Companies & Sectors
Maximum growth for branded gold jewellery retailers expected to come from smaller cities, towns

Crisil Ratings says stagnant growth in metros is leading jewellery retailers to push expansion in Tier-II and Tier-III centres. This is expected to put pressure on funding

Branded gold jewellery retailers are increasingly getting into small cities and towns to expand their business, which has stagnated somewhat for many players in the face of intense competition in the larger cities. According to a Crisil Ratings study, this expansion will drive growth for these branded gold jewellery retailers over the medium term.

The ratings agency estimates that about two-thirds of the new outlets that these retailers set up over the next few years, will be in these small cities and towns, from where they are expected to derive over half of their revenues by 2012-13. That's up from about 40% in 2009-10.

This expansion will strengthen the business profile of these players, but it will also required larger funding to support inventory which is the bulk of costs.

"Intensifying competition in the large cities has led to stagnation in growth for players. The branded jewellers are, therefore, now increasingly pursuing opportunities that expansion into Tier-II and Tier-III centres can offer," said Gurpreet Chhatwal, director, Crisil Ratings.

Crisil has made these observations from a study it undertook recently of 63 gold jewellery retailers that is has rated. These retailers accounted for about a fifth of the gold jewellery business in the country in 2010-11.

The demand for gold jewellery in these centres is strong and growing, buoyed by increasing affluence and preference for branded jewellery, the ratings agency said. Buyers are not in search of a humble goldsmith these days. And the rising disposable income in households, increasing number of young customers, and growing consumer preference for branded jewellery are factors that will buttress the retailers' expansion plans.

"The wide variety of designs, aggressive marketing and promotional strategies, including hallmarking, and innovative offers such as gold deposit and buy-back schemes, will also bolster the growth of branded players' in these towns," Mr Chhatwal said.

This expansion into smaller cities and towns is expected to strengthen the business risk profiles of players through increased scale of operations, enhanced geographical diversity and improved cost efficiencies. But this will also require larger working capital to essentially support inventory, which accounted for 86% of the current assets of players in the three years through 2010-11. Crisil points out that excessive reliance on external borrowings would stretch the capital structure.

In the decade through 2010-11, some of the rated players have grown from being one- or two-outlet retailers, to expand significantly in the metros and Tier-I cities. In the process, they have established a distinct identity through brand-building initiatives that have fuelled their growth.

According to R Vasudevan, head of CRISIL Ratings, "The average gearing of Crisil-rated players will remain high at 2 to 2.25 times over the medium term, on account of expected increase in external debt to fund inventory. Nevertheless, the cash-sale model and liquid nature of gold will continue to support the financial risk profiles of gold retailers. Branded jewellers, who efficiently manage their working capital requirements, and successfully ramp up operations in the Tier-II and Tier-III outlets early, will witness rating upgrades in the next 12-18 months."


Cochin Shipyard deploys 2 new offshore vessels

BY 80, an anchor handling tug supply vessel, was contracted by Shipping Corporation and BY 84, a platform supply vessel, by Brage Supplier of Norway

Public sector Cochin Shipyard Ltd (CSL) has deployed two new offshore support vessels constructed for Shipping Corporation of India and a Norwegian company.

BY 80, an anchor handling tug supply vessel, was contracted by Shipping Corporation and BY 84, a platform supply vessel, by Brage Supplier of Norway.
BY 80, to be named SCI Urja, is the last in a series of four 120-tonne bollard pull anchor handling tug supply vessels (AHTS) being built for Shipping Corporation of India Ltd, Mumbai. The vessel is of AH03 design, designed by STX Europe, and is classified under the Rules and Regulations of the American Bureau of Shipping as 'Dual Class' with the Indian Register of Shipping.

The 66x16-metre vessel is equipped with a 300-tonne anchor handling winch, Grade-1 dynamic positioning systems and Grade-1 fire-fighting equipment and is capable of all normal offshore supply functions. The vessel has accommodation for 29 people and also meets the requirements of a emergency rescue & response vessel, which will enable standby and rescue functions in case of an oilfield exigency.

Upon delivery, the vessel will fly the Indian flag and will be registered at Mumbai.

BY 084 is the last of a series of four platform supply vessels of type PSV 09 CD, designed by STX Europe, being built for Brage Supplier, Norway. The vessel is a modern large diesel electric PSV designed to cater to all-around needs of the offshore oil and gas industry.

The yard presently has 34 ships on order. The shipyard posted impressive performance for the fifth year in a row in 2010-11. The yard achieved a turnover of Rs1,462 crore during 2010-11, compared to Rs1,417 crore in the previous year, and a net profit of Rs227.53 crore as compared to Rs223.04 crore in the previous year.


Rana Sugars aims to export 1 MT of sugar

“We will have sufficient supply of sugar considering the domestic output (24.2 MT), stock and consumption pattern,” Rana Sugars Ltd managing director, Rana Inderpartap Singh

Integrated sugar manufacturer Rana Sugars has pitched for allowing export of one million tonne (MT) of sweetener so that domestic sugar firms can take advantage of its high global prices.

"We want the Centre to permit 1 MT of sugar export to cash in on high rates of sugar in global markets," Rana Sugars Ltd managing director, Rana Inderpartap Singh told PTI. "The decision should be taken soon by the Centre to avoid a situation similar to what was in the case of wheat crop where despite lifting ban on its export, the shipments remains unfeasible due to low international prices," he said.

Further, he stated that the sweetener rates shot up from $750 per tonne four months back to $875 per tonne, which are enough to give handsome returns to sugar exporters.

"At current global rates, sugar exports fetch Rs38 per kg while in domestic market, rates are hovering around Rs28 per kg. So, the sugar companies can get additional Rs10 per kg," he said. The government has so far allowed export of 1 MT of sugar in phases under Open General License (OGL).

Sugar maker stressed that even after allowing 1 MT of sugar export; the country would have enough stock in hand not to cause any "abrupt" hike in domestic sugar rates.

Sugar industry has pegged the sweetener output at 24.2 MT for the season 2010-11, (October-September) as against 19 MT in previous season. The stock for the last season stands at 5 MT, while the country's sugar consumption is expected at 22.5 MT.

"We will have sufficient supply of sugar considering the domestic output (24.2 MT), stock and consumption pattern," Singh added.

He further pointed out that sugar output for 2011-12; season was expected at 26.5 MT with acreage going up by 5-7% in the country.

Rana Sugars, one of the largest sugar producers in the country has crushing capacity of 15,000 tonnes per day with two units in UP and Punjab. The company saw a big jump in sales to Rs870 crore in 2010-11, compared to Rs 550 crore in the previous fiscal.

On Thursday, Rana Sugars ended flat at Rs5.39 on the Bombay Stock Exchange, while the benchmark Sensex declined 0.81% to 18,502.38.


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