RAPAPORT... India’s Gitanjali Group has partnered with high-profile businesses around the world, turning the company into a force to be reckoned with.
From its first brand, Gili, which made the company a household name when it was launched in 1994, the Gitanjali Group has made its presence visible in a wide variety of segments in the Indian jewelry market. It is practically everywhere. It not only made diamond jewelry acceptable to the Indian consumer, but through its various promotions — such as heart-shaped pendants and rings for Valentine’s Day and Diwali — it made itself the most desirable brand for young and old alike looking for genuine diamond jewelry. The company also sets itself apart from its competitors with numerous and imaginative promotions and tie-ins, from associations with nearly all the popular Bollywood celebrities to its latest offering, a Wimbledon jewelry line.
FLASHBACKThe late Chinubhai Choksi — father of Mehul C. Choksi, the present chairman of the Gitanjali Group — laid the foundation for M/s. Gitanjali Exports Corporation in 1966, naming the company after his two daughters, Gita and Anjali. Initially, trading in rough and polished diamonds formed the company’s core business and it was considered one of the biggest exporters of raw diamonds worldwide. Credibility for Gitanjali grew in 1969 when it became one of the first Indian companies to be a Diamond Trading Company (DTC) sightholder. This led to Gitanjali entering the international jewelry arena, gradually expanding its business to the U.S., Japan, France and Hong Kong. The next generation took over the reins in 1985 when Mehul Choksi entered the business. In 1986, he launched the flagship company of the group, Gitanjali Gems Limited, and established its first diamond polishing factory in Mumbai. As of September 12, 2000, under part IX of the Companies Act, 1956, Gitanjali Exports Corporation became a Public Limited Company, which in turn became a 51 percent subsidiary of Gitanjali Gems Limited on September 20, 2005.
Under the leadership of Mehul Choksi, the company entered into various joint ventures that enhanced its reach to international markets, including the then untapped market of Japan. In 1993, the company set up its first manufacturing unit in Mumbai, yet another step in its evolution from trading house to cutting and polishing entity to manufacturer of diamond and plain gold jewelry. Having established itself as a leader in India, the company’s presence was being acknowledged in other parts of the world as well. In 1997, Gitanjali entered the U.S. jewelry market through an alliance with the U.S.-based Simon Golub and Sons and the Italian Jewelry Centre. The group ventured into the Middle East in 1998 and united with the Dubai-based Damas, retailing through duty-free shops and opening retail outlets in the United Arab Emirates (UAE).
Soon after opening its second manufacturing unit in Surat in 1999, the company faced several hurdles. It had to discontinue its bullion trade due to the change in India’s indirect taxation laws. The issue of conflict diamonds added to the worry, coupled with the negligible returns on company investments in various other projects and ventures. The spirit of optimism kept the company going, bolstered by the four-year-old relationship with Damas. The Nakshatra brand was launched in the UAE in association with Damas in 2002. The same year, the company introduced its first independent chain store — Cira. But what brought about a complete turnaround at the company was the launch of the D’damas Diamonds brand in India in 2003. The D’damas jewelry line was launched for both customers and retailers, along with a special D’damas jewelry manufacturing unit. This was followed by the Glitterati line, introduced to the Indian retailers, and the D’damas brand Damas Solitaire, simultaneously launched in India and the UAE. Subsequently, Gitanjali took over two of DTC’s major brands – Nakshatra and Asmi. Today, D’damas is a 51 percent subsidiary of the Gitanjali Group.
Gitanjali is currently one of the largest integrated diamond and jewelry manufacturing companies in India, with close to 24 brands and sub-brands in its portfolio. It manufactures jewelry at price points ranging from $20 to $800 per piece.
TECHNOLOGICAL ADVANCEMENT
As Gitanjali’s preeminence in the jewelry retail business has grown, says Sam George, chief technological officer, Gitanjali Group, “management has been very keen to allow ‘technology’ to drive the business to achieve the desired results. We identified technology to play a major role in two key areas of our business operations — retail operations and the manufacturing process.”
To take care of their retail operations, the group uses Enterprise Resource Planning (ERP) software. It took two years to finalize an ERP vendor. “We embarked on our ERP journey by deciding what our ‘as is process’ is,” says George, “and we took some time to decide what our ‘to be process’ should be, keeping in mind the changing dynamics in the retail segment.” The ERP software is being deployed to meet supply-chain requirements and also to support the company’s efforts to be proactive to customer needs. Sharing details about the technology used for the manufacturing process, George adds, “The group today has a dedicated software team of ten engineers that has, over the past year, developed a customized software project, code name Nebula, which takes care of our manufacturing needs, mapping the process involved from customer order to delivery stage. We have used the best available technology to design our jewelry through CAD/CAM tools and to get the products finished using the latest laser precision machines, cutting down production and delivery time.”
