2013-2014 guide to the jewellery market in india...2013-2014 guide to the jewellery market in india...

2013-2014 Guide to the Jewellery Market in India December 2013

Equity Communications

Diamond Market Specialists

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www.diamondshades.com

Methodology

We use secondary data for our research. We mine raw data going back at least forty years in our analysis

and this data and information is extremely useful in our work. These are some of the sources we mine:

International statistics data provided by the OECD, IMF, various departments of the United Nations

International statistics data provided by USA government departments such as the Bureau of

Economic Analysis and Federal Reserve Banks

International statistics data provided by EuroStat

National statistics offices in China, Hong Kong, India, USA, Japan, Switzerland, Zimbabwe,

Australia, UK

Proprietary research by leading global financial institutions such as Goldman Sachs, Amundi,

Nomura, Credit Suisse and JP Morgan

Proprietary research by leading regional financial institutions and brokerage firms in China, Hong

Kong, Japan and India

Industry promotion bodies such as the World Gold Council and the Silver Institute

Annual reports and investor presentations by a core group of 150 public companies countries from

India, Hong Kong, China, Europe, USA, Australia, Canada, South Africa, South East Asia and

Zimbabwe. These companies operate in various industries including the diamond industry, luxury

goods industry, precious jewellery retailing industry and general retailing

Earnings call transcripts which are extremely useful

Industry trade publications

International and regional financial news organisations

Nevertheless, analysis of data and trends is an art. For the most part, our researchers at Equity

Communications are our greatest asset.

In the following pages, you will discover our views on the consumption of precious jewellery in India as

well as discover our ideas on the likely direction of such consumption in the future. You will also get to

find out why we selected India as the most promising market for precious jewellery for many years to

come.

For our purposes, we define precious jewellery as jewellery pieces made of gold, platinum or silver, in

their pure form or combined with other lesser metals like copper. Such jewellery pieces can be in plain

form or gemset precious jewellery. In the gemset category, this report provides extended study of polished

diamonds consumption in India.

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Acknowledgements and Disclaimers

Acknowledgements

2013-2014 Guide to the Jewellery Market in India is based on research by the Diamond Industry Research Team at

Equity Communications: Tinashe Takafuma, Gerald Manyengavana, Musafiri Chisaka and Fred Divine.

2013-2014 Guide to the Jewellery Market in India is based on information available up to the end of October 2013 for

the most part.

Please Note

The views expressed herein are solely those of Equity Communications as of the date of this report and are subject to

change without notice. Data Tables, Survey Results and Financials provided in this report are not intended, nor

implied, to be a substitute for the professional advice you would receive from a qualified accountant, attorney or

financial advisor. Always seek the advice of an accountant, attorney or financial advisor with any questions you may

have regarding the decisions you undertake as a result of reviewing the information contained herein. Nothing in this

report should be construed as either investment advice or legal opinion.

General Disclaimer

This document is produced and circulated for general informational and educational purposes only. It is provided by

Equity Communications. Equity Communications research utilizes data and information from public, private and

internal sources. While we endeavour to keep the information up to date and correct, we make no representations or

warranties of any kind, express or implied, about the completeness, accuracy, reliability, or suitability of this

publication. The information and analysis contained in this publication has been compiled or arrived at from sources

believed to be reliable but Equity Communications does not make any representation as to their accuracy or

completeness and does not accept liability for any loss arising from the use hereof. Furthermore, the material

contained herewith has no regard to the specific investment objectives, financial situation or particular needs of any

specific recipient or organisation. It is not to be construed as a solicitation or an offer to buy or sell any commodities,

securities or related financial instruments.

For more information, please visit http://www.diamondshades.com/

© Copyright 2013, Equity Communications Private Limited, ALL RIGHTS RESERVED.

