MIRA
INFORM REPORT
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Report Date : |
21.05.2008 |
IDENTIFICATION
DETAILS
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Name : |
VAIBHAV GEMS LIMITED |
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Registered Office : |
K-6B, Fateh Tiba, Adarsh Nagar, Jaipur – 302 004, Rajasthan |
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Country : |
India |
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Financials (as on) : |
31.03.2007 |
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Date of Incorporation : |
08.05.1989 |
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Com. Reg. No.: |
17-4945 |
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CIN No.: [Company
Identification No.] |
L36911RJ1989PLC004945 |
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TAN No.: [Tax
Deduction & Collection Account No.] |
JPRV01948C |
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PAN No.: [Permanent
Account No.] |
AAACV4679F |
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Legal Form : |
Public Limited Liability Company. The company shares are listed on the
Stock Exchange. |
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Line of Business : |
Exporters of Gemstones |
RATING &
COMMENTS
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MIRA’s Rating : |
Aa |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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Maximum Credit Limit : |
USD 26870424 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well-established and reputed company having fine track.
Available information indicates high financial responsibility of the company and
its management. Trade relations are fair. General financial position is good.
Payments are reported as usually correct and as per commitments. The company can be considered good for normal business dealings at
usual trade terms and conditions. It can be regarded as a promising business partner in a medium to long
run. |
LOCATIONS
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Registered Office : |
K-6-B Adarsh Nagar, Jaipur,
India Zip Code: 302004 , Rajasthan, India |
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Tel. No.: |
91-141-2601020 |
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Fax No.: |
91-141-2603288 |
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E-Mail : |
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Website : |
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Corporate Office : |
E-68, EPIP, Sitapura , Jaipur, India , Zip Code: 302022, Rajasthan, India |
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Tel. No.: |
91-141-2770648 |
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Fax No.: |
91-141-2770510 |
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Website : |
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Branches : |
·
905 & 304, Panchratna , Opera House ·
Unit No 186 a , SDF - VI |
DIRECTORS
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Name : |
Mr. Sunil Agrawal |
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Designation : |
Chairman |
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Profiles: |
He is a commerce
graduate with an MBA from Columbia University. A first generation entrepreneur,
he established Vaibhav Enterprises in 1980 with the objective to trade in
gemstones. He has travelled widely, and gained an immense knowledge of
gemstones and jewellery. He has brought this expertise to bear on the
success of the company. He has represented the company at all major
international trade shows and jewellery fairs. He is credited with the
pioneering commercialisation of popular gemstones like Tanzanite. |
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Name : |
Mr. Suresh Panjabi |
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Designation : |
Director |
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Profile : |
After
establishing his gems trading business in Hong Kong, he became well known
internationally within the trade. He is widely travelled and has visited the
most prominent mines in the world. He possesses an in-depth knowledge of the gemstone
industry and its supply chain and the high-end jewellery business. |
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Name : |
Mr. Rahimullah |
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Designation : |
Director |
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Profile: |
Beginning his
career in his emerald trading and export business , he has gained considerable
experience and knowledge in this field, and has traveled extensively in
Africa, Europe and the Far East to source rough stones. He brings with him 30
years of industry experience. His dedication, vision and acumen have been
responsible for the company's impressive growth. |
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Name : |
Mr. Nirmal Kumar Bardiya |
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Designation : |
Director |
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Profile: |
One of the most
renowned jewellers of Jaipur with a vast experience in the manufacture of coloured
gemstones, he is associated with the Company since 2001. He is highly
specialised in high volume gemstones and beads, and is one of the leading
global players in this segment, . |
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Name : |
Mr. Anandi Lai
Roongta |
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Designation : |
Director |
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Profile: |
A post-graduate
in Economics and Law, he is a retired IAS officer and worked with the
government of Rajasthan, the Government of India and various public sector
units. He held prestigious positions like Managing Director of the Rajasthan
Finance Corporation, Chairman-cum-Managing Director of the Rajasthan State
Industrial Development and Investment Corporation Limited and was also the
Industry Advisor to’ the Government of Rajasthan. |
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Name : |
Mr.M.L. Mehta |
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Designation : |
Director |
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Profile: |
A retired IAS
officer and a renowned public administrator, social activist and human
resource developer, he is a gold medallist and a Post Graduate in Physics
from the University of Rajasthan, he is a P.G. Diploma Holder in urbanisation
from the University of London with merit and a Graduate from the National
Defence College in New Delhi. He has served in senior government positions
such as the Chief Secretary of the Government of Rajasthan, Additional
Secretary of the Ministry of Home Affairs and Director of NA8ARD. He has won
prestigious awards like Indira Gandhi Priyadarshni Vriksha Mitra Award
(1986), Acharya Jai Mai Cyan Award (1988) and Mewar Gaurav Award (1994). |
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Name : |
Mr. Surendra
Singh Bhandari |
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Designation : |
Director |
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Profile: |
One of the
senior most Chartered Accountants of Rajasthan and a senior partner of S.