ACQUISITIONS AND MERGERSAccording to Mehul Choksi, “India is emerging as one of the biggest markets for luxury goods. With growing pay packages and increased disposable income, the spending power, especially on luxury products, is on an upsurge. This is driving the luxury market’s growth. To capitalize on the existing potential, the company has decided to recruit global leaders from the worlds of fashion, design and lifestyle to help map out the future direction of luxury retailing in the country. In preparing for this change, Gitanjali Group has established tie-ins with some of the big names in the field of designer jewelry and watches and other lifestyle accessories and products, such as silverware and gift items.”
In the recent past, Gitanjali has completed a spate of acquisitions, including a 97 percent stake in specialty retailer Samuels Jewelers Inc, USA, which operates 97 stores spread across 18 states, with current revenues of $100 million. The December 2006 acquisition, for an investment of $50 million, is being financed through internal accruals and proceeds of the recently concluded $110 million foreign currency convertible bond (FCCB).
Gitanjali Gems Ltd. also purchased a majority interest in Tri-Star Worldwide LLC, a BHP Billiton direct customer, CanadaMark™ licensee, manufacturer and global distributor of Canadia® brand diamonds and diamond jewelry.
Some of the popular brands that have been introduced by the group are Gitanjali Popular, Gitanjali Lifestyle and Gitanjali Luxury. Gitanjali Popular – Jewels for all, is an umbrella brand that includes Mayagold, Ezee Diamonds and Diya.
Gitanjali Lifestyle is a new initiative of the Gitanjali Group. It is the ultimate product line for anyone who dreams of possessing silver in fusion with other metals, along with an array of luxury watches from around the world. It incorporates international brands such as Greggio, Olri, Dogale, Morellato and Bezel, among others. The Greggio Collection consists of a vast array of silver products for home and office in a variety of styles, shapes and decors. The sub-brands of Greggio Argento are: tableware, La Tavola; home decor, La Casa; office items, Ufficio and baby gifts, Set Regalo Bimbo.
A PEEK INTO THE FUTURE
Speaking about the strength of the company and peering into its future, G.K.Nair, executive director, finance, Gitanjali Group, gives credit for the company’s growth to chairman Mehul Choksi, whose vision for the company is, he says, always “five years ahead of the market. We are 1,000 outlets today and by 2009, we wish to surpass 2,000 outlets, including our exclusive outlets, franchise-led outlets and outlets in malls, petrol pumps, etc.”
The company has applied for 25 patents for new diamond cuts and is in the process of developing 200 acres of land in Hyderabad as a Special Economic Zone (SEZ). The Hyderabad SEZ project will see an estimated turnover of $1.237 billion when fully operational and is expected to directly provide employment for more than 50,000 personnel. The investment for this project is $123 million. It is expected to house more than 75 to 100 diamond, plain and studded gold jewelry items and watches. “We are planning to have six factories in Hyderabad,” says Nair, “where we will be using half a million square feet for manufacturing. Here, we intend to dedicate one floor in a couple of factories specifically for physically challenged people, where care would be taken in terms of design for them to enter the factory, work comfortably and also for their recreation.”
With nearly 40 years of experience in the world of diamonds and almost as many in the manufacturing of jewelry, the Gitanjali Group is moving forward, its pace still ahead of its competitors. Thanks to the sheer dedication of all its team members, coupled with impeccable leadership under Mehul Choksi, the group is sure to remain a frontrunner.
Gitanjali’s Leading BrandsGiliThe first jewelry brand to be launched in India that achieved “superbrand” status offers Indian consumers a world of choice and “Easy Elegance.” It is a brand of mass appeal.
D’damasA joint venture between Gitanjali Gems and the Dubai-based Damas Group, this is a contemporary collection of branded gold and diamond jewelry. There are 16 sub-brands under its umbrella.
AsmiAsmi Diamond Jewellery, a brand promoted by Diamond Trading Company (DTC), was taken over by the Gitanjali Group. Asmi has a strong retail network of 250 counters across India.
SanginiThis was launched in association with Sanghvi Exports as one of its flagship brands in 2004.
NakshatraAlso achieving superbrand status, Nakshatra is a brand owned by the DTC, with manufacturing, distribution and marketing rights held by Brightest Circle Jewellery Pvt. Ltd., a joint venture between Gitanjali and two other companies.
Gitanjali Financial Results (Expressed in U.S. $ millions)
Year ended Year ended Growth
3/31/2006 3/31/2007 (percent)
Revenues 540.68 786.27 44.28
EBIT1 22.85 35.31 53.33
EBIT Margin2 4.22% 4.49% —
Profit Before Taxes (PBT) 14.20 26.14 82.57
Profit After Taxes (PAT) 11.57 20.80 78.35
Earnings Per Share (EPS) 0.28 0.35 27.16
1 EBIT: earnings before interest and taxes.
2 EBIT Margin: earnings before interest and taxes divided by sales; ratio of earnings to sales.
Article from the Rapaport Magazine - October 2007. To subscribe click here.