Gitanjali Gems is one of the largest manufacturers and retailers of diamonds and jewellery in India. It sources rough diamonds from various primary or secondary sources then engages in the cutting and polishing the rough diamond for export to the international market as well as manufacture and sale of diamond and other jewellery through its retail operations in India and abroad.
The company started as back as 1966 as a partnership and in the last fiscal clocked in revenues of Rs.13.711.56 million. The demand for diamond and jewellery products is dependent mainly on higher employment and economic levels, which leave higher disposable income in the hands of the consumers. In times of a downturn consumers can quite easily scale down their consumption of jewellery and diamonds.
Gitanjali Gems has got two-diamond manufacturing facilities located at Borivali in Mumbai and at the Special Economic Zone in Surat. It has also got a 100% export oriented unit in SEEPZ Mumbai, which produces gold and platinum studded jewellery. There are two jewellery-manufacturing facilities at MIDC, Andheri, and Mumbai, which produce branded jewellery for the retail operations in India. The company exports to all the major international markets and has a workforce of over 2300 employees. Some of the better-known brands under which the company sells its jewellery are Nakshatra, Asmi, Gilli and D’Damas.

Financials

The company has witnessed declining profits for the last consecutive five years. While the net profits for the year 2001 was Rs.455.68 million it has steadily declined and reached a level of Rs.102.47 million in the last fiscal. The revenues of the company have also stagnated during the last five years and in the last fiscal stand at Rs.13587 million. This is a low margin business mainly as raw material costs form a very high percentage of the total turnover. The net profit margin for the last year has been a mere 0.75%. And while this is low it is not an exception as when the company was enjoying a high profit in 2001 even at that time the net profit margin was very low at 1.2%.

Conclusion

While the business exists from a very long time and is run by capable management to have made it last so long, there is no real appeal for the investors to buy into this IPO as the margins are very tight and there are going to be safer and better bets for investments. However if the pricing is very low say 4 or 5 times earnings it might induce investors to buy into this. But all in all only people with a fair bit of appetite for risk should buy into this IPO.