Bhandari and Company he is one of the leading management consultants to
various companies in the areas of banking and tax assignments, corporate restructuring,
amalgamation and mergers, besides handling audit assignments in various
renowned companies and financial institutions,. Presently he is on the Board
of Reliance Capital Trustee Company Limited., Asian Hotels Limited and
Spectrum Power Generation Limited. |
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Name : |
Mr. Sanjeev
Agrawal |
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Designation : |
Director |
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Profile: |
A commerce
graduate and promoter of Stone Age Limited, engaged in the export of building
stones to Far East Asia, USA, Canada and Europe, he has travelled extensively
across America and Europe and possesses an in-depth understanding of the
market dynamics of these geographies. |
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Name : |
Mr. Ikramullah |
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Designation : |
Director |
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Profile: |
An authority in
the manufacture of emeralds in India, he has gained an extensive experience
in the gemstones industry through his family business and also as a result of
his extensive global exposure. |
MAJOR SHAREHOLDERS
/ SHAREHOLDING PATTERN
|
Names of Shareholders (as on 31.03.2007) |
No. of Shares |
Percentage of
Holding |
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Indian Promoters |
2775677 |
10.06% |
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Foreign Promoters |
1562840 |
5.66% |
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Banks |
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FIIS |
4148679 |
15.04% |
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Private Corporate Bodies |
700358 |
2.54% |
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Indian Public |
685833 |
2.49% |
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NRIs |
48386 |
0.18% |
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Others |
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Clearing Members |
2571 |
0.00% |
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Foreign Company – Cortland Investment
Limited |
8913529 |
0.00% |
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Shares Underlying GDR |
8750000 |
32.31% |
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Total
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27587873 |
100.00% |
BUSINESS DETAILS
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Line of Business : |
Exporters of Gemstones |
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Products : |
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GENERAL
INFORMATION
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Bankers : |
· ICICI UK Bank Limited · HSBC Bank, USA , NA |
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Facilities : |
Notes: (i) Above Loans
are secured by hypothecation of Stock-in-trade and Book Debts on pari-passu
basis. (ii) Further Secured, on parri-passu basis, by :- a. Equitable
Mortgage of Land and Buildings situated at K-6A and K-6B, Adarsh Nagar and
E-68 and E-69 EPIP, Sitapura, Jaipur b. Hypothecation
of Plant and Machineries and Other Movable Assets c. Personal
Guarantee of Chairman |
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Banking
Relations : |
Good |
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Auditors : |
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Name : |
B Khosla and Company Chartered Accountants |
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Associates/Subsidiaries : |
· Jewel Gems USA Address: 30-00 47th Avenue 5th Floor · STS Gems Limited, HK Address: 6/F,Block B, Dongxing Industrial
Building, · STS Gems Thai Limited Address: 47/16 moo 4 Sukhapiban 2 RD · Genoa Jewellers Limited · Commonwealth Trust limited · Drake Chambers, Tortola, Address: British Virgin Islands · Jewel Gem USA Inc.; · STS Gems Japan Limited; · STS Gems Limited, Hong Kong; · STS Jewels Inc., USA; Address: 30-30 47th Avenue 5th Floor · STS Creations Thai Limited, Thailand; Address: Teddington Studios, · STS Gems Thai Limited, Thailand; · Indo Mexico Co. S. De R.L. De C.V., Mexico; ·
S. De R.L. De C.V., · Genoa Jewelers Limited, BVI; · STS Jewels Canada INC. Address: 30-00 47th Avenue 5th Floor · Umbrellas .Com Inc., USA; Address: # 3 Cyrus Wathey Square · STS Gems USA Inc.; Address: 30-30 47th Avenue 5th Floor · The Jewellery Channel Ltd., United Kingdom; · Genoa Jewelers STT (St. Thomas) Limited, US
· Genoa Jewelers (St. Kitts) Limited, West Indies; · Genoa Jewelers (SXM) N.V., St. Maarten. Address: 5150 Dronninggens Gade · Der Schmuckkanal Deutschland GmbH; Germany · The Jewellery Channel Inc., USA; Address: Unit 1
13/f Winner Building 34-40 Man Yue Ph.:
852-23675066 · STS Jewel Gems (China) Ltd., China Address: 211 Aurum Building · Genoa Jewelers (ST Kitts) Limited Address: Boolchand House · Der Schumuckkanal Deutschland GmbH Derschmuckkanl, · The Jewellery Channel Inc. Address: Corridor Park Point, |
CAPITAL STRUCTURE
Authorised Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
31000000 |
Equity Shares |
Rs. 10/- each |
Rs.310.000 millions |
|
4500000 |
Preferences Shares |
Rs. 100/- each |
Rs.450.000 millions |
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Total |
Rs.760.000
millions |
Issued, Subscribed & Paid-up Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
27587873 |
Equity Shares |
Rs. 10/-
each |
Rs.275.878
millions |
|
4400000 |
Cumulative Preferences Shares |
Rs. 100/-
each |
Rs.440.000
millions |
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Total |
Rs.715.878 millions |
Out of the above
Equity Shares :-
a) 7294920 Equity Shares were allotted as fully paid up Bonus Share by
capitalisation of Profit & Loss Account
b) 8750000 Equity Shares have been allotted as underlying Share for
