February 2008

GEMS LIMITED

Corporate Presentation

Registered Office: 'Laxmi Tower', Office No. 6, B Wing, 1st Floor, Bandra Kurla Complex, Bandra (East), Mumbai - 400051

Agenda
Company Overview Large and Expanding Market Integrated Business Model Focus on Jewellery Retail New Initiatives and Expansion Strategy Visionary Management – Driving Growth Exceptional Financial Performance
2

Business Overview
Established presence One of India’s largest integrated diamond and jewellery companies Established in 1986 Sightholder status with DTC through a promoter group company Sophisticated and scalable diamond and jewellery manufacturing facilities Approximately 1,246 retail outlets in India and 143 outlets in the U.S. Growing revenues and profitability
Revenues (Rs. bn)
40 35 30 25 20 15 10 5 0
= GR CA 59%

Integrated business model Diamond processing Jewellery manufacturing Jewellery retailing in India Branded jewellery International jewellery retailing Samuels and Rogers Gems & jewellery SEZs Leading brands Among the first branded jewellery in India Leading jewellery brands

EBITDA margin (%)
35 34 7% 6% 5% 4% 3% 2% 1% 0%

24 14

FY 05

FY 06

FY 07

9M Dec-07

Note: Exchange rate used for conversion US$ 1.0 = INR 39.750

3

Business Map
Gitanjali Gems

Diamond and Jewellery

Lifestyle

Infrastructure

Manufacturing and Wholesaling Diamond Processing 5 state-of-the-art processing and manufacturing units 4 decades of experience Sufficient production for internal and external use India

Retail

U.S. / International

Pioneers of branded jewellery in India Brands rated amongst best in India Strong sales and distribution network including 112 distributors and ~1,250 outlets High value acquisitions in the U.S.

Developing 200 acre SEZ in Hyderabad Back-end support through supply for retail operation from manufacturing units Enhancement of manufacturing capacity High value creation Plans to develop more SEZs at Panvel, Nanden, Nashik, Nagpur, Aurangabad and Calcutta Government incentives / tax benefits

4

End to End Process and Integrated Presence
Presence across the entire value chain
Exports Sourcing rough & uncut diamonds Diamond Processing Jewellery Manufacturing Exports Jewellery Branding U.S. Retail Indian Retail

Our operations are extensive and cover every step in the end to end process
Sourcing Processing Manufacturing Branding and Retailing

Prestigious sight-holder position Enables quality supply at efficient prices

Two modern processing facilities Additional facilities commence post SEZ completion

Three state–of-the-art functional facilities More upcoming facilities in SEZ

Pioneers of branded jewellery in India Excellent set of brands Exhaustive sales & distribution network

SEZ completion will assist both processing and manufacturing functions of the company 5

Moving up the Value Chain
New ventures have high growth and high margin potential SEZ / Gitanjali Infra-tech
Value creation through added revenues and added manufacturing facilities

Jewellery Retail Growth
10-12% EBIDTA

Diamond Manufacturing & Wholesale
4-5% EBIDTA

Retail Lifestyle High margins expected

Diamond Processing
2-3% EBIDTA

Margin play 6

Business Outlook
Strong presence across the value chain SEZs will provide back end support and create value Lifestyle expected to compliment retail jewellery operations

Growth / Value

Indian Jewellery Retail Retail Lifestyle

SEZ / Gitanjali Infra-tech U.S. Jewellery Retail

Diversifying into high growth / value space

Diamond Manufacturing & Wholesale

Diamond Processing

Strong and expanding Indian & U.S. retail operations Vast experience in diamond Processing & manufacturing Supply for Indian & International retail operations leveraged from company’s own manufacturing units

Investment
7

Investment Highlights
Large, integrated diamond and jewellery player Presence across the entire value chain – Fully integrated operations Sophisticated manufacturing facilities including upcoming Hyderabad SEZ Strong retail presence in India and the U.S. Strong brand equity and broad product range Significant focus on retail and distribution network to drive growth Diversifying into high growth/value areas such as SEZs and retail lifestyle Visionary leadership and a deep management team

8

Agenda
Company Overview Large and Expanding Market Integrated Business Model Focus on Jewellery Retail New Initiatives and Expansion Strategy Visionary Management – Driving Growth Exceptional Financial Performance
9

