Advanced Search

Gitanjali Expects IIJS Sales of $170M or More

Choksi Remains Bullish on Gold, Says Diamonds Prices Past Their Peak

Aug 5, 2011 8:11 AM   By Dilipp S Nag, Avi Krawitz
Comment Comment Email Email Print Print Facebook Facebook Twitter Twitter Share Share

RAPAPORT... Gitanjali Group is expecting to generate sales totaling  more than $170 million (INR 8 billion) during the India International Jewellery Show (IIJS) that is underway in Mumbai as the company has maintained a strong outlook for the Diwali season coming up in October and November.

''So far, we have done fair and good business,'' said Mehul Choksi, chairman and managing director of Gitanjali Group. He told Rapaport News on the second day of IIJS, Friday, that ''Normally we start five days before the show and we expect business to be 100 percent more than last year. Our target is to reach about INR 8 billion.''

IIJS opened in Mumbai on Thursday with strong visitor traffic, but cautious trading took place  as buyers appeared unsure whether to buy from the getgo or wait to see whether prices soften based upon weak economic sentiment in the U.S.

Still, Choksi said he was confident the Indian market would remain solid and that the upcoming Diwali season in October and November is expected to be strong. He added that preparations for the season have already started, which is expected to boost sales beginning in August.

''I presume growth during Diwali will be around 50 percent in value,” Choksi said. Diwali and Akshaya Tritiya, which falls in May and is one of the busiest gold-buying festivals, will together account for about 30 percent of the company’s annual sales.

Gold at $2,000

Choksi based his optimistic outlook on feedback that people were still buying gold despite higher prices.

''The general impression is that gold is going to go to $2,000 [per ounce] and I think people will rush to buy gold, because gold is going to go up,” he said. Spot gold hit a record high reaching $1,683.30oz Thursday, up 40.5 percent year on year.

In contrast, Choksi said he expects that diamond prices may have peaked and that a slight correction may be pending before stability sets in. “I think we have already seen the peak in prices and I don’t think that we will see [those levels] for the next two or three years,” Choksi said.

He dismissed the notion that a big crisis would lead to another downturn. “A big crisis can come only if the December season goes very badly and whatever is produced doesn’t sell,” he said.

Bullish on India & China

The impact of a second global slowdown so soon after the Great Recession may weaken growth in India and China, where Gitanjali has focused its expansion plans. He expressed some caution that China’s growth could slow given the country’s exposure to economic and financial problem of the U.S., but he maintained confidence that China still provides a strong growth opportunity.

As a result, Gitanjali is planning to set up or acquire a factory and a more visible retail presence in China in the current fiscal year, which ends on March 31, 2012.

He stressed, however, that growth would be driven by Gitanjali’s India operation and the company is planning to open 500 to 600 stores there this year.

Choksi added that Gitanjali is very strong in tier-3 and tier-4 cities, which are smaller towns, because there is no "reputed brand jeweler in those markets,” he said. According to CRISIL Ratings, retailers are expected to generate more than half of their revenues from these small to mid-size towns by the 2012 to 2013 fiscal period as new stores are set up to serve these population centers. The demand for gold jewelry in those smaller towns is strong, buoyed by increasing affluence and preference for branded jewelry.

U.S. Growth But Cautious

Choksi was less optimistic about the U.S., even though the company's operations there have produced double-digit growth. He noted that while the U.S. is okay for new products, the trade does not necessarily influence prices. ''India is able to raise prices and still sell,'' he said.

Gitanjali has increased prices by 50 percent to 60 percent since the beginning of this year in India, while price increases in the U.S. have only been around 15 percent to 20 percent, he explained.

Choksi said he was cautious about recent economic  news coming from the U.S., which does not necessarily reflect the sales reality. ''We are watching very carefully and are prepared for further cuts in expenses if it’s required should there be a slowdown. Generally, this year the business has been good.''

Choksi said he is not concerned the European debt crisis will impact the business either as the company doesn’t have great exposure to Europe. The various European jewelry brands the company has bought in the past few years have been with intention to target the Russian and Asian market, he explained. 

Looking For Investors

Gitanjali is restructuring its business in an effort to raise its value and thereafter plans to bring in private equity investors. 

''We feel that we are much more valuable than what we are currently showing,'' he said. ''So we would rather first concentrate on increasing our value before we find the investors.''

Gitanjali, which retails diamond jewelry under the brands Gili, Nakshatra, Asmi and D'Damas in India, operates three diamond manufacturing factories and nine jewelry manufacturing units in India, and has more than 3,000 points of sale and retail stores.


Comment Comment Email Email Print Print Facebook Facebook Twitter Twitter Share Share
Tags: diamonds, Dilipp Nag, Avi Krawitz, Dilipp S Nag, Avi Krawitz, Gitanjali, growth, India, Jewelry, retail, sales
Similar Articles
Brilliant Earth Reflections collection July 2022Brilliant Earth Enjoys Sales Bounce
Aug 14, 2022
Revenue rose strongly at Brilliant Earth in the second quarter as the US retailer expanded its online-offline model
Comments: (0)  Add comment Add Comment
Arrange Comments Last to First
© Copyright 1978-2022 by Rapaport USA Inc. All rights reserved. Index®, RapNet®, Rapaport®, PriceGrid™, Diamonds.Net™, and JNS®; are registered TradeMarks.
While the information presented is from sources we believe reliable, we do not guarantee the accuracy or validity of any information presented by Rapaport or the views expressed by users of our internet service.