Gitanjali Gems eyes China, after Dubai

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India’s largest jewellery retailer Gitanjali Gems Ltd will acquire a Chinese manufacturing unit and jewellery retail firm by the end of 2011 as it looks to expand its global footprint and boost sales.

Gitanjali, which retails diamond jewellery under the brands Gili, Nakshatra, Asmi and D’Damas inIndia, recently acquired four Italian jewellery brands from a unit of Dubai’s debt-laden jewellery group Damas International.

“We plan to make an announcement by December this year… It will be something mid-sized as we plan to acquire it and then help it attain scale,” Abhishek Gupta, head of corporate strategy told Reuters on Tuesday, without giving any financial details about the China deal.

In June this year, Gitanjali Gems acquired Italy-based jewellery firm DIT Group SpA for $11 million. DIT operates under the names Stefan Hafner, IoSi, Porrati and Nouvelle Bague.

DIT, a unit of Dubai’s Damas International, had filed for bankruptcy and was in the process of liquidation inItaly.

“Along with DIT Group Spa, Gitanjali has acquired its operating vehicle BLU Srl, which was set up to help the four brands (Stefan Hafner, IO Si, Roberta Porrati, and Nouvelle Bague) keep working when DIT had sought to restructure debt,” Gitanjali Gems Managing Director Mehul Choksi was quoted as saying.

Global footprint

TheUnited Statesaccounts for 35 percent of the total diamond jewellery market, while China, Japan, India and the Middle East each account for 10 percent of the demand globally.

Gitanjali, which the market values at $596.8 million, has a retail presence in the Middle East and the United States.

It plans to open 2-3 more stores in the Middle East in the current fiscal year ending March 2012 and is hoping its business in the U.S., which was affected during the global meltdown, will turn profitable at the operational level.

“We are investing into advertising and a lot of other strategies to boost our U.S. business. It already has started turning around from the middle of last year but we still have some stores which are not profitable yet,” Gupta said.

It plans to invest 3.5-4 billion rupees as capital expenditure in FY12 which will meet its working capital requirement, new store additions and cost of inventory.

Gitanjali, which is undergoing a business restructuring, plans to finish the process in the next 2 months, after which it hopes to make an announcement about roping in a private equity partner.

In February, Reuters had reported the company was in talks with L Capital, the investment firm co-funded by luxury group LVMH, to sell stake.

Robust demand

Gitanjali has said demand for gold and diamond jewellery inIndiacontinues to remain robust despite rising prices and that the company expects to clock in profit growth of 50 percent this fiscal year on a sales growth of 35 percent.

In FY11, net profit stood at 3.55 bln rupees on net sales of 94.56 billion rupees.

The company expects its same-store sales, a key gauge of profitability for retailers, to grow at 30-35 percent in FY12.

The Indian retailer added four new Indian diamond jewellery brands to its offering on Tuesday, on affordable price points, and expects the brands to boost sales this fiscal.

It also said it expects sales of 8 billion rupees from the upcoming India International Jewellery Show.

Expansion mode

Gitanjali has been in an expansion mode the last few years, acquiring several companies including a December 2010 $15 million purchase of Giantti Italia S.R.L., a jewellery company based inMilan,Italy. In 2007, the firm acquiredUSfirms Samuels Jewelers Inc and Rogers.

The company’s American stores suffered during the global meltdown, but Gitanjali expressed hope for profitable turnarounds soon.

While?Gitanjali?is currently restructuring its business, it has capital expenditure plans for its 2012 fiscal year totaling $79 to $90 million; the money includes working capital, new store additions and inventory costs.

Gitanjali Gems Limited engages in the manufacture and retail of diamonds and jewellery inIndiaand internationally. The company operates in two segments, Diamond and Jewellery. ?The company markets its products primarily under the brand names of Gili, Nakshatra, Asmi, Sangini, D?damas, Vivaaha, and Giantti. ?It has operations in theUnited States, theUnited Kingdom,Belgium,Italy, the Middle East,Thailand, South East Asia, andJapan. Gitanjali Gems Limited was founded in 1966 and is based inMumbai,India.

Gitanjali Gems Ltd. announced that they will report Q1, 2012 results on Aug 12, 2011

Sources: Reuters, jewellerynewsasia, businessweek, israelidiamond

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