875000 Global Depository Receipts
FINANCIAL DATA
[all figures are in Rupees Millions]
ABRIDGED BALANCE
SHEET
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SOURCES OF FUNDS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
715.878 |
275.878 |
105.600 |
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2] Share Application Money |
0.000 |
440.000 |
0.000 |
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3] Reserves & Surplus |
6001.728 |
5779.673 |
533.700 |
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4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
6717.606 |
6495.551 |
639.300 |
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LOAN FUNDS |
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1] Secured Loans |
636.610 |
444.274 |
283.700 |
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2] Unsecured Loans |
0.000 |
0.000 |
0.000 |
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TOTAL BORROWING |
636.610 |
444.274 |
283.700 |
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DEFERRED TAX LIABILITIES |
2.991 |
2.945 |
0.000 |
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TOTAL |
7357.207 |
6942.770 |
923.000 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
148.399 |
151.598 |
101.000 |
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Capital work-in-progress |
0.000 |
0.000 |
0.600 |
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INVESTMENT |
5270.946 |
3933.352 |
55.600 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
613.598
|
485.427 |
360.100 |
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Sundry Debtors |
1114.415
|
873.294 |
466.300 |
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Cash & Bank Balances |
153.216
|
1638.537 |
32.900 |
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Other Current Assets |
0.101
|
4.443 |
0.000 |
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Loans & Advances |
257.022
|
35.685 |
23.200 |
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Total
Current Assets |
2138.352
|
3037.386 |
882.500 |
|
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Less : CURRENT
LIABILITIES & PROVISIONS |
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Current Liabilities |
177.107
|
128.506 |
82.900 |
|
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Provisions |
23.383
|
51.060 |
33.800 |
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Total
Current Liabilities |
200.490
|
179.566 |
116.700 |
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Net Current Assets |
1937.862
|
2857.820 |
765.800 |
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MISCELLANEOUS EXPENSES |
0.000 |
0.000 |
0.000 |
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TOTAL |
7357.207 |
6942.770 |
923.000 |
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PROFIT & LOSS
ACCOUNT
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PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
|
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Sales Turnover |
2781.695 |
2194.651 |
1677.100 |
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Other Income |
45.263 |
19.290 |
11.100 |
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Total Income |
2826.958 |
2213.941 |
1688.200 |
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|
Profit/(Loss) Before Tax |
256.984 |
370.426 |
149.800 |
|
|
Provision for Taxation |
14.128 |
7.207 |
[1.200] |
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Profit/(Loss) After Tax |
242.856 |
363.219 |
151.000 |
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Expenditures : |
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Manufacturing Expenses |
147.436 |
82.643 |
67.200 |
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Administrative Expenses |
76.937 |
52.396 |
30.200 |
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Raw Material Consumed |
2126.460 |
1542.797 |
1302.500 |
|
|
Increase/(Decrease) in Finished Goods |
NA |
NA |
[0.900] |
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Salaries, Wages, Bonus, etc. |
154.964 |
113.712 |
72.900 |
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Financial Expenses |
45.524 |
36.699 |
16.600 |
|
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Power & Fuel |
NA |
NA |
6.500 |
|
|
Depreciation & Amortization |
18.653 |
15.268 |
12.300 |
|
|
Other Expenditure |
NA |
NA |
30.200 |
|
Total Expenditure |
2569.974 |
1843.515 |
1538.400 |
|
QUARTERLY RESULTS
|
PARTICULARS |
30.06.2007 |
30.09.2007 |
31.12.2007 |
|
Type
|
1st
Quarter |
2nd
Quarter |
3rd
Quarter |
|
Sales Turnover |
593.700 |
856.800 |
963.700 |
|
Other Income |
2.700 |
2.900 |
6.200 |
|
Total Income |
596.400 |
859.700 |
969.900 |
|
Total Expenditure |
559.700 |
781.600 |
926.000 |
|
Operating Profit |
36.700 |
78.100 |
43.900 |
|
Interest |
11.200 |
15.900 |
28.200 |
|
Gross Profit |
25.500 |
62.200 |
15.700 |
|
Depreciation |
4.200 |
4.400 |
4.500 |
|
Tax |
2.700 |
5.700 |
2.200 |
|
Reported PAT |
18.600 |
52.100 |
9.000 |
KEY RATIOS
|
Year |
31.03.2007 |
31.03.2006 |
31.03.2005 |
|
Debt-Equity Ratio |
0.08 |
0.11 |
0.39 |
|
Long Term Debt-Equity Ratio |
0.00 |
0.00 |
0.00 |
|
Current Ratio |
2.71 |
2.67 |
2.36 |
|
TURNOVER RATIOS |
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|
Fixed Assets |
12.14 |
11.58 |
12.04 |
|
Inventory |
5.06 |
5.19 |
5.52 |
|
Debtors |
2.80 |
3.28 |
3.88 |
|
Interest Cover Ratio |
6.65 |
11.09 |
10.02 |
|
Operating Profit Margin(%) |
11.54 |
19.25 |
10.66 |
|
Profit Before Interest And Tax Margin(%) |
10.87 |
18.55 |
9.92 |
|
Cash Profit Margin(%) |
9.40 |
17.25 |
9.74 |
|
Adjusted Net Profit Margin(%) |
8.73 |
16.55 |
9.00 |
|
Return On Capital Employed(%) |
4.37 |
10.97 |
20.66 |
|
Return On Net Worth(%) |
3.91 |
10.85 |
26.09 |
LOCAL AGENCY
FURTHER INFORMATION
SUBSIDIARIES:
STS Jewels Inc., USA, a 100 per cent subsidiary and its subsidiaries STS Gems
USA Inc, STS Jewels Canada Inc., 2 Umbrellas.com engage in marketing jewellery.
