What's shining within the gem and jewellery space?

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What's shining within the gem and jewellery space?

Is the gem and jewellery sector ready to glitter, Ganesh Shanbhag of SMS Financial gives his views on this buzzing space.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

Ganesh Shanbhag of SMS Financial reviews the emerging gems and jewellery space.

He picks out few of his favourites and also gives his views on some stocks that have been in th news from this space.

Excerpts  from CNBC-TV18's exclusive interview with Ganesh Shanbhag:

Q: What is exciting the market about the gem and jewellery space ?

A: Actually there are two things, the gold price increase that has happened, and the bottomline which is improving. We have seen more action taking place within the retail space, and more companies with brands coming in. More companies are coming into the IPO segment and that will lead more depth into the industry.

In Goldiam we have seen a decent run up and  Su- Raj is also a turn around candidate over the last two years as it is doing well, Vaibhav   also has good expansion plans. Overall the pack seems to be doing pretty well.

Q: Do you think Goldiam has enough resources to take care of their new chain of stores ?

A: Actually, they are a debt free company. It seems very interesting. Earlier what used to happen is that in the export front, the margins used to get skewed because most of the supply would go to Wal-Mart, and companies of that sort where there is a lot of pressure on the margins. Though we did see a lot of turnover, margins use to often get skewed.

In the retail space, we typically say that margins are in the vicinity of around 30 to 40%. But managing the retail play is a very interesting case because logistics and managing that entire retail story takes time. There is a lot of expenditure on the advertising front and the brand creation. So that actually will consume time and resources. So we have to see how that works out.

Q: Aside of Goldiam anything else, which is doing similar kind of work, which excites you ?

A: I think we have to look at Gitanjali Gems which is scheduled for an IPO soon. That company already has very good brands within them like Asmi, Nakshatra and D'damas. These are excellent brands that the company has picked out and the company is ready for an IPO now.  After this the company gets listed we will have to see what will happen in this space.

Q: What about Shrenuj , Vibhav, or Su - Raj?

A: None of them are in the retail space right now, and I don't think they have any plans to be in the retail space right now. So they are not a threat as such, though there are certain companies planning on retailing via call centers. That means they will give ads in the paper and supported via call center and do a different kind of retailing story without retail chains. So we will have to see as to how that comes in also.

A: Absolutely. I think all throughout we have been seeing that the model on the export front, has skewed margins. In the retail model where the margins are going to be good will lead to a change in discounting for these companies, if they put their act in place.  

A: I think there is still space for upside because retail space is very interesting and we should understand that because of the malls coming in, they would have an excellent visibility. It is like Archies got re-rated once the retailing story was on. If Goldiam is getting into retailing with 100 stores, I think the stock can be re-rated further.