Buy: Shree Ganesh Jewellery House (I) Ltd

CMP: Rs.28.50

Key Highlights:

• Shree Ganesh Jewellery House (I) Limited is:18 (eighteen) companies in one, engaged in mining, refining, jewellery manufacture, retail, solar energy, gold loan financing and bullion trading. Last week, the Reserve Bank of India (RBI) has eased the norms for extending loans against gold jewellery as collateral. Now, non-banking finance companies (NBFCs) can give a loan up to 75% of the gold value; the previous limit was 60%, the Business Standard report suggests. The loan-to-value ceiling had been raised after moderation in the growth of gold loan portfolios of NBFCs in the recent past, RBI stated on Wednesday. In the last few years, Shree Ganesh Jewellery House (I) Limited had an increasing instance of people coming to it to pledge their gold holdings and seek loans against them, largely on account of the trust inspired by its long-standing presence in the business. During the FY13, it took cue from these instances and extended to the organised business of gold loan financing. The business is attractive for some valid reasons: the loan amount is more than covered by the quantum of collateralised gold; the short loan tenures make it possible to generate a superior IRR. 
• It is possessing one of the most extensive value chains in the global gems and jewellery sector. The Company’s headquarters is in Kolkata; its three manufacturing locations are located in and around Kolkata; its 46 sales and marketing offices are spread pan-India. The Company’s products are exported to the UAE, Singapore, Hong Kong and the US. 
• The Company intends to build 2,00,000 sq. ft of retail space with an incremental 100,000 sq. ft in just a single year (2013-14) and an incremental 1,00,000 sq. ft over the next few years. Interestingly, this will not just be an incremental space play; each showroom will be spread across no less than 10,000 sq. ft; each store will be centrally located in prominent cities and each store will be stocked with an extensive repertoire drawn from the Company’s Domjur factory.
• In order to explore the emerging market in Bangladesh Shree Ganesh Jewellery House (SGJH) has entered into a joint venture with Rocks Creation Limited of Dhaka, Bangladesh for manufacture of gold jewellery, both plain and studded with diamonds and other precious and semi-precious stones.
• SGJH has clocked a 28% increase in turnover to Rs.12971 crore and a net profit of Rs.462 crore in FY13 as compared to Rs.461 crore in FY12.
• The company has formed a 100% subsidiary in Ghana for procurement of Dore Gold / Unrefined gold for further refining in India. Its order book during the May, 2013, was Rs.2500 crore. Currently, exact state of the order book was not known, but the market rumour is around Rs.2000 Cr. 
• Middle East continues to be its global market focus. Also, through its subsidiary at Ghana, it is planning for procurement of dore gold for refining in India. Recent relaxations by the government of India could be positive for the company. 
• The promoters' holding is 73.46% (Indian: 49.31% & Foreign: 24.15%). The FIIs hold 8.44% while the DIIs hold 4.96%. The Non Institution  holding is only 13.14%. The corporate bodies hold 2.44%. This increased the premium value of the share price. 
• Severe restrictions on import of bullion have hit hard Shree Ganesh Jewellery House, one of country’s largest gold jewellers, which is also a major trader and supplier of the yellow metal to the local industry. The Kolkata-based company has suffered a loss of over Rs.1,000 crore in one month as it had to cancel an import deal with a UAE company due to government imposed curbs, it said on Wednesday. “Due to regulatory non-allowance for import of gold into India for domestic selling Shree Ganesh Jewellery House FZE, a wholly owned subsidiary in UAE, had to cancel a bullion purchase contract in October. As such the subsidiary has suffered a loss of approximately Rs 1,137 crore,” the company said. However, this is one time loss and would have least effect on the future results of the company. 
• The recent media report suggests that the government could go for a review of the Import restrictions on Gold. The Economic Times of 3 January, 2014 writes: Amid demands for relaxing curbs on gold import, India's Commerce and Industry Minister Anand Sharma Friday said the government would review the policy, noting there is a need to strike a balance. The Directorate General of Foreign Trade ( DGFT), the commerce secretary, the economic affairs secretary and Reserve Bank of India (RBI) will discuss and take a collectively decision, Sharma told reporters on the sidelines of an event. This is expected to have a positive sentimental effect on the gold counters.  CLICK HERE. 
• SGJH, a nominated agency to directly import precious metals, imports 98% of its raw materials but generates 80% of its revenues from exports, creating a hedge at a time of a weakening rupee.