For more information please contact:

Tinashe Takafuma Head of Research [email protected]

http://www.diamondshades.com/

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Table of Contents

2013-2014 Guide to the Jewellery Market in India

by Tinashe Takafuma

Summary

page 5

Local Economy page 7

Demographics page 9

Market Profile page 12

Appendix

page 30



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Page Reference

India Nominal GDP 1980-2018

page 7

India Real GDP Growth rate 1980-2018

page 7

India GDP per Capita 1980-2018

page 7

India Real GDP and CPI Inflation 2000-2018

page 7

India's Total Wealth 2000-2013

page 8

India's Wealth Per Adult 2000-2013

page 8

India's Adult Wealth Pattern 2010-2013

page 8

Population Projections for India 2000-2030

page 9

Urbanization Prospects for India 1990-2030

page 9

Adult Population for India 2000-2013

page 9

Crude Birth Rate for India 1980-2030

page 10

Population Below 15 years (From 25 years ago to present) page 10

Total Fertility Rate for India 1980-2030

page 10

Age at First Marriage for Females

page 10

Employment Growth for India 1990-2013

page 11

Labour Productivity Growth for India 1990-2013

page 11

Private Consumption Growth for India 2006-2013

page 11

Indian Rupee Cross-rates 2003-2013

page 11

Retail Sales of Precious Jewellery 2002-2012

page 12

Gold and Diamond Demand by Region

page 12

Retail Sales of Gold Jewellery in India 2002-2012

page 14

Gold Jewellery Demand Trends in India 2003-2013

page 14

Gold Price in India Rupees and US$ 1993-2013

page 15

Retail Sales of Diamond Jewellery in India 2002-2012

page 16

Diamond Jewellery Demand by Region

page 17

Diamond Jewellery Market Share of Sales in India

page 17

Consumption Breakdown for Diamond Jewellery in India page 17

Market Share: Organized Retail versus Informal 2006-2016 page 18

Quarterly Gold Demand for Jewellery in India 2010-2013 page 20

Quarterly Retail Sales of Gold Jewellery in India 2012-2013 page 23

2013 Retail Sales of Precious Jewellery in India (Rupees) page 23

2013 Retail Sales of Precious Jewellery in India (US$)

page 23

Titan Industries Jewellery Division

page 30

Tara Jewels

page 32

Tribhovandas Bhimji Zaveri (TBZ)

page 33

Revenue Growth (selected retailers)

page 34

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India: Summary of Jewellery Market in 2013-2014

India is currently number two in gold jewellery consumption by volume, number four in platinum

jewellery consumption by volume and number one in diamond jewellery consumption by volume. The

country will remain the most important market for precious jewellery in terms of potential for many years

to come. For one, demand for precious jewellery is already formidable because of strong cultural

traditions and yet more than 90% of adults in India possess wealth valued below US$10,000.

With further economic growth, a large number of Indians will move to higher wealth bands and this will

lead to an acceleration of precious jewellery consumption.

However, that is a story for the future. In the present, consumption of precious jewellery in India gained

momentum in the aftermath of the Global Financial Crisis as Indians rode the wave of gold price inflation,

encouraged by stronger economic growth and lower inflation.

Consumption of precious jewellery subsequently lost momentum when the situation reversed. Economic

growth is now weaker and Indian consumers are currently battling higher inflation.

Retail sales of gold jewellery are forecast to decrease by 4% to 1,763 billion rupees (US$31.732 billion) in

calendar year 2013. Demand for gold jewellery was strongest in the first half of the year, corresponding

with the initial burst of lower gold prices. Volume demand for gold jewellery is forecast to increase by

4.3% to 575.2 tonnes in 2013. Consumer demand for gold was robust from the last quarter of 2012

culminating in even stronger buying in the second quarter of 2013, following massive declines in the price

of gold.

When the price of gold first plunged to levels last seen in 2010, jewellery consumers quickly saw this as a

buying opportunity and rushed to make purchases. Many reasoned that the dip in gold prices was an

anomaly and expected gold prices to soon return to their long-term upward trajectory. However, this has

not occurred. As a result, volume demand has been quite weak in the second half of 2012.

Retail sales of diamond jewellery are forecast to increase by 11% to 478 billion rupees (US$8.609 billion)

in calendar year 2013. Demand for diamond jewellery grew at the slowest pace in recent years...

...continued on next page

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India: Summary continued...

...after consumer budgets were shifted from other jewellery products to augment gold jewellery purchases.

Retail sales of precious jewellery are forecast to decrease by 1.2% to 2,241 billion rupees (US$40.341

billion) in 2013 mainly because of higher purchases of gold jewellery at lower gold prices.

In the short-term, demand for jewellery products has been stifled by higher inflation, less positive macro-

economic environment, and moves by the Indian government to force a reduction in gold and polished

diamonds imports.

