The gems and jewellery industry has been growing at an incredible pace. From a Rs. 17000-crore industry 10 years back, it has grown to Rs. 250,000-crore industry. The most interesting aspect of the growth story is the rising market share of organized retail players. The market share which was less than 7% a few years back has now grown to 24%. And the market share of organize players is expected to reach 35%-mark over the next five years.
Sanjeev Agarwal, CEO, Gitanjali, moderator of another keenly awaited panel discussion titled ‘funding for expansion’ set the tone for an engrossing session by mentioning those interesting facts and observations. To put things into perspective, he highlighted the growing importance of working capital for a jeweller to increase stock level and enhance marketing spends with an intention to garner larger market share in this extremely competitive marketing scenario. “The concept of plowing back the profit to the business year-on-year won’t be able to meet new-age growth requirements. Jewellers need to wake up to the fact,” said Agarwal.
The power panel comprising of V Balasubramaniam, chief business officer, BSE Ltd, Jyoti Saran, general manager (MCRO), SBI, Mumbai, D R Dogra, managing director & CEO, Credit Analysis and Research Ltd. (CARE) and B Madhuprasad, chairman, Keynote took it from where Agarwal had left and discussed in details various funding options and opportunities – borrowing from financial institutions, raising money through BSE SME listing, earning healthy credit rating etc.
Credit Rating – Gateway to greater funding options
“Banks, financial institutions (FIs) as well as formal institutional lenders always base their lending decisions on credit rating. It also helps in tapping alternative financing options such as private equity, venture capital and other non-bank sources,” said Dogra while introducing a gamut of opportunities a healthy credit rating opens up to a jeweller.
In addition, he prescribed some to-do things which a jeweller should implement to bring in greater financial discipline to the business before opting for credit rating. “They should set up robust management information system, ensuring greater transparency in dealing with stakeholders, prudent inventory hedging practices and regular debt servicing,” said Dogra. “Financial institutions seek lower collateral while lending funds to the companies with higher credit rating,” said Saran.
BSE SME – unlocking growth early
Balasubramaniam in his speech highlighted how BSE SME could prove to be a game-changer for the jeweller when it comes to raising capital. Launched in 2012, BSE SME aims to assist SMEs to raise equity capital to realize growth and expansion and thus help them grow into large companies. It helps the company to unlock their value. It boosts the visibility of the company and provides immense opportunity to investors to identify and invest in good companies at an early stage.
“BSE SME Platform is actually integrated with the main exchange of BSE. It leverages the entire infrastructure of the existing equity platform and network of the BSE. The listing guidelines have been relaxed and the companies can get listed within a period of three months,” said Balasubramaniam.
In addition, the companies which have completed two years of listing on the BSE’s SME platform can migrate to Main Board of the Exchange, provided their paid-up capital is paid-up capital is between Rs.10-25 crore.
Raising equity through IPO or private equity – awareness is growing
According to Madhuprasad, the awareness towards raising equity through an IPO and also through the private equity has considerably increased amongst the jewellers. The transaction size has been reasonably large. The growing awareness can be attributed to the indomitable urge among the jewellers to grow.
What is the ideal roadmap to gain better valuation? “It’s important is to have a proper transparent accounting methodology and put corporate governance in place both in spirit and law. “A jeweller needs to analyze the strength and weaknesses of the company and also the investors’ perception of the industry and arrive at a practical valuation which should be investor friendly. Investor friendly pricing automatically ensures initial listing gains,” explained Madhuprasad.
Saran feels that brining in financial discipline is gaining supreme importance today, as financial institutions have become watchful and circumspect while lending fund to the companies.