Covering the entire geographies of America and Canada, these companies study
the recent trends, fashion and demand of customers and regularly provide
feedback to the manufacturing companies in the group.
Jewel Gem USA Inc., a 100 per cent subsidiary of the Company, is engaged in marketing jewellery, precious and semi precious stones and gift articles through retail chain stores in Alaska. These large retail stores, branded as 'Milano Diamond Gallery,' cater to the needs of high-end customers at various locations in Alaska.
STS Gems Thai Limited, a 100 per cent subsidiary, is situated in Thailand, one
of the most economic places for jewellery production with specialization. The
company, engaged in the manufacturing and marketing of precious, semi-precious,
colored gemstones and studded jewellery, provides economical and skilled
production facilities to the group.
STS Creations Thai Limited, a 100 per cent subsidiary is engaged in the
manufacturing and marketing of silver studded jewellery.
STS Gems Limited, Hong Kong, a 100 per cent subsidiary and its subsidiary STS
Jewel Gem China Limited, is engaged in manufacturing, outsourcing and marketing
jewellery in addition to product development.
STS Gems Japan Limited, a 100 per cent subsidiary is engaged in marketing
colored gemstones and jewellery in the Japanese market, another important
jewellery market after USA and Europe, capitalizing on the potential in this
segment.
Indo Mexico Co. S. De R.L. De C.V., Mexico, a 100 per cent subsidiary is
engaged in marketing jewellery, precious and semi precious stones, diamonds,
metals and gift articles through the retail store brand 'Milano Diamond
Gallery' in Mexico.
Genoa Jewellers Limited, BVI, a 100 per cent subsidiary, and its subsidiaries
Der Schmuckkanal Deutschland GmbH, Germany, The Jewelry Channel Inc., USA,
Genoa Jewelers STT Limited (St. Thomas), Genoa Jewelers Limited (St. Kitts),
West Indies, Genoa Jewelers (SXM) N.V., St. Maarten, The Jewelry Channel Ltd.,
United Kingdom are engaged in marketing jewellery, precious and semi precious
stones, and gift articles through retail chain stores and online 24-hour
television shopping channels.
RETAIL OUTLETS:
To further their objective and cater to the demand of high-end customers at major holiday destinations of the world like Mexico, Alaska and the Caribbean, the Company has set up 7 more retail stores during the year under review, taking the total number of stores to 19. Today, retail outlets have emerged as the face of VGL allowing direct customer interaction. This retail drive has helped the Company to enhance its brand value and emerge as a name that people like to associate with. The Company is one of the fastest growing retailer in holiday destinations and has increased its rank from 9th to 2nd in terms of recommended stores by Cruise liners.
ON-LINE TV CHANNEL:
Due to the changing dynamics of the business, it is imperative for a company to look for more innovative and cost efficient mode of selling.
Television channels have emerged as one such mode. They have caught the fancy of consumers in a big way and the sales through this medium are growing at a rapid pace. The Company, recognizing the potential of TV channels as a platform to add more customers and increase market share without incurring any further costs, has started two more 24 hours online Jewellery Shopping Channels in Germany and the USA. These channels have been set up through their wholly owned subsidiaries 'Der Schmuckkanal Deutschland GmbH' and 'The Jewelry Channel Inc.,' respectively. Now the Company has three 24 hours online Jewellery Shopping Channels in UK, USA and Germany. These channels can be reached out on the internet also, at:
AWARDS AND RECOGNITION:
The Company was once again awarded with the coveted GJEPC Export Award, the Twelfth successive award for being the largest Indian exporter of coloured gemstones. Subject was also short-listed amongst top 25 Companies for ICSI National Award for excellence in Corporate Governance in recognition of sound corporate governance and disclosure practices followed by the Company, for the third year in a row.
OUTLOOK:
During 2006-07, the Indian economy registered a GDP growth of more than 8
per cent, helped by a strong growth in its manufacturing and services sectors.
The continued encouragement provided by the Government of India to the domestic
gem and jewelry industry is expected to drive performance.
Initiatives taken by GOI, Ministry of Commerce and industry and relaxations/concessions announced under Foreign Trade Policy 2004-09 for Gem and Jewelry industry are as under:
1. Service tax on services (related to exports), which are rendered abroad have
been exempted.
2. Re-import of Diamonds and Jewellery (either in complete or partial lot) exported on consignment basis have been allowed.
3. Cut and polished Diamonds have been exempted from custom duties.
4. Import duty on several categories of gems and jewellery has been reduced in
the 2007-08 budgets.