Global Gems and Jewellery Industry
Global market for gems and jewellery pegged at US$ 145 billion Diamond-studded jewellery contributes close to 50% of the total demand Plain gold jewellery contributes over 40% of the total demand United States alone represents over 45% of total worldwide diamond jewellery sales The United States, Middle East, China, India, Japan, Italy and the United Kingdom constitute close to 75% of the global demand for jewellery Jewellery manufacturing and Jewellery retailing constitute close to 75% of the Jewellery value chain Value addition continues to be highest for the players with an integrated presence in the Jewellery value chain
Plain Gold jewellery 41.6%

Market share of various jewellery segments (2005)
Plain platinum Jewellery 6.2% Others 5.0%

Diamond Jewellery 47.2%

Key world markets for jewellery (2005)
Rest of the World 24% China 9% India 8% Italy 5% Japan 8% Turkey 3% US 31%
Source: GJEPC–KPMG report

Middle East 9% UK 3%

10

Indian Gems and Jewellery Exports
India, China, Israel and Belgium are the leading countries engaged in the global diamond cutting and polishing industry India accounts for approximately 60% of the global polished diamonds in value terms, 80% in caratage and 90% in pieces The gems and jewellery industry occupies a prominent position in Indian economy. Leading foreign exchange earner US$ 17 billion of exports in FY 2007 - US$ 11 billion in diamonds USA, Hong Kong, UAE and Belgium are the major export destinations Exports of Gems and Jewellery (excluding Cut and Polished Diamonds) grew at 18% CAGR over FY 2005-2007 Superior craftsmanship and low-cost labour increases competitiveness
8% U.A.E. 10% Belgium 12% Hongkong 31%

India’s imports and exports of raw material and gems and jewellery (2006—07) Imports US$14.0 billion
Other Gold Bars 19% 4%

Exports US$17.2 billion
Rough Diamonds 3% Gold Jewellery 30% Other 3%

C&P Diamonds 14%

Rough Diamonds 63%

C&P Diamonds 64%

Exports of cut and polished diamonds (2006-07)
Japan Israel 4% Others 8% U.S.A. 27%

Exports of Gems and Jewellery (excluding Cut and Polished Diamonds) (2006-07)
Others 18% Hongkong 3% U.K. 3% U.S.A. 40%

U.A.E. 36%

US$10.9 billion
Source: GJEPC

US$6.3 billion

11

Indian Retail Jewellery Overview
India is one of the largest jewellery markets 97% of jewellery sales are by “Family jewellers” Change in the demographics and increased consumerism of Indian retail market Organized retail is growing at a rapid pace across all sectors Share of organized retail jewellery increasing rapidly: Expected to grow from US$ 350 million in 2006 to US$ 2.28 billion by 2010 Key elements for development of a successful brand brand image aesthetic designs marketing and promotion distribution network Yesterday
Unbranded, From Family Jeweller

Today
Branded

Gold Jewellery

Diamond Studded Jewellery

Jewellery for Investment

Jewellery for Fashion

Traditional Ethnic and Chunky designs Marriage and Festival Season as peak seasons Jewellery sold on commodity basis with labour charges

Fashionable, lightweight and innovative designs “Wearability” and Gifts spreading the demand through the year Jewellery being sold on a per piece basis

Increasing disposable income and discretionary spending by Indian consumers leading into a change in consumer behavior towards demand for branded and luxury products 12

U.S. Retail Jewellery Overview
Largest jewellery consumer country 50% of worldwide diamond jewellery sales are made in the United States U.S. and Canadian retail jewellery accounted for approximately U.S.$ 66 billion of sales in 2006 Diamond jewellery accounts for over 50% of total jewellery sales Fragmented markets with number of independent regional and local jewellery retailers, as well as national jewellery chains Jewellery retailers also include department stores, mass merchant discount stores, direct mail suppliers, online retailers and television home shopping programs
Representative list of jewellery retailers in the U.S.

13

Agenda
Company Overview Large and Expanding Market Integrated Business Model Focus on Jewellery Retail New Initiatives and Expansion Strategy Visionary Management – Driving Growth Exceptional Financial Performance
14

Establishing Presence Across the Value Chain
Diamond - Import and Manufacturing Jewellery Manufacturing – Domestic and Exports Jewellery Retailing – Domestic and International Leading Indian Jewellery Brands Internationalization of business model
Rough Distribution Jewellery Manufacturing Jewellery Retailing

Diamond Polishing

Diamond Distribution

Shopping Experience

Access to large retail markets like USA Expansion into relating of Lifestyle Products Development of infrastructure for Gems and Jewellery sector - SEZs