Current conditions in India have greater negative impact on diamond jewellery sales than on gold

jewellery sales since consumer demand for diamonds is more discretionary. With persistent inflation,

prices for goods in India are higher and this makes jewellery less competitive.

Outlook

Jewellery sales in India will experience slower growth in the period 2013-2016 than in the period 2009-

2012. The culprits will be ongoing weakness in consumer spending which has been hit by rising inflation,

lower real wage growth and a poorer macro-economic environment.

Demand for gold in jewellery manufacturing should oscillate in the 500-650 tonnes per year range, on the

back of continued modernisation of sales channels in India and the expected gradual rise in the number of

middle class consumers.

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India: GDP Snapshot

Source: IMF World Economic Outlook Database, Equity Communications Data. Data as at October 2013

India has reversed gains of the last few years

Unlikely that India will achieve average growth of +6% in next five years, as per IMF forecast

Gigantic population means middle-class is increasing in impactful numbers

Deteriorating inflation fundamentals

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India: Wealth Snapshot

Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Data Book 2013,

Equity Communications Research

Total wealth position has deteriorated

Wealth per adult has lost momentum

Currently leads world’s poor, increasing in number

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India: Demographic Snapshot

Source: Top – US Census Bureau, International Database, July 2012, Middle - United Nations, Department of

Economic and Social Affairs, Population Division (2012). World Urbanization Prospects: The 2011 Revision, Bottom -

James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Data Book 2013. Equity

Communications Research

Lower population growth positive for improvement in standard of living

Positive with improving urban infrastructure; negative with slums

Massive opportunity with sustainable long-term economic growth

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India: Demographic Snapshot continued...

Source: United Nations, Department of Economic and Social Affairs, Population Division (2013). World Population

Prospects: The 2012 Revision. Equity Communications

Population regeneration is improving to a level that is conducive for faster economic growth. Age at first marriage is becoming more attractive and this is positive for consumption of precious jewellery for engagements and weddings.

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India: Employment, Consumption, Rupee cross-rates

Source: Top Two - The Conference Board Total Economy Database, January 2013, Consumption Data - OECD (2010),

"Main Economic Indicators - complete database" accessed Oct 2013. Bottom - Equity Communications Data


India: Jewellery Consumption Trends

Source: Top – Equity Communications Data, Converted from local currency using 1 Rupee = 0.018 US dollars, Bottom –

Care Report 2011


India: Jewellery Consumption Trends continued...

Demand for gold jewellery is very strong because of cultural preferences, including

adornment+investment factor - 81 to 86 percent of jewellery retail sales are gold jewellery

products (22-24 karat pure gold preferred because easier to liquidate). There is a culture of buying

gold during auspicious occasion of Diwali, Akshaya Tritiya, Dussehra and also during weddings.

In rural India, farmers typically buy gold jewellery after every successful harvesting season as it is

the best form of investment for them. Gold is also a natural hedge against inflation.

Jewellery fashion changes seasonally leading to higher product obsolescence - slow moving

jewellery at the tail end of seasons, therefore significant recycling may reduce new sales - possibly

up to ten percent.

Sales of higher priced jewellery are supported by the introduction of schemes that enable

consumers to make advance payments in monthly instalments. Consumers purchase often

discounted jewellery at the completion of the instalment period.

Increasing number of consumers (20-30%) augmenting gold purchases with diamond jewellery

purchases. Diamond jewellery has a stronger adornment factor - diamond jewellery set in lower

18 karat gold (diamond necklaces very popular). Platinum-setting gaining share of diamond

jewellery sales - now at 20-25% of diamond jewellery sales.

Jewellery brands recent phenomenon but very popular with the youths in metropolitan cities - a

globally connected youth market is revolutionising jewellery consumption in India. Demand for

fashion jewellery on the rise.


India: Retail Sales of Gold Jewellery

Source: Top – Equity Communications Data, Converted from local currency using 1 Rupee = 0.018 US dollars, Bottom –

World Gold Council, Gold Demand Trends, Equity Communications Database

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India: Retail Sales of Gold Jewellery continued...

Retail sales of gold jewellery in India have tracked increases in the price of gold because of the strong

adornment+investment demand factor. Volumes change from year to year depending on consumer

economic sentiment but significant gold price inflation in recent years had put massive pressure on

consumer demand. As a result, gold grammages for jewellery pieces were trending downwards up until

the significant plunge in gold prices in April 2013.