• The consortium of banks is expected to restructure its Rs.3000 Cr plus loan.  Shree Ganesh Jewellery House India Ltd, is Indian jewellery maker backed by Credit Suisse Group AG. Credit Suisse Pe Asia Investments (Mauritius) Ltd holds 4.45% of the shares of the company. IFCI Ltd, Axis Bank Ltd and LICI holds, 1.94%, 1.05% and 1.39% of the shares of the company. Credit Suisse PE Asia Investments (Mauritius) Ltd was the company’s fifth-biggest shareholder as of 30th September, 2013, according to the BSE website. Shree Ganesh Jewellery House (I) Ltd. is a 10,000 Cr. (US $ 2 billion approx) turnover company and is a Govt. of India recognized '4 Star Export House'. The company is one of the leading manufacturers and exporters of handcrafted gold jewellery from India and the shares of the company are listed in Bombay Stock Exchange and National Stock Exchange of India.
• The group promoted and headed by Mr. Nilesh Parekh and Mr. Umesh Parekh has subsidiary offices in Hyderabad, Chennai, Bangalore, Delhi. The group is into manufacturing of gold, diamonds and gemstone studded jewellery. 
• Incorporated in 2002 by Shree Ganesh Group of Kolkata, Shree Ganesh is engaged in trading and manufacturing & export of handcrafted/machine-made plain & studded gold jewellery and diamond jewellery over the last five decades. The company markets its jewellery products under the brand name, ‘GAJA’. It also entered into a 50:50 JV with Societa Aretina Lavorazione Preziosi S.P.A. (SALP SPA) to be operated under the name of OROITALIA Chains Pvt. Ltd.
• The Domjur factory has provided the necessary foundation to scale the Company’s growth for the next few years without the need to make another large investment. This scale will be increasingly used to provide the Company with an adequate inventory of finished jewellery that will adequately stock the Company’s large retail outlets. The larger quantum of gold required to sustain the Company’s operations will be derived from captive mining as the latter scales progressively over time. The increased brand exposure will translate into a larger scope for the gold loan financing business. Besides, the wind energy generation business will be largely independent of the Company’s Balance Sheet and will continue to grow using its cash flows and leverage.
• It is a dividend paying company. The company paid a dividend 30% (Ex-date: 29 Aug, 2013). The small-cap company has equity capital of Rs 71.91 crore. Face value per share is Rs 10.
• Shree Ganesh Jewellery House (I) said that the company has approached State Bank of India (SBI), the lead bank of the consortium for referring the matter to Corporate Debt Restructuring Cell for Corporate Debt Restructuring (CDR) of its debts. The Flash Report for the same is being submitted to the lead bank and SBI has convened the consortium meeting of all the bankers today, 20 December 2013.
• Over the course of 2013-14, SGJH intends to diversify from a significant presence in one business (jewellery manufacture) to a scaled presence in another (branded retail and renewable energy generation through a subsidiary), enter the business of gold mining and then extend itself into full fledged gold loan financing. The result is that while it is largely engaged in just three businesses today, it expects to be formally involved in five by the close of 2013-14. 
• Shree Ganesh Jewellery House, entered into a joint venture with a reputed refiner that increased  its access to Dore bars and then sought mining rights in Africa, which can potentially make it an ore producer.
• Peer Group of Shree Ganesh Jewellery House:
  (i) Rajesh Exports Ltd.
  (ii) Vaibhav Global Ltd.
  (iii) PC Jeweller Ltd.
  (iv) C Mahendra Exports Ltd.
  (v) Shrenuj & Company Ltd. 
• Manufacturing units:
  Manikanchan SEZ (Kolkata) - Gold manufacturing capacity: 42 tonnes (42, 000 kgs) of hand-crafted jewellery; craftsmen: 334.
  Mondalpara (West Bengal) - Gold manufacturing capacity: 1.5 tonnes of Italian fusion jewellery, 0.6 tonnes of bangles jewellery and 0.45 tonnes of plain and studded gold jewellery; craftsmen: 60.
  Domjur (West Bengal) - Gold and diamond studded jewellery manufacturing capacity: 20 tonnes of handcrafted jewellery and 1.5 lac carat diamond studded jewellery; Refining capacity: 35 tonnes p.a.; craftsmen: 400 (expected).
• Awards and accolades:Award for ‘Outstanding Export Performance’ by Gems and Jewellery Export Promotion Council in the category of ‘Plain Precious Metal Jewellery Exports’ from Units by EOU/EPZ, 2010-11.
• Recognised as the highest exporter of gems and jewellery from India by DHL-CNBC International Trade Awards.
  Recognised as a Four Star Export House.
  Nominated agency under the Foreign Trade Policy, permitting the Company to directly import precious metals.
  Credit rating of A1+ for short-term debt and A+ for long-term debt as appraised by CARE.
• In 2013, Business World International Business Awards was conferred to Shree Ganesh Jewellery House (I) Ltd. for ‘Excellent Export Performance’ in the past three years.