Direct from Miners

Jewellery Wholesaling

Jewellery Branding

Jewellery manufacturing and retailing comprise almost 2/3rd of the value chain 15

Diamond Processing
Sight holder of Diamond Trading Company (DTC) through promoter group company One of ~90 sightholders globally Tri-Star, our subsidiary is a direct customer of BHP Billiton Quality diamond sourcing at competitive prices Two diamond manufacturing facilities located at Borivili in Mumbai and at Surat in Gujarat
Cleaving Marking

Borivili facility spread over 40,000 square feet with modern diamond processing equipment and employs more than 1,200 people Latest diamond processing machinery and trained labour Diamonds exported to countries including the U.S., Europe, Hong Kong, Japan, China, Middle East and Thailand
16
Cutting Sawing

Polishing

Strategic Acquisition of Tri-Star

Acquired a 70% stake in Tri-Star Worldwide LLC Direct customer of BHP Billiton Licensee of CanadaMark, a tracking system that records all CanadaMarkTM Diamonds in its database Manufacturer and global distributor of Canadia® brand diamonds and diamond jewellery in various countries, such as Australia, Canada, England, Ireland, Northern Ireland, New Zealand, Scotland, and the United States

Direct purchase of rough diamonds from the BHP Billiton Source of ‘‘Mined in Canada’’ brand diamonds

17

Jewellery Manufacturing
Jewellery manufacturing for exports and for the Indian retail and wholesale market Products include both diamond studded and other jewellery Exports Sophisticated facility at the SEEPZ at Andheri, Mumbai Producing gold and platinum diamond studded jewellery Domestic Two jewellery manufacturing facilities in Andheri, Mumbai Small facilities in an SEZ in Surat, Gujarat
Sprue grinding Model and mould making

Designing

Waxing and wax setting

Casting

Filling

Polishing

Metal setting

Rhodium polish

18

Agenda
Company Overview Large and Expanding Market Integrated Business Model Focus on Jewellery Retail New Initiatives and Expansion Strategy Visionary Management – Driving Growth Exceptional Financial Performance
19

Jewellery Retailing in India
Strong retail and distribution network with panIndia presence 112 distributors Approximately 1,246 outlets, including outlets in host stores 10 exclusive stores 28 franchisee stores One of the first companies to introduce branded jewellery Over 12 branded jewellery lines (including sub brands), targeted at different customer profiles Gili and Nakshatra - “Superbrands” in 2004 by ICSC Continue to grow retail operations and expand market penetration for branded jewellery
Sangini Agni Gili TBZ D'Damas Moksh Vivaha 0 9% 8% 7% 6% 20 40 60 80 14% 27% 22%

Strong Brand Recall
Tanishq Nakshatra Asmi 29% 62% 69%

Source: The Solitaire – TNS Survey 2005

20

Leading Brands addressing diverse consumer segments
Easy Elegance Diamond studded branded jewellery at reasonable prices Pan-India retail presence with approximately 150 outlets Awarded Superbrand status in 2004 by ICSC The Fire Within The Enchanting Enigma Partners for Life The Art of Beauty The Art of the Different The Wedding Collection Pure. Proud. Precious Was originally introduced by DTC Premium work wear collection Includes entire range including bridal jewellery Awarded Superbrand status in 2004 by ICSC Brand focus on couples Covers entire product range including bridal jewellery Designs combine international quality and Indian values Gold jewellery brand under D’Damas Offers contemporary and modern designs in gold jewellery Plain gold as well as diamond jewellery for weddings Gold jewellery aimed at Indian wedding market and other similar events High-end jewellery brand Offers branded jewellery, watches and other lifestyle accessories Source of “Mined in Canada” branded diamonds Canadia branded diamond jewellery sold by retailers in the U.S., Canada, U.K. and Australia

Giantti

Unique International Allure Lifestyle Redefined

21

Multi Channel Distribution Network
Sales through exclusive Distributor Network Exclusive distributor network for each brand to sell to jewellery retailers across the country Once delivered, the distributor assumes the responsibility of selling the product Commission paid depends on the brand and sale value of the final product Sales to Department Stores and Reputed Jewellery Retailers Sales through Retail Stores owned/managed by the Group

Large jewellery stores, shopping malls and department stores Shoppers Stop Globus Westside Gold Souk Directly serviced by the Gitanjali Group

The retail operations of the group are classified into three different formats Retail Stores owned by the group Shop in shop outlets in department stores Franchisee stores