Source: Chart - World Gold Council, Gold Demand Trends, Equity Communications Database


India: Retail Sales of Diamond Jewellery

Purchases of diamond jewellery are comparatively complex because they require at least passing

knowledge of the 4Cs of diamond jewellery - colour, clarity, cut and carat. Without doubt, this has been a

significant barrier to sales growth in India and other nascent diamond markets since diamond jewellery is

traditionally expensive.

Nevertheless, establishment of organized retail chains in India has given Indian jewellers the platform to

educate consumers about diamond jewellery. Furthermore, the introduction of certified diamonds has

increased trust and made diamond valuations more transparent.

Indian diamond industry players are taking diamonds to the mainstream, allowing people of most

economic levels to purchase diamond jewellery. Jewellery manufacturers are innovating and producing

fashionable diamond jewellery which is cheap by traditional world standards but targeted at the middle

class in India where demand for such products - diamond accented jewellery - is strong and growing in

leaps and bounds.

Source: Chart – Equity Communications Data, Converted from local currency using 1 Rupee = 0.018 US dollars


India: Diamond Jewellery Consumption pattern

There is a shift in consumer

preference to low-priced

everyday diamond jewellery

which is about 50 percent

cheaper than event-driven

diamond jewellery and also

cheaper than pure gold

jewellery. Everyday

jewellery cannot be

expensive jewellery.

Trendy lightweight designs,

guaranteed buy-back

schemes, transparent

pricing, and availability of

quality certification have all

boosted sales.

The quality of cheap

diamond jewellery produced

has also improved

dramatically in the last

three years and we believe

it will soon debut on the

world stage.

India has a 32 percent urban population. As a result, diamond jewellery sales are very minimal in rural

areas where gold jewellery is extremely dominant. Diamond jewellery sales are stronger in the larger

and wealthier cities and decline rapidly as we move towards rural India.

Source: Top – Gitanjali investor presentation, Bottom Two – Equity Communications Research


India: Jewellery Retailing Landscape

India is modernizing its retail landscape. Traditionally, Indians go to the preferred and trusted

neighbourhood jeweller for their jewellery requirements. However, this is gradually changing with the

emergence of numerous regional retail chains and a sprinkling of countrywide retail chains.

Industry Profile

India continues to modernize and urbanize its retail model

New regulations, duties and taxes that favour formal business operations - materials sourcing and

business finance

Input costs increasing more than 200% in five years

Competition for limited quality retail space

Consumer preference for hallmarked and certified jewellery is fast becoming standard - retail

brands

Highly Segmented

Source: Chart – Equity Communications research and projections. As at November 2013


India: Jewellery Retailing Landscape continued...

The dominant profile of business in India is low margins and high volumes. Margins continue to be under

severe pressure owing to a steep rise in commodity prices and steep competition. For this reason, the

jewellery in India will have to be more aggressive in its push for large-scale adoption of branded

jewellery as this will create space for more sustainable margins in the sector. Fortunately, fashion -

conscious youths have shown strong appetite for branded jewellery and this has provided a much needed

pull-factor in the demand for branded jewellery and establishment of jewellery retail brands.

Nevertheless, the Indian market remains very difficult for foreigners to penetrate

because...

Weddings and Cultural Festivals are key consumption drivers - demand is very traditional with

product preferences varying from region to region and season to season

Retail landscape underdeveloped - extremely limited quality real estate available to foreigners for

the establishment of profitable store networks

Unusual sales methods - trade-ins, discounts and buy-back schemes popular because of

adornment+investment factor and seasonal consumption of jewellery

Restrictive tariff arrangements on imported jewellery and luxury - margins for jewellery are

already comparatively lower

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India: 2013 Interim Review of Jewellery Market

Gold Stole headlines in 2013:

1. The gold price plunged and released pent up demand for gold jewellery

2. The Reserve Bank of India announced new restrictions on gold imports into India in order to improve

the country’s national accounts position

1. The gold price plunged and released pent up demand for gold jewellery

When the price of gold first plunged to levels last seen in 2010, consumers of gold jewellery in key

markets quickly saw this as a buying opportunity and rushed to make purchases. Many reasoned that the

dip in gold prices was an anomaly and therefore expected gold prices to soon return to their long-term

upward trajectory. However, this has not occurred and probably will not occur in the foreseeable future.

As a result, we expect investment demand for gold jewellery to remain muted going forward.