The duty has been reduced on rough synthetic stones to 5 per cent from 12.5 per
cent and on raw corals to 10 per cent from 30 per cent.
The Company expects a combination of governmental encouragement to the industry
as well as its own initiatives like entering retail market segment, better
capacity utilization, stabilization of new ventures, etc which will enable the
Company to increase its top line and margins.
Through this, the company expects to derive a greater operating leverage and enhance wealth for its investors.
MANAGEMENT'S
DISCUSSION and ANALYSIS:
The Global Gems And
Jewellery Industry:
The global market for gems and jewellery today is pegged at USD 210 billion with key markets having registered an average compounded annual growth rate (CAGR) of 5-10 per cent in the last decade.
Increased competition among top producing countries
Forward Integration by countries producing rough diamond
Emergence of different materials - different alloys within gold as well as
non-gold jewellery
Emergence of new manufacturing techniques
Requirement of stricter quality norms and hallmarking
Sale of jewellery is concentrated in eight key world markets, which garner more
than three-fourths of the world's sales. The U.S. is the world's largest market
while India and China are the emerging centres of jewellery consumption. Value
addition at the two ends of the value chain is the highest, with intermediate
segments adding relatively lower value (29 per cent in diamond cutting and
polishing and 32 per cent in jewellery manufacturing).
Electronic Retail:
One of the fastest growing segment in the global gems and jewellery industry, retail through electronic media represents a wider consumer shift towards home shopping. World jewellery sales are expected to grow at a 4.6 per cent CAGR with internet sales expected to cross 6 per cent of total retail sales by 2010.
COMPANY OVERVIEW:
The company is a professionally managed, end-to-end vertically integrated gems and jewellery business organization. It is one of the eight worldwide sight' holders in tanzanite and is a leader in processing other popular gemstones such as fire opal, apatite and emerald. Procuring directly from sources, it has buying operations across the globe in Tanzania, Thailand, Mexico, China, New York, South Africa, Madagascar, Brazil and Zambia to name a few. To capitalize on the opportunities present in the electronic retail segment, The Company has strategically forayed into television marketing channels in the UK, Germany and USA which will allow it to realize good margins at high volumes. Additionally to ensure a sustainable future, the company is moving from a B2B to a B2C strategy.
Strengths:
·
Strong product design
and development.
·
Broad-based
manufacturing infrastructure.
·
Internationally
accepted product range.
·
World-class quality
standards.
·
Global cost
competitiveness.
·
Availability of a
wide and well-accepted product range addressing various retail segments.
·
End-to-end vertical
integration from mines to retail.
·
Long-standing
relationships with corporate customers.
· Independent and experienced Board of Directors.
Retail:
· Jewellery Brands in stores: lliana, Kiara, Escada, Ippolita, Judith Ripka, Tanya Moss and many more.
· The company creates more than 15,000 designs a year and is known for its tanzanite products
· The company has an established presence of nineteen retail stores across high-end holiday destinations in Alaska, Mexico and the Caribbean.
· The company's 24-hour television channels in the USA, UK and Germany retails jewellery, reaching a wide range of customers.
Wholesale:
· Improved relations with existing customers
· Retail comprises 70 per cent of sales while wholesale comprises 30 per cent
· Currently venturing towards sales through television channels
Manufacturing and infrastructure:
· The company plans to construct a new plant in a RIICO-developed SEZ by 2008, with initial production of 1.2 million pieces
· The Company's China and Bangkok facilities are expandable so as to increase production
· Complimentary synergies in the global business
· The company is eliminating intermediaries and getting directly into business
· Manufacturing also includes the diamond processing business
1) Gemstones
Division:
220000 square feet gemstone cutting facility at Adarsh Nagar, Jaipur
2) Diamond Division:
4500 square feet diamond processing unit at Sitapura, Jaipur
3) Jewellery Division:
30000 square feet facility located in the Export Promotion Industrial Park at Sitapura, Jaipur.
3000 square feet product development centre and diamond jewellery sourcing
office at SEEPZ, Mumbai.
4) Chain Division:
Unique state-of-the-art micro weight chain plant with installed capacity of over 0.4 million chains - probably the first production facility outside the USA
5) Designing and Product Development
Division:
Exclusively dedicated infrastructure at Jaipur and Mumbai with the latest CAD / CAM software for design precision and reduced turnaround times.
OUTLOOK:
Jewellery sales through electronic media is the fastest growing segment in
the Gems and Jewellery markets due to shift in the customer preferences from
street shops/departmental stores to online TV shopping. The electronic retail
market is pegged at USD 7700 million, forming a 10.55 per cent of the total
jewellery sales. Currently, the world jewellery market is expected to grow at a
CAGR of 4.6 per cent. Internet sales are expected to cross 6 per cent of total
retail sales by 2010. This segment has a considerable share in the world
jewellery market with a market size of around USD 6.38 billion in USA, around
USD 820 million in the UK and around USD 500 million in the Germany.
FINANCIAL OVERVIEW:
Consolidated sales of the Vaibhav Group, increased from Rs. 2974.56 million in 2005-06 to Rs. 5191.52 million in 2006-07, growing by 74.53 per cent.