22

Retail Expansion in the U.S. – Acquisition of Samuels

8th largest jewellery chain in the US Established in 1891 Offers exclusive designer collections and a large selection of loose and mounted diamonds Variety of brands such as ‘‘Samuels Jewelers’’, ‘‘Schubach Jewelers’’, ‘‘Samuels Diamonds’’ and ‘‘24 Karat Card’’ Primarily targeted at the middle and upper middle class consumers Manages 97 retail stores across 18 states in the U.S.
17 exclusive stores 80 shops in department stores

Expansion into the US – the world’s leading diamond jewellery market ~50% of world market, according to the International Diamond Exchange Vertical integration with control over the entire value chain Samuels expected to source a significant portion of its jewellery products from Gitanjali Access to established systems and processes Established retail infrastructure Experienced personnel Advantage of 116-year heritage and leading market position Platform for further retail expansion in the U.S.

Aggregate price for 97% stake: approximately U.S.$12.0 million in cash and 1.55 million shares of Gitanjali Gems

23

Retail Expansion in the U.S. – Acquisition of Rogers

Established in 1920 Offers exclusive designer collections Operates its stores under “Rogers Jewelers” and
“Andrews Jewelers” brands

Further retail expansion into the U.S. Scaling up the U.S. operations to drive operating efficiencies Further access to value chain synergies Long heritage and leading market position

Primarily targeted at the middle and upper middle class consumers Manages 46 retail stores across U.S. Primarily located in the mid-west region of the U.S.

24

Agenda
Company Overview Large and Expanding Market Integrated Business Model Focus on Jewellery Retail New Initiatives and Expansion Strategy Visionary Management – Driving Growth Exceptional Financial Performance
25

Aggressive Expansion across the Value Chain

EXPANSION EXPANSION Ramping up the retail chain Expanding stores in India Acquisitions including Samuels, Rogers and Tri-Star Plans to make further inorganic growth in the U.S. & Far-east Expanding manufacturing capabilities to address increasing demand

DIVERSIFICATION DIVERSIFICATION Gitanjali Lifestyles to focus on manufacture and distribution of luxury and lifestyle products Developing 200 acres gems & jewellery SEZ in Hyderabad Plans to develop more SEZs focused on gems & jewellery across India To partner for developing real estate infrastructure

Further integration within the jewellery value chain Higher margins in retail business Higher value addition

Leverage our key strengths Large opportunity for incremental revenue Diversify business model

26

Infrastructure Development for Gems & Jewellery Industry
Indian government encouraging the development of industry specific SEZs Tax and other benefits to producers and developers Attractive trade benefits available to the gems and jewellery industry in SEZs Facilitating manufacturing and processing with tax exemptions Gitanjali Gems to develop infrastructure projects to cater to the export production needs of gem and jewellery manufacturers Leverage our expertise and experience in the industry to develop world class infrastructure Partner with reputed developers for development of real estate Gitanjali Gems’ SEZ projects
Location Hyderabad, Andhra Pradesh Raigad, Maharashtra Nanded, Maharashtra Aurangabad, Maharashtra Nagpur, Maharashtra Nashik, Maharashtra Type of SEZ Gems and jewellery Gems and jewellery Gems and jewellery Gems and jewellery Multi product Multi services Area (hectares) Approval status 80.9 Formal approval received. Notified by the central government 10.2 Formal approval received from central government 50.0 In-principle approval received from state and central government 50.0 In-principle approval received from state government 1,000.0 In-principle approval received from state government 100.0 In-principle approval received from state and central government

27

Hyderabad SEZ: World Class Manufacturing Capacity
Gitanjali Gems has received notification for an exclusive 200acre gem and jewellery SEZ in Hyderabad Developing five world class diamond and jewellery manufacturing facilities One facility expected to commence commercial production in December 2007 Four facilities expected to commence commercial production in calendar year 2008 Dedicated training centre at Hyderabad SEZ with present capacity to train up to 1,200 employees 10-year income tax holiday to developer and 5 year income tax breaks for all firms operating within the SEZ Other tax benefits in respect of Central Sales Tax, Service Tax and Excise Duty World class infrastructure to house domestic and international diamond and jewellery manufacturers 28

Expansion into Lifestyle Products
Increasing disposable income levels and globalization Growing market for lifestyle and luxury products in India Lifestyle products including watches, silverware, leather goods, writing instruments and jewellery Leveraging our experience in distribution and consumer behaviour for luxury products Signed a JV agreement with Netherlands based ARMO to form a 50:50 JV “Morellato India” for importing, wholesaling, distributing and manufacturing global luxury products