Source: Chart - World Gold Council, Gold Demand Trends, Equity Communications Data. Data as at November 2013.


India: 2013 Interim Review continued...

2. The Reserve Bank of India announced new restrictions on gold imports into India in order to improve the country’s national accounts position

At least 20% of all gold imports into India must be for re-export

20% of all gold imports to be retained in customs bonded warehouses

Fresh imports of gold allowed only after the exports have taken place to the extent of at least 75%

of gold remaining in the customs bonded warehouse.

Customs duty on gold imports hiked from 8% to 10% and on imported gold jewellery from 10% to

15%

Gold imports in any form for domestic use shall be made available only to entities engaged in

jewellery business/bullion dealers supplying gold to jewellers

Gold for domestic use shall be made available only after full upfront cash payment

Ban on import of gold coins and bars for investment purposes

Implications for Jewellery Industry

Retailers with significant export business to come out ahead since steady availability of gold is

ensured, including better financing terms

Informal businesses to be further marginalized from official raw materials procurement channels

Export Jewellery businesses have become crucial again - management attention to likely shift from

domestic expansions to foreign expansions (More exports required to grow domestic business)

New procurement rules that outlaw gold loans to increase pressure on finance costs, cash-flow

management to require more scrutiny

Pressure on retailers to push more diamond jewellery which has better margins. Light weight gold

and diamond jewellery pieces also an option

Essentially, the government of India is trying to disrupt India's famous love-affair with gold because of its

negative impact on the country's current account balance. Gold contributed nearly 30% of India's trade

deficit during 2009-10 to 2011-12. Indian consumers put money into gold because they trust it much

more than they do banking products offered by the country's financial institutions. Furthermore, as much

as 42.4% of India's GDP is believed to be in the underground economy, up from 27.4% in the pre-reforms

period. Gold provides liquidity for the untaxed underground economy in India.


India: 2013 Interim Review continued...

Put simply, the new rules state that gold imports for domestic purposes cannot be increased without a

similar increase in gold imports for re-export purposes. As such, there are concerns that current gold

jewellery exports are not enough to cover actual current domestic demand for gold jewellery.

Nevertheless, a cursory analysis of gold import and export data provided by the Gems and Jewellery

Promotion Council of India suggests that gold exports are adequate to cover domestic demand for gold

jewellery. Therefore, we believe the new policy environment will ultimately lead to further realignment

of the jewellery industry in India to the benefit of well positioned jewellery businesses - those with

significant export operations plus appealing domestic jewellery retail brands.


India: 2013 Retail Sales of Jewellery

Source: Equity Communications Data. Data as at November 2013. Converted from local currency using 1 Rupee =

0.018 US dollars. Gold Volume Data- World Gold Council, Gold Demand Trends, Equity Communications Data

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India: 2013 Retail Sales of Jewellery continued...

Summary

Retail sales of gold jewellery are forecast to decrease by 4% to 1,763 billion rupees (US$31.732 billion) in

calendar year 2013. Demand for gold jewellery was strongest in the first half of the year, corresponding

with the initial burst of lower gold prices. Volume demand for gold jewellery is forecast to increase by

4.3% to 575.2 tonnes in 2013. Consumer demand for gold was robust from the last quarter of 2012

culminating in even stronger buying in the second quarter of 2013, following massive declines in the price

of gold.

When the price of gold first plunged to levels last seen in 2010, jewellery consumers quickly saw this as a

buying opportunity and rushed to make purchases. Many reasoned that the dip in gold prices was an

anomaly and expected gold prices to soon return to their long-term upward trajectory. However, this has

not occurred. As a result, volume demand has been quite weak in the second half of 2012.

Retail sales of diamond jewellery are forecast to increase by 11% to 478 billion rupees (US$8.609 billion)

in calendar year 2013. Demand for diamond jewellery grew at the slowest pace in recent years after

consumer budgets were shifted from other jewellery products to augment gold jewellery purchases.

Retail sales of precious jewellery are forecast to decrease by 1.2% to 2,241 billion rupees (US$40.341

billion) in 2013 mainly because of higher purchases of gold jewellery at lower gold prices.


India: 2013 Retail Sales of Jewellery continued...

Jewellery products are discretionary goods whose demand fundamentals are at the mercy of consumer

economic sentiment. If consumers believe the economy is healthy, they are more likely to absorb rising

prices of discretionary goods. When economic sentiment is weak, consumers purchase fewer

discretionary goods.

