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Shree Ganesh Jewellery Eyes Acquisitions to Drive Growth

Company Expects to Double its Retail Stores in India

Sep 2, 2011 8:08 AM   By Dilipp S Nag
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RAPAPORT... Shree Ganesh Jewellery House Ltd. (SGJH) is looking to acquire a retail chain in Dubai and a brand in Europe as the Kolkata-based handcrafted gold jewelry maker seeks to expand its retail business.

''We are planning to acquire a brand in Europe and market it into China, where there is a lot of money,'' Nilesh Parekh, the chairman of SGJH, told Rapaport News. ''Our Dubai and Europe plans are under negotiations and once it is over then we will buy,'' he said.

Parekh stated that SGJH also has plans to expand operations in Africa. It derives more than 85 percent of its sales from overseas market and primarily exports to the United Arab Emirates (UAE,) Singapore and Hong Kong. The company makes gold jewelry, diamond jewelry, gemstone-studded jewelry and light-weight Italian jewelry.

SGJH, which operates 23 retail chains under the “GAJA” brand in India, is planning to more than double the number of its stores in this financial year that ends on March 31, 2012.

''We plan to take our total number to 50 stores by the end of this financial year,'' Parekh stated.

He added that SGJH has also entered into a strategic alliance with Bharti Enterprises Ltd., which is developing large format stores, for a store within a store arrangement in its retail stores to sell jewelry.

''This is an exclusive tie up. We will be expanding first in south and then in north region,'' Parekh said.

According to study by CRISIL Ratings, growth across India's branded gold jewelry sector is likely as new stores open in small to mid-size towns. Retailers are expected to generate more than half of their revenues from these smaller population centers by fiscal period 2012 and 2013, compared with around 40 percent in fiscal period 2009 and 2010.

Growth Targets in Fiscal 2011-2012

Parekh noted that said sales during the upcoming Diwali season will be “fine” for most of the companies as the monsoon season has been good this year.

Monsoon rains are crucial for India’s agriculture production as about 60 percent of the country’s farmland depends upon rain. A good monsoon improves agriculture productivity, thereby boosting harvest and rural incomes, which in turn helps lift  sales, from gold to consumer durables.

Parekh said SGJH’s current bookings represent about $544 million (INR 25 billion) and are expected to be executed by the end of December.

He added that the company is targeting sales growth of between 20 percent to 25 percent in the full fiscal year, up from total sales of $1.27 billion (INR 58.38 billion) it posted the previous fiscal year.

Forays into Gold Loan Business

Parekh, pictured, said that SGJH has entered into loan against gold business by acquiring a Kolkata-based non-banking financial services company (NBFC). He declined to give the company name and the acquisition cost.

NBFC provides loans that are secured by gold jewelry, primarily to individuals who face difficulty in accessing formal credit to meet their urgent cash requirements. They have created a niche market with gold loan capabilities by providing easy access, with little documentation and formality, for quick disbursal of loans and lockers to ensure safety of the gold that is pledged. Traditionally, gold owners in southern India are more forthcoming than other parts of the country to accept and exercise the option of pledging gold to borrow money.

''We are going to put $43.5 million (INR 2 billion) initially in the business. We will start with 50 branches initially in south and expand gradually,'' Parekh stated.
The NBFC, which already has an existing portfolio of gold loans, will be a 100 percent subsidiary of SGJH and is expected to operational by December, he added.

Parekh also said that construction of the company’s gold refining facility at Domjur in West Bengal is progressing well and the facility is expected to be operational by the end of this calendar year.

The proposed facility, which has a total capacity to refine 35 tons of gold annually, is expected to assist in reduction of raw material cost and optimization of operations, further improving profit margins, SGJH stated in its first-quarter results presentation.

The company currently has manufacturing units located in Mondalpara, Manikanchan Special Economic Zone (SEZ) in West Bengal.
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Tags: Dilipp S Nag, NBFC, SGJHL, Shree Ganesh Jewellery House
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