29

Agenda
Company Overview Large and Expanding Market Integrated Business Model Focus on Jewellery Retail New Initiatives and Expansion Strategy Visionary Management – Driving Growth Exceptional Financial Performance
30

Visionary Leadership with Extensive Experience
Senior management team
Mehul Choksi Chairman and Managing Director Founded Gitanjali Gems in 1986 Has been a visionary in identifying and executing various initiatives including branding and retailing Instrumental in launching several successful brands Pioneer in corporatising the jewellery industry in India G. K. Nair Executive Director (Finance) A Chartered Accountant by qualification, Mr. Nair has been associated with the Company since 1998 He heads the finance division and oversees the finance and accounting functions Also responsible for shaping the corporate strategy and identifying global opportunities Priti M. Choksi Head, Jewellery Division Neher Modi CEO, International Jewellery Business Vikram Singh Design & Production – Jewellery Exports Rahul Vira Business Development - Retail Prashant Rege Infrastructure Development Gaurav Marya Head - Lifestyle Deepak Gandhi International Jewellery Business Shashank Pathak Lifestyle Retailing Shekhar Wadke COO & Head – Desire Srikanth Badiga Infrastructure Development Dhruv Desai General Manager, Banking David Barr Co-Chairman, Samuels Sharad Mehta Manufacturing Sudhir Mehta Procurement and Selling - Diamonds Upen Shah Vice President—Finance & Taxation Randy McCullough President & CEO, Samuels Jagdeesh Shivdasani Distribution Pankhuri Warange Company Secretary Adrianus Voorn Executive Director (Manufacturing) Mr. Voorn is a Dutch national. He is in charge of our manufacturing operations He is a mechanical engineer by qualification and has been a Director on the Board since 1999

31

Agenda
Company Overview Large and Expanding Market Integrated Business Model Focus on Jewellery Retail New Initiatives and Expansion Strategy Visionary Management – Driving Growth Exceptional Financial Performance
32

Financial Highlights: Strong Revenue and Earnings Growth
Revenues on high growth trajectory Sales (Net) (US$ million)
R 59 CA G
$345

Improving business mix leading to better margins EBITDA Margin (%)

%

$872

5 wth Gro
$560

1% $847
4.4% 1.9% 4.8%

$605

5.8%

6.1%

FY05

FY06

FY07

9MFY07

9MFY08

FY05

FY06

FY07

9MFY07

9MFY08

Improving business mix and operating leverage leading to strong earnings growth EBITDA (US$ million)
R 15 CA G 6%
$42 $32

Net Profit (US$mm)
0 th 6 row G %
$52

R CA G

201%
$23 $13

6 wth Gro
$20

2%
$32

$27 $6 FY05 FY06 FY07

$3
9MFY07 9MFY08

FY05

FY06

FY07

9MFY07

9MFY08

33

Shift In Business Mix – Driving Growth in Profitability
2006 2007 9M FY 2008

Jewellery

Sales Mix

15%

Jewellery 32% Diamond 68% Diamond 85% Jewellery 43%

Diamond 57%

Sales growth (Y/Y)

75%

44%
Diamond 46% Diamond 62%

51.3%
Diamond 36%

Segment results
Jewellery 38%

Jewellery 54%

Jewellery 64%

Overall EBITDA Margin

4.4%

4.8%

6.1%

34

Forward looking statements
This presentation may contain “forward looking statements” by Gitanjali Gems Limited (“Gitanjali Gems”) that are not historical in nature. These forward looking statements, which may include statements relating to future results of operations, financial condition, business prospects, plans and objectives, are based on the current beliefs, assumptions, expectations, estimates, and projections of the management of Gitanjali Gems about the business, industry and markets in which Gitanjali Gems operates. These statements are not guarantees of future performance, and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond Gitanjali Gems’ control and difficult to predict, that could cause actual results, performance or achievements to differ materially from those in the forward looking statements. Such statements are not, and should not be construed, as a representation as to future performance or achievements of Gitanjali Gems. In particular, such statements should not be regarded as a projection of future performance of Gitanjali Gems. It should be noted that the actual performance or achievements of Gitanjali Gems may vary significantly from such statements.

35

GEMS LIMITED

Thank You

Sign up to vote on this title
UsefulNot useful