In the short-term, demand for jewellery products has been stifled by higher inflation, less positive macro-

economic environment, and moves by the Indian government to force a reduction in gold and polished

diamonds imports.

Current conditions in India have greater negative impact on diamond jewellery sales than on gold

jewellery sales since consumer demand for diamonds is more discretionary. With persistent inflation,

prices for goods in India are higher and this makes jewellery less competitive.

For 2013 at least, gold jewellery sales by volume are expected to be stronger than for 2012 despite a

poorer third quarter performance compared to 2012. Earlier this year, consumers in India took

advantage of the unprecedented slump in gold prices to massively increase gold jewellery purchases,

especially for cultural gifting purposes. Furthermore, since jewellery purchases occur on budgets,

budgets were shifted from other jewellery products to augment gold jewellery purchases.

For the last quarter of 2013, consumers will likely shift to lighter gold jewellery products in light of the

prevailing economic conditions that have kept gold prices higher in India. On the other hand, farmers in

India appear to have had a good harvest and this always boosts gold jewellery sales in addition to strong

seasonal demand for weddings and festivals. However, gold import curbs by the government as well as

strong out of season purchases earlier this year could also result in lack-lustre sales for the season.


India: Outlook for Jewellery Market

Jewellery Product Preferences

Gold Jewellery versus Platinum Jewellery Vs Diamond Jewellery

Demand for gold jewellery is steeped in tradition that goes back more than a thousand years....that is not

about to change. Therefore, gold jewellery sales will still experience volume growth subject to a better

macro-economic environment and stronger disposable incomes.

On the whole, Indian society is modernizing and becoming less traditional. Consumers have shown a

willingness to amplify traditional demand for gold jewellery with purchases of jewellery made from other

precious materials like diamonds and platinum. At steady gold prices, demand for such products will grow

faster than demand for gold jewellery products simply because it is still in the nascent stage.

Behind this revolution in consumption patterns is the large population of young people in India using

internet technology to stay in tune with the world. As a result, the Indian young adult population in the

major cities is fast become sophisticated and increasingly becoming less satisfied with plain gold jewellery.

Younger jewellery consumers in India care more about design, style and seasonal trends. For this reason,

branding, marketing and product placement have become important.

Diamond jewellery is actually not a great financial investment as more consumers in India are starting to

find out. We believe this will likely impact the pace of diamond jewellery adoption by Indian consumers

going forward.

For the most part, diamonds of the cheaper variety are becoming more prevalent within day-to-day

jewellery pieces as they offer flexibility in terms of style and colour, often adding a more contemporary feel

to a look or outfit. We fully expect movement of diamond jewellery consumption away from the

adornment+investment category and towards the adornment only category.

Retailers have been trying to grow share of diamond jewellery to at least 40% of sales as this would greatly

improve profit margins. However, the goal has so far proved elusive because gold jewellery sales have also

been growing at a remarkable pace, fuelled by significant gold price inflation. Let us see what happens

with steadier and lower gold prices.


India: Outlook for Jewellery Market continued...

2013 -2016

Please refer to charts in first section for Macroeconomic and Demographic Scorecard.

Jewellery sales in India will experience slower growth in the period 2013-2016 than in the period 2009-

2012. The culprits will be ongoing weakness in consumer spending which has been hit by rising inflation,

lower real wage growth and a poorer macro-economic environment.

At Equity Communications, we still feel India is a policy mess and will remain so for the foreseeable

future. Our thinking is that India will stumble along for the remainder of this decade because of glaring

structural deficiencies such as troublesome inflation and the current account deficit which remains

vulnerable to poor policy decisions and business-culture problems.

We believe Indian culture is greatly responsible for the country growing below its potential GDP.

Nevertheless, the 5 to 7% annual GDP growth rate guarantees that India will become the next China in the

2020s because of its gigantic population.

*****

Demand for gold in jewellery manufacturing should oscillate in the 500-650 tonnes per year range, on the

back of continued modernisation of sales channels in India and the expected rise in the number of middle

class consumers. Indian jewellers are raising money on the local stock exchange and using proceeds for

raw material procurement and store expansions, including large format stores across the country.

Recycling of gold jewellery is also expected to increase in the coming years because jewellery designs are

becoming stