Gitanjali Gems eyes 20% growth in topline this year

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Gitanjali Gems has revised the dates of its share buyback. It now opens on August 19 and closes December 18. The buyback is at maximum price of Rs 120 per share for a maximum amount of Rs 144 crore. Commenting on the same, GK Nair, Director-Finance, Gitanjali Gems, says the company has been buying shares every day.

Gitanjali Gems, he says, is looking at a 20% growth in topline this year.

Here is a verbatim transcript of the exclusive interview with GK Nair on CNBC-TV18. Also see the accompanying video.

Q: You have a buyback underway. How much have you already bought?

A: Correct. This opened on August 19. It is going to be on till December 18 I am told. I don't have an exact number how much we have bought but we have been buying every day in the range at which it is permitted, like we cannot buy anything upwards of Rs 120. So, within that we have been putting the trades I am told.

Q: Your buyback limit has been announced at Rs 144 crore. Why would you want to do this at all? Wouldn't Rs 144 crore be better employed in expansion plans?

A: This was announced in the board meeting, which was held in the first week of January 2009. It took so much time for the compliance and the regulatory permissions to be in place. We are quite fine with the buyback because that was the decision of the board. We would like to honour that commitment. Whatever the number of shares that would be available, we would be looking at that within the regulatory framework.

Q: On the business front, could you tell us a little bit about this shift that we are seeing in diamond jewellery on the back of the skyrocketing gold prices and on an incremental basis, how much of a percentage increase do you think this would bring into your revenue?

A: We are looking at a 20% growth in topline this year, growth in the domestic and international markets. We are seeing a lot of upswing happening at both places. In fact I have been spending some time in the US for the last three months and I saw about 7-8% sales going up in the last four weeks. We are extremely buoyant of on a good season this year in the US.

We are also looking at a robust domestic market ahead of the season. We are already seeing that happening. As far as the gold price is concerned, we are quite hedged on gold. Our margins are substantially high in the branded segment. So, that really doesn't affect us much.

Q: Could you give us an update on your expansion plans with D'damas, the kind of status check on that as well?

A: D'damas is doing good in the domestic market. We have consolidated our business in the domestic market and we will be taking it forward.

Q: You had plans to open about 60 stores in the next couple of years' time. Could you give us an update on that? How much have you invested in this particular JV?

A: There is a group initiative to open stores for different brands: Gili, D'damas, Nakshatra, and Asmi. So, this is part of that. We have invested a good amount in the last one and a half years. In fact the GDR that we did a year and a half back in December 2007, major proceeds have been invested into the retail. So, we have been looking at that and consolidating that sector quite strongly. I don't have the exact numbers now.

Q: What do you expect to end the year with in terms of revenues and bottomline?

A: The bottomline and the topline will both go up. In fact we expect the bottomline to grow substantially simply because last year we had a lot of expenses, consolidation, overheads, controlling measures and with the increased margin arising out of the reduced raw material prices, both diamond and to some extent gold, we are expecting a high margin.

Q: Have exports picked up after that shock of last September?

A: Honestly speaking, in the jewellery segment we sell quite a bit of it in our own retail, majority in the US and partly in UAE and in China. So, exports have to be looked at in that angle in our case.

So, more the retail sales on the counter, more the exports for us because 70-80% of our retail requirements are met in-house, meaning we procure diamonds, cut and polish, jewellery manufacturing. So, the entire value chain is more important to us. So, that has gone up with the increased retail sales as I mentioned.

Q: What is the retail response that you are getting from China because you have just invested some USD 30 million in that market as well?

A: We have 30-40 stores. We are trying to consolidate thing there. The response has been good. It is not a very big pie of our business today. But maybe if we are able to consolidate the way we were successful in the US, it can give us a huge share in the topline.