Additionally, other income increased from Rs. 23.81 million in 2005-06 to Rs. 151.72 million in 2006-07, a growth of 537.21 per cent.
RISK REVIEW:
At the company, they recognize that every business entails risk. Over the last decade, two initiatives have contributed significantly to their continued success: mitigating ongoing risk and cashing in on the vast business upside. Early risk identification and appropriate counter-measures have enabled subject to reconcile creativity with industry. At the company, a comprehensive risk warning system incorporates all key aspects of risk management. This enables the company to identify and manage strategic and operational risks at the individual, management and Board levels.
They define the risks upon identification of the business objectives. They have categorized risks into three broad segments:
· Operational
· Financial
·
Strategic
Risk
mitigation:
USA is the largest jewellery consumer in the world, home to
the largest fashion-conscious customers. The company has been present in the US
markets for the last 17 years, and has constantly widened its base of large
customers. To mitigate the risk arising from an excessive presence in this
geography, the company has diversified into jewellery sales via twenty four
hour television channels in UK and Germany. They have also established retail
outlets in the high income tourist destinations of Alaska, Mexico and the
Caribbean.
SEASONALITY
RISK:
Jewellery is considered to be a seasonal business; lower revenues in the non-peak season may make the business unsustainable.
Risk
mitigation:
· The company' products addresses the fashion conscious upper and mid value segment, where the impact of seasonality is limited.
· Products are marketed through large retail chains like Wal-Mart, J.C Penney, Sears, Macy's, Zales, Sterling, Friedman and White Hall among others; where jewellery is complementary to clothing.
· Offers designs and products at different price points to maximise the off take during the non-peak season as well. Commissioned stores in different holiday destinations like Alaska, Caribbean islands and Mexico, where an off-season in one location corresponded to a peak season in another.
· Forayed into television and internet-driven marketing where seasonality is less pronounced. Moreover seasonality in the television market complemented the seasonality of the traditional stores.
· Employs a distribution strategy to service markets, which have complementary seasons.
· Initiated the manufacture and marketing of diamond jewellery to provide a wider product range to diversified customers.
EXCHANGE RATE
FLUCTUATION RISK:
Since the company is an Export Oriented Unit (EOU), foreign
currency volatility can affect its top line realizations.
Risk mitigation:
Foreign exchange fluctuations are managed through an in-house treasury and forex management team that tracks forex movements leading to informed decisions on exposures. The company imports a substantial quantity of raw materials, naturally hedging its forex exposures.
WORKING CAPITAL RISK:
Given the working capital intensive nature of the jewellery business (working capital constituted a substantial part of capital employed), a mismatch between receivables and payables could result in a liquidity crisis.
Risk mitigation:
The company' prudent working capital management resulted in a tight control over receivables and inventory. A sufficient cash buffer reinforced short-term liquidity. An extension into retail and TV operations will reduce the long cycle of receivables.
DEBTORS' RISK:
The company supplies materials to its buyers on credit, and
any default in which can jeopardise cash flow.
Risk mitigation:
The company supplies material on
credit only to large and credible retail houses like Wal-Mart and JC Penney.
The company's retail operations are conducted in cash, eliminating the risk of default.
RAW MATERIALS RISK:
· Gold: High volatility in gold prices may lead to lower margins.
· Synchronisation of procurement with purchase order rates.
· Coloured gemstones: Gemstones pricing and availability.
Risk mitigation:
· Sources gemstones directly from the mines through international auctions.
· Procurement in a majority of cases is done within a few days of the acceptance of the order.
· Usually purchases gemstones that can be procured in large quantities since these generally have greater price stability.
PRODUCT OBSOLESCENCE
RISK:
The company caters to dynamic markets where fashions change rapidly, making the need to predict trends accurately critical.
Risk mitigation:
· The company possesses five design centres across the world to accelerate the rollout of approximately 15,000 new designs every year.
· Employs 350 designers, world-class CAD software operators and experienced design technicians in its product design centres.
· Members of the design teams are sent by the company to other countries to study design trends, enabling a faster product turnaround.
FIXED ASSSETS:
· Freehold Land
· Leasehold Land
· Building
· Plant and Machinery
· Electric installation
· Furniture and Fixtures
· Office Equipments
· Computer
· Vehicles
OTHER DETAILS:
|
Contingent Liabilities: |
31.03.2007 (Rs. in
millions) |
|
Guarantee given by the bank on behalf of
company |
24.835 |
|
Guarantee given to bank by the company |
256.590 |
|
Disputed Income Tax Matters |
11.239 |
Enterprises in which Directors are interested:
· Amrin Gems Export;
· Stone Age Limited;
· VGL Softech Limited;
·
Shivram Properties Private Limited.
WEBSITE DETAILS:
The company incorporated in Jaipur in 1989, is today a professionally managed, end-to-end vertically integrated business organization.
Subject was engaged in the exports of gemstones on a nominal scale upto 1994. In 1996-97, as an exercise in forward integration, the company came out with IPO that was aimed at establishing a world-class jewelry-manufacturing unit for export of gem-studded gold jewelry. In the year 1999-00, it set up a new 100% EOU at EPIP, Sitapura.
