Gitanjali ups retail ops, sees SEZ slowdown 

Mon 02 Nov 2009

By Aniruddha Basu and Nandita Bose

MUMBAI - Jeweller Gitanjai Gems Ltd expects to add 300,000 square feet of retail space by December as it expands its presence in direct retail to tap a reviving local market.

"We are driving through a major expansion through direct retail and adding 300,000 square feet of space by December," Chairman and Managing Director Mehul Choksi told Reuters, adding that the company will spend 1.25 billion rupees over 18 months.

"This entire cycle will get over by 2010. Then we may push forward also," he said.

Direct retail operations contribute to 30 percent of the firm's revenues.

"Our jewellery sales which have been growing at 25 percent so far will be extended further, we believe it will go to 35-40 percent for the next six months," Choksi said.

Earlier in the day, the company, which has been looking at India and America for further acquisitions, bought a majority stake in its joint venture parter Spectrum Jewellery Pvt Ltd , which owns the 'Sangini' brand of diamond jewellery.

"We have advanced our shares in the Sangini brand from 50 to 93 percent. So we have bought out the joint venture," he said.

The acquisition will add 1 billion rupees in revenue in 3 years, he said.

The firm, he said, was sitting on cash reserves of up to 1 billion rupees and had debt-equity of 0.6-0.7 to equity.

The company earlier in the day posted a net profit of 373.9 million rupees in the quarter ended September 30 from 353 million rupees a year ago helped by rising prices of gold and robust domestic demand.

Net sales rose to 9.59 billion rupees from 7.28 billion rupees in the year-ago quarter.

"We are looking at better and a very strong second half. We are looking at a 50 percent growth as far as our revenues are concerned and that should give us substantial increase in our net margins too," he said.

Gitanjali, one of India's largest jewellery houses, sells jewellery under the Gili, Nakshatra, Asmi and D'Damas brands in India. Choksi estimates the total net worth of these brands at 15 billion rupees.

The company, which has set up one special economic zone in Hyderabad has seen a delay with its plans to set up others after the global economic meltdown.

"The next one in Panvel has been notified and (for) Nasik we have acquired land. But for the ones in Aurangabad and Nagpur we haven't acquired land yet."

"We are a little bit slow on the SEZs I would admit. We are about one year delayed... because of the slowdown we have seen last year," Choksi said.

Shares of the firm ended up 0.92 percent at 115.05 rupees in a weak Mumbai market.

(Editing by Sunil Nair)





(Reuters)

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