gitanjali gems ltd.pdf

GEMS LIMITED

February 2008

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

Corporate Presentation

2

Integrated Business Model

Company Overview

Large and Expanding Market

Visionary Management – Driving Growth

New Initiatives and Expansion Strategy

Agenda

Focus on Jewellery Retail

Exceptional Financial Performance

3

Established presenceOne of India’s largest integrated diamond and jewellery companiesEstablished in 1986Sightholder status with DTC through a promoter group companySophisticated and scalable diamond and jewellery manufacturing facilitiesApproximately 1,246 retail outlets in India and 143 outlets in the U.S.

Growing revenues and profitability

Revenues (Rs. bn) EBITDA margin (%)

Business Overview

Integrated business modelDiamond processingJewellery manufacturing Jewellery retailing in IndiaBranded jewelleryInternational jewellery retailing

Samuels and RogersGems & jewellery SEZs

Leading brandsAmong the first branded jewellery in IndiaLeading jewellery brands

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

14

24

35 34

05

10152025303540

FY 05 FY 06 FY 07 9M Dec-07

0%1%2%3%

4%5%6%7%

CAGR = 59%

4

Business Map

Pioneers of branded jewellery in IndiaBrands rated amongst best in IndiaStrong sales and distribution network including 112 distributors and ~1,250 outletsHigh value acquisitions in the U.S.

Developing 200 acre SEZ in HyderabadBack-end support through supply for retail operation frommanufacturing units Enhancement of manufacturing capacityHigh value creationPlans to develop more SEZs atPanvel, Nanden, Nashik, Nagpur,Aurangabad and CalcuttaGovernment incentives / tax benefits

Diamond Processing

Gitanjali Gems

Diamond and Jewellery Lifestyle Infrastructure

RetailManufacturing and

Wholesaling

India U.S. / International

5 state-of-the-art processingand manufacturing units4 decades of experienceSufficient production for internal and external use

5

End to End Process and Integrated Presence

Our operations are extensive and cover every step in the end to end process

Prestigious sight-holderpositionEnables quality supply atefficient prices

Branding and RetailingProcessingSourcing

Two modern processing facilities

Additional facilities commence post SEZ completion

Manufacturing

Three state–of-the-artfunctional facilitiesMore upcoming facilitiesin SEZ

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

Pioneers of branded jewellery in IndiaExcellent set of brandsExhaustive sales & distribution network

Presence across the entire value chain

Diamond Processing

Sourcing rough &

uncut diamonds

Exports

JewelleryManufacturing

Exports

JewelleryBranding Indian Retail

U.S. Retail

6

Moving up the Value Chain

Margin play

Gro

wth

Diamond Processing

Diamond Manufacturing &

Wholesale

Jewellery Retail

Retail Lifestyle

SEZ / Gitanjali

Infra-tech

New ventures have high growth and high margin potential

2-3% EBIDTA

4-5% EBIDTA

10-12% EBIDTA

Value creation through added revenues and added manufacturing facilities

High margins expected

7

Investment

Gro

wth

/ V

alue

Retail Lifestyle

U.S. Jewellery

Retail

Indian Jewellery

Retail

SEZ / Gitanjali

Infra-tech

Diamond Manufacturing &

Wholesale

Diamond Processing

Strong presence across the value chainSEZs will provide back end supportand create valueLifestyle expected to compliment retail jewellery operations

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

Diversifying into high growth / value space

Business Outlook

8

Investment Highlights

Strong retail presence in India and the U.S.

Sophisticated manufacturing facilities including upcoming Hyderabad SEZ

Presence across the entire value chain – Fully integrated operations

Significant focus on retail and distribution network to drive growth

Large, integrated diamond and jewellery player

Strong brand equity and broad product range

Diversifying into high growth/value areas such as SEZs and retail lifestyle

Visionary leadership and a deep management team

9


Company Overview




Agenda



10

Others5.0%Plain platinum

Jewellery6.2%

Plain Gold jewellery

41.6%

Diamond Jewellery

47.2%

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

Market share of various jewellery segments (2005)

Key world markets for jewellery (2005)

Source: GJEPC–KPMG report

US 31%

Turkey 3%

Middle East 9%UK 3%

Rest of the World 24%

Japan 8%

Italy 5%

India 8%

China 9%

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Other3%

Rough Diamonds

3%

Gold Jewellery

30%

C&P Diamonds

64%

Others18%

U.S.A.40%

U.A.E.36%

U.K.3%

Hongkong3%

Others8%

Japan4%

Israel8%

U.S.A.27%

Hongkong31%

Belgium12%

U.A.E.10%

Other4%

Gold Bars19%

C&P Diamonds

14%

Rough Diamonds

63%

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

Exports of cut andpolished diamonds (2006-07)

Exports of Gems and Jewellery(excluding Cut and

Polished Diamonds) (2006-07)

India’s imports and exports of raw material and gems and jewellery (2006—07)

US$10.9 billion US$6.3 billionSource: GJEPC

Imports US$14.0 billion Exports US$17.2 billion

12

Indian Retail Jewellery Overview

India is one of the largest jewellery markets97% 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 imageaesthetic designs marketing and promotiondistribution network

Yesterday Today

Unbranded, From Family Jeweller Branded

Jewellery for Investment Jewellery for Fashion

Gold Jewellery Diamond Studded Jewellery

Traditional Ethnic and Chunky designs

Fashionable, lightweight and innovative designs

Marriage and Festival Season as peak seasons

“Wearability” and Gifts spreading the demand

through the year

Jewellery sold on commodity basis with

labour charges

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

13

U.S. Retail Jewellery Overview

Largest jewellery consumer country50% of worldwide diamond jewellery sales are made in the United StatesU.S. and Canadian retail jewellery accounted for approximately U.S.$ 66 billion of sales in 2006Diamond 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.

14


Company Overview




Agenda



15

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

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

Rough Distribution

Diamond Polishing

Diamond Distribution

Jewellery Manufacturing

Jewellery Wholesaling

Shopping Experience

Jewellery Retailing

Jewellery Branding

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

16

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

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

Marking

Cleaving

Sawing

Cutting

Polishing

17

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

18

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

Designing

Model and mould making

Waxing and wax setting

Casting

Sprue grinding

Filling

Polishing

Metal setting

Rhodium polish

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Company Overview




Agenda



20

6%

7%

8%

9%

14%

22%

27%

29%

62%

69%

0 20 40 60 80

Vivaha

Moksh

D'Damas

TBZ

Gili

Agni

Sangini

Asmi

Nakshatra

Tanishq

Jewellery Retailing in India

Strong retail and distribution network with pan-India presence

112 distributors

Approximately 1,246 outlets, including outlets in host stores10 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

Strong Brand Recall

Source: The Solitaire – TNS Survey 2005

21

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 Was originally introduced by DTC

Premium work wear collection

The Enchanting Enigma

Includes entire range including bridal jewellery Awarded Superbrand status in 2004 by ICSC

Partners for Life Brand focus on couples Covers entire product range including bridal jewellery

The Art of Beauty Designs combine international quality and Indian values

The Art of the Different

Gold jewellery brand under D’Damas Offers contemporary and modern designs in gold jewellery

The Wedding Collection

Plain gold as well as diamond jewellery for weddings

Pure. Proud. Precious Gold jewellery aimed at Indian wedding market and other similar events

Giantti Unique International Allure

High-end jewellery brand

Lifestyle Redefined 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

Leading Brands addressing diverse consumer segments

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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 through exclusive Distributor Network

Large jewellery stores,

shopping malls and

department stores

Shoppers Stop

Globus

Westside

Gold Souk

Directly serviced by the

Gitanjali Group

Sales to Department Stores and Reputed Jewellery Retailers

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

Sales through Retail Stores owned/managed by the Group

Multi Channel Distribution Network

23

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

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 processesEstablished retail infrastructureExperienced personnel

Advantage of 116-year heritage and leading market position

Platform for further retail expansion in the U.S.

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

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

24

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

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.

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

25


Company Overview




Agenda



26

Aggressive Expansion across the Value Chain

Ramping up the retail chainExpanding 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

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 & jewelleryacross IndiaTo partner for developing real estate infrastructure

EXPANSIONEXPANSION DIVERSIFICATIONDIVERSIFICATION

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

27

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

Location Type of SEZ

Area (hectares) Approval status

Hyderabad, Andhra Pradesh

Gems and jewellery

80.9 Formal approval received. Notified by the central government

Raigad, Maharashtra

Gems and jewellery

10.2 Formal approval received from central government

Nanded, Maharashtra

Gems and jewellery

50.0 In-principle approval received from state and central government

Aurangabad, Maharashtra

Gems and jewellery

50.0 In-principle approval received from state government

Nagpur, Maharashtra

Multi product

1,000.0 In-principle approval received from state government

Nashik, Maharashtra

Multi services

100.0 In-principle approval received from state and central government

Gitanjali Gems’ SEZ projects

28

Hyderabad SEZ: World Class Manufacturing Capacity

Gitanjali Gems has received notification for an exclusive 200-acre 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

29

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

30


Company Overview




Agenda



31

Senior management team

Mehul ChoksiChairman and Managing Director

Founded Gitanjali Gems in 1986 Has been a visionary in identifying and executing various initiatives including branding and retailingInstrumental in launching several successful brands Pioneer in corporatising the jewellery industry in India

G. K. NairExecutive Director (Finance)

A Chartered Accountant by qualification, Mr. Nair has been associated with the Company since 1998He heads the finance division and oversees the finance and accounting functionsAlso responsible for shaping the corporate strategy and identifying global opportunities

Adrianus VoornExecutive Director (Manufacturing)

Mr. Voorn is a Dutch national. He is in charge of our manufacturing operationsHe is a mechanical engineer by qualification and has been a Director on the Board since 1999

Priti M. ChoksiHead, Jewellery Division

Dhruv DesaiGeneral Manager, Banking

Upen ShahVice President—Finance & Taxation

Neher ModiCEO, International Jewellery Business

Sudhir MehtaProcurement and Selling - Diamonds

Sharad MehtaManufacturing

Pankhuri WarangeCompany Secretary

Vikram SinghDesign & Production – Jewellery Exports

Shashank PathakLifestyle Retailing

Prashant RegeInfrastructure Development

Jagdeesh ShivdasaniDistribution

Rahul ViraBusiness Development - Retail

Shekhar WadkeCOO & Head – Desire

Gaurav MaryaHead - Lifestyle

Srikanth BadigaInfrastructure Development

David BarrCo-Chairman, Samuels

Randy McCulloughPresident & CEO, Samuels

Deepak GandhiInternational Jewellery Business

Visionary Leadership with Extensive Experience

32


Company Overview




Agenda



33

Financial Highlights: Strong Revenue and Earnings Growth

$345

$605

$872

$560

$847

FY05 FY06 FY07 9MFY07 9MFY08

Revenues on high growth trajectory

CAGR 59%

Sales (Net) (US$ million)

Growth 51%

Improving business mix leading to better margins

EBITDA Margin (%)

Improving business mix and operating leverage leading to strong earnings growth

EBITDA (US$ million) Net Profit (US$mm)

1.9%

4.4% 4.8%5.8% 6.1%


$6

$27

$42$32

$52


CAGR 156% Growth 60%

$3

$13

$23$20

$32


CAGR 201% Growth 62%

34

Shift In Business Mix – Driving Growth in Profitability

Jewellery15%

Diamond85%

Jewellery32%

Diamond68%

Diamond57%

Jewellery43%

Jewellery38%

Diamond62%

Jewellery54%

Diamond46%

Jewellery64%

Diamond36%

2006 2007

Sales Mix

Segment results

Overall EBITDAMargin 4.4% 4.8%

9M FY 2008

6.1%

Sales growth (Y/Y) 75% 44% 51.3%

35

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.

Thank YouGEMS LIMITED

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