In 2003-04, it established a new state-of-the-art jewelry-manufacturing unit at Sitapura and also installed a micro-weight gold chain manufacturing plant probably the one outside USA.
In 2004-05, subject ventured into international retail market by setting up its wholly owned subsidiary Jewel Gem Inc. USA. The company set up retail chain stores at major tourists destinations like Alaska and Caribbean under the brand name “GenoA Jewelers”. Subject also commissioned diamond-processing unit at Adarsh Nagar, Jaipur for captive consumption in manufacturing jewellery and exports.
In 2005-06, the Company became an Indian MNC, probably the first in the Indian gems and jewelry sector by extending its operations in more than 10 countries, through the acquisition of STS Group of companies and setting up of 12 Retail Stores at major holiday destination of the world. During the year subject completed US$ 70 Million GDR issue successfully. Warburg, one the leading private Equity Investor of the world has also acquired more than 27% Equity Stake in the company.
At the company manufacturing infrastructure is most contemporary and scientific by making full use of CAD, CAM systems and equipments such as Laser soldering machines. Besides this, the company has a modern, extensive computer network, and has implemented an ERP solution to integrate all its operations.
With a very small beginning, today the company is the largest exporter of colored gemstones from India, and also the one of the largest exporter of studded jewelry.
CNBC, Country’s most reputed business news channel, has awarded 'Emerging India Award 2006' to the company in Gem and Jewellery category.
Subject has been Short listed for the 3rd time in Succession for adopting good corporate governance practices, for the ICSI National Corporate Governance Award.
The company with its unique business model, has started 24 hours jewellery TV channel in UK, Germany and USA.
The company has again received highest Export Award (Coloured Gemstone Category) for the 16th time, 13th time in succession.
On 12th October 2007, Nalanda India Fund Limited, one of the reputed private equity funds, has invested USD 35 million in the Company.
AWARDS
|
Name of Award/Certificate |
Year of Award/Certificate |
Name of Institution giving the award/certificate |
|
Highest Export Award on all India basis in cut and polished colored gemstone category |
1994-95 to 2006-07 |
Gems and Jewellery Export Promotion Council, State Govt. |
|
CNBC Emerging India Award, Gems and Jewellery Category |
2005-06 |
CNBC TV 18 and ICICI |
|
Short listing in top 20 Companies for ICSI All India Corporate Governance Award |
2003-2004, 2004-05 and |
The Institute of Company Secretaries of India |
|
PNB Expo Gold card |
2003-2004 |
Punjab National Bank |
|
Certificate of Merit from for implementing excellent corporate governance practices |
2002-2003 |
Rajasthan Chamber of Commerce and Industries |
|
Second highest export award in studded gold jewellery category |
2000-2001 |
Gems and Jewellery Export Promotion Council |
|
Highest Export Award in export of Cut and Polished Coloured Gems |
1996-1997 |
The Jewellers Association, Jaipur |
|
Export company of the year award |
1997 |
Institute of marketing and Management |
|
State Award for Export Excellence |
1994-95 |
Government of Rajasthan |
MILESTONES:-
|
1980 |
Launching of Vaibhav Enterprises. |
|
1989 |
Incorporation of Vaibhav Gems Limited. |
|
1994 |
VGL takes over Vaibhav Enterprises. |
|
1996-97 |
Public offer of Rs. 70.950 millions at a premium of Rs. 20/- per
share. |
|
1999-00 |
Set up 100% EOU at EPIP, Sitapura. |
|
2002-03 |
Issued Bonus shares in 1:1 ratio. |
|
2003-04 |
|
|
2004-05 |
|
|
2005-06 |
|
|
2006-07 |
|
|
2007-08 |
|
PRESS RELEASES:-
30th October, 2007
Vaibhav Gems Limited Receives $35 Million (US) Investment from Nalanda Capital Jaipur, India — October 30, 2007 — Vaibhav Gems Limited (India NSE:VAIBHAVGEM), a multi-national company in the jewelry industry, today announced an investment by Nalanda Capital’s India Fund equaling 14.9 percent share of the company in the form of Global Depository receipts and an additional 5% stake through warrants. The total transaction size, if warrants are exercised, will be about US $35 million.
Nalanda Capital Pte. Ltd is a Singapore-based private equity investment firm.
The firm’s India fund closed at $400 million in late May 2007. Nalanda Capital
Founder and Manager Pulak Prasad
will represent the firm on the VGL Board. Prasad was previously managing
director in India for the global private equity firm Warburg Pincus.
“We at Vaibhav are very pleased to have Nalanda Capital on our board,” said Sunil Agrawal, Chairman of
Vaibhav Gems Limited (VGL) “We look forward to their insights and expertise to
take Vaibhav to next level.”
VGL has expanded over the past several years to include jewelry shopping channels in the UK, Germany and the US, 19 retail stores in Caribbean and Mexico, its own manufacturing units in India, Thailand and China and a wholesale operation. In 2005, VGL acquired New York-based STS Jewels and its subsidiaries, which have continued to expand products and territories.
