General
- The Gems & Jewellery Industry is one of the fastest growing segments in India with an annual growth of approximately 15%. The Gem & Jewellery industry presently constitutes nearly 10.7% of India’s exports.
- The domestic market is estimated to cross US $ 26 billion by 2012 and trade circles estimate it to grow to about US $ 25.2 billion in the next 2 – 3 years.
- India is the largest consumer of gold in the world and consumes nearly 800 tons of gold, which accounts for nearly 20% of the world consumption. Of this, nearly 600 tons goes in making of gold jewellery.
- India is emerging as the world’s largest trading centre for gold, which is targeted to cross US $ 16 billion by 2012.
- India has an abundant supply of skilled manpower suited for designing and producing high volumes of exquisite jewellery at low labour costs.
- Due to the very high export orientation of the industry, most of the large players have established their offices / subsidiaries / associates in nearly all the important trading centres of the world like USA, Singapore, Hongkong, China, UAE, Tokyo, Belgium, Tel Aviv, London etc.
- India is the largest diamond cutting and polishing centre in the world and globally enjoys a 60% share in value, 82% share in caratage terms and 95% share in terms of pieces. Effectively, 9 out of 10 diamonds sold worldwide are processed in India.
- India’s export of Gems & Jewellery products (constituting cut and polished diamonds, gold jewellery, coloured gemstones, pearls, non-gold jewellery, synthetic stones etc) was at US $ 23.72 billion in 2008-09 and approx U.S. $ 27.67 billion in 2009-10.
Retail Sector
- While recently there has been a growing trend of large business entities entering this sector, the Gems & Jewellery sector still continues to be dominated by small and medium sector entities.
- With a growing middle class consumer market, the market for branded jewellery is expanding substantially and is expected to be in the range of US$ 2.2 billion by 2010.
- Many of the large players in the industry are setting up retail chains of jewellery showrooms across India which market gold (plain and studded) jewellery, fusion jewellery, diamonds etc.
- With gold being seen as an investment alternative, the market for gold coins / bars has increased substantially and is presently estimated at US $ 2.11 billion.
Opportunities and Challenges
- With the phenomenal increase in the growth opportunities and scales of business operated, the challenges have also increased manifold.
- Some of the significant challenges faced by the industry are
- Price Risk of key raw materials
- Foreign Exchange Risk
- Security risk during mass scale production, handling and movement
- Fast changing fashions, models etc
- Credit Risk
- Country / Territory Risk for market concentration in few countries.
- Compliance risk has increased significantly as a result of the multinational operations of the industry
- Ability of management in handling country specific challenges.
- In case of diamonds, concentration of rough diamonds supply with a few suppliers is a major challenge
- Increased international and domestic vigilance by authorities considering Gems & Jewellery products (eg. gold, diamonds etc) being considered as sensitive goods.
- Scaling up the local systems and procedures to suit international standards and requirements.
- Products are more based on discretionary and impulsive buying and hence get affected first during any downturn.
- While the challenges are many, the industry also offers significant growth opportunities considering the future outlook.
What we do
Suresh Surana & Associates has been involved in the Gems & Jewellery industry for over 2 decades and provides a wide range of professional services to this industry viz.
- Internal Audit and Risk Management (including Compliance audits)
- International and Indian Taxation
- Corporate Advisory and Structuring covering Tax / Foreign Exchange regulations, Double Taxation Avoidance Agreements (DTAA) regulations, Commercial regulations etc.
- Advisory and assistance in outbound and inbound Foreign Direct Investments from and into India, formation / re-structuring of Joint Ventures, Mergers and Acquisitions etc.
- Quality Management Systems covering compliance of standards defined by De Beers, Rio Tinto etc.
- Operations Consulting covering lean management systems, JIT approach, Inventory management tools, preparation of Standard Operations Manuals (SOPs) defining pre-agreed systems and procedures etc and assisting in their implementation.
- Financial Process Outsourcing
- Transfer Pricing
- Information Technology Solutions covering data and process automation, assisting in the identification and implementation of software, ERP etc.
- Enterprise Risk Management enabling organisations to help identify, control and mitigate / manage risk across the organisation.
- Company Law compliance and Commercial documentation