufacturing units in West Bengal because of labour unrest and political protests. Nobody can guarantee that a stage will not come in which Shree Ganesh Jewellery is forced to close its manufacturing unit and shift it to some other State.

New brand Gaja Lites

As a part of an aggressive retail expansion and marketing, the company launched a sub-brand Gaja Lites. Shree Ganesh Jewellery is one of the largest exporters of hand crafted jewellery in India. The company derives more than 90% of its revenue through exports. But now it is concentrating on domestic sales also. It wants to establish a strong presence in important Indian cities and towns. The company’s retail revenue at present stands at Rs.400 crore. The company wants to triple this to Rs.1200 crore. Gaja Lites is a fashioned lightweight diamond and gold jewellery line. It will be made available in around 250 retail outlets in Tier 2 and 3 cities. Already the company is marketing its brands Gaja and Gaja Heritage.

Rural prosperity is growing

Branded jewellery is making a good progress in India. After the government has made it compulsory to hallmark each and every jewel, the sales are bound to pick up further. Brands like Tanishq, Shree Ganesh, Adora, Gitanjali and HK Jewel are focusing on smaller cities and towns. There is also a good demand for branded jewelleries from rural areas as farmers have seen their prosperity increase after five or six successive good harvest seasons. MMTC is also establishing its rural shops to sell branded jewellery. Rural rich have the capacity to buy varieties of branded jewellery. Jewellery business hitherto had been an urban phenomenon. But it is spreading slowly and steadily to the interior areas of India where 80% of the population live. In fact World Gold Council has estimated that rural and semi-urban areas make around 60% of India’s Rs.70000 crore gold jewellery markets. Sale of branded jewellery in rural areas is still small at around 7% of the rural jewellery market valued at around Rs.3000 crore but it is growing at a fantastic rate of around 30% p.a. Two thirds of the retail outlets in the medium term will be opened in small towns by the retailers. In future, retail jewellers will be deriving more than 50% of their income from small towns. Urban-rural dividing line is thinning fast as far as jewellery business is concerned. HK Jewels is planning to establish 300 retail jewellery outlets in rural areas in Northern States like Gujarat, Bihar, Jharkhand, Madhya Pradesh and Rajasthan. HK sells its jewels under the brand name Kisna. Titan which markets its jewellery under the brand name Tanishq has a separate brand name GoldPlus for rural and semi-urban areas.

Foray into NBFC

Shree Ganesh Jewellery has bought a Kolkata-based NBFC. The investment cost is not known. Earlier, Shree Ganesh Jewellery sought RBI permission for floating a NBFC. As the permission from RBI was not forthcoming, the company has adopted acquisition route to make an entry into this segment. The company which Shree Ganesh Jewellery acquired has an existing business of gold loans. It will be functioning as a subsidiary of Shree Ganesh Jewellery. Even the name of this finance company is not known. Why should Shree Ganesh Jewellery hide the details from its investors? Transparency demands that everything should be disclosed at an early date.

Margins expected to improve

Due to the commencement of gold refining and bullion expansion the margins of Shree Ganesh Jewellery are expected to go up significantly by around 1.5%. The company has an operating profit margin of around 6.5% as on 31.03.11. Following reduction of basic customs duty on gold ore and concentrate to Rs.140 per ten grams of gold content from the earlier two per cent ad valorem, refining business has received an impetus. Around 35% of the refining capacity of the company will find use in its captive consumption. Shree Ganesh Jewellery is a licensed canalising agency in the bullion business. It is expecting to increase its business from half a tonne to around 25 tonnes. Earlier the company was importing bullion for the use of banks. Now it can source bullion for its own captive use in the refining business.

Gold loan financing is safe

Shree Ganesh Jewellery’s venture into NBFC augurs well. Gold loan financing is a very profitable business. Muthoot Finance and Manapuram Finance, the two Kerala-based companies are growing day by day. Shree Ganesh Jewellery will also find the business very profitable. Moreover the loans sanctioned against the pledge of gold jewels are hundred per cent safe and recoverable and will never become NPA.

Invest for medium term

The shares of Shree Ganesh Jewellery can be purchased at the current market price of Rs.92 for medium term holding for the following reasons:

  • Branded jewellery segment is growing fast in India
  • India is the largest consumer of gold in the world
  • 90% of the company’s revenue comes from export of jewellery
  • Now the company has started concentrating in domestic markets too
  • The company has a large revenue of around Rs.6000 crore every year
  • The company’s margins will increase by 1.5% because of gold refinery and bullion business
  • The company’s foray into semi urban and rural areas is bound to bring rich reward
  • The share price is close to its lowest price in the last one year
  • Affluence of Indians is growing and is widespread covering even small towns and rural areas
  • The company is a beneficiary because of the depreciation of Indian rupee against the dollar

The only disadvantage for the company is that it is located in the State of West Bengal. Any time political unrest or Maoist violence or labour unrest may force the company to close down its shop temporarily or permanently. In that eventuality, the company will have to shift to some other State like Gujarat as Ratan Tata did

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