“The Team at Nalanda Capital feels that VGL’s business model and recent expansions show promise for long-term growth and a wise investment for its fund as the company is well diversified and vertically integrated,” continued Agrawal.
The team at Nalanda Capital has had a long and successful track record of private equity investing in India. Given the peculiar nature of the Indian private equity industry, the Nalanda team believes that the right long term investing model for India is to apply the private equity discipline in the public markets. The team has successfully applied this discipline in their professional careers before Nalanda.
About Vaibhav Gems Limited
Vaibhav Gems Limited, through its subsidiaries, engages in the manufacture and marketing of gemstones and jewelry primarily in India. VGL is the largest exporter of colored gemstones from India and one of the largest exporters of studded jewelry. VGL is a multi national company having offices across the globe in New York (STS Jewels Inc.),
London (The Jewelry Channel),
Germany (Der Schmuckkanal GmbH),
Japan (STS Gems Japan Limited),
China (STS Gems China Limited), Hong Kong (STS Gems Limited), and
Thailand (STS Gems Thai Limited and STS Creations Thai Limited).
VGL can be found online at http://www.vaibhavgems.com.
27th November, 2006
ICSI NOMINATES
VAIBHAV GEMS LIMITED AS TOP 25 COMPANY IN INDIA Top
Two Companies to Receive Corporate Governance Award
Jaipur, India — November 27, 2006 — For three years in a row, Vaibhav Gems Limited (VGL), a multi-national company in the jewelry industry, has been named among the top 25 companies in India by The Institute of Company Secretaries of India (ICSI). The organization selected VGL as a top 25 companies based on the organization’s track record of following positive corporate governance practices under the leadership of Sunil Agrawal, the chairman of the company. ICSI will award the top two companies with its “National Award for Excellence in Corporate Governance” on December 23 in Chennai, India.
Vaibhav Gems Limited is committed to the adoption of best governance practices and adherence in spirit and action,” said Agrawal.” The governance practices followed here are a product of our own desire to meet and exceed those goals and its improvement is a continuous process, with no upper bound.”
VGL has been striving for excellence through adoption of best governance and disclosure practices over the last few years. The company has been making proper disclosures on Board composition and functions, management thoughts on business performance and outlook as well as the significant risks and protective measures taken by the company.
“The selection of the Top 25 companies is done after detailed deliberations by a jury of professionals with respected expertise in their respective fields, “ said N.K. Jain, secretary and CEO of ICSI. “This award is extremely prestigious, and a symbol of excellence in itself.”
In pursuit of excellence and to identify, foster and reward the culture of evolving globally acceptable standards of corporate governance among Indian companies, ICSI instituted its “National Award for Excellence in Corporate Governance" in 2001. The underlying guideline for the Corporate Governance Award is to identify the corporations which best establish and follow corporate governance norms in letter and spirit.
About ICSI
The ICSI is a statutory body under an act of Parliament – the CS Act, 1980 with a mission to continuously develop high caliber professionals ensuring good corporate governance and effective management and carry out proactive research and development activities, for protection of interest of all stakeholders, thus contributing to public good. More information about ICSI can be found online at www.ICSI.com.
About Vaibhav Gems
Limited
Vaibhav Gems Limited, through its subsidiaries, engages in the manufacture and marketing of gemstones and jewelry primarily in India. VGL is the largest exporter of colored gemstones from India and one of the largest exporters of studded jewelry. VGL is a multi national company having offices across the globe in New York (STS Jewels Inc.),
London (The Jewelry Channel),
Germany (Der Schmuckkanal GmbH),
Japan (STS Gems Japan Limited),
China (STS Gems China Limited), Hong Kong (STS Gems Limited), and
Thailand (STS Gems Thai Limited and STS Creations Thai Limited).
VGL can be found online at http://www.vaibhavgems.com.
CMT REPORT
(Corruption, Money Laundering and Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts, India Prisons Service,
Interpol, etc.
1] INFORMATION ON
DESIGNATED PARTY
No records exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is or
was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No available
information exist that suggest that subject or any of its principals have been
formally charged or convicted by a competent governmental authority for any
financial crime or under any formal investigation by a competent government
authority for any violation of anti-corruption laws or international anti-money
laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE
GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms and
conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE
RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.42.67 |
|
UK Pound |
1 |
Rs.83.41 |
|
Euro |
1 |
Rs.66.39 |
SCORE and RATING
EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
8 |
|
PAID-UP CAPITAL |
1~10 |
8 |
|
OPERATING SCALE |
1~10 |
8 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
9 |
|
--PROFITABILIRY |
1~10 |
7 |
|
--LIQUIDITY |
1~10 |
8 |
|
--LEVERAGE |
1~10 |
8 |
|
--RESERVES |
1~10 |
8 |
|
--CREDIT LINES |
1~10 |
8 |
|
--MARGINS |
-5~5 |
--- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
72 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING
EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial and operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Unfavourable and favourable factors carry similar weight in credit consideration.
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
NR |
In view of the lack of information, we have no basis upon which to
recommend credit dealings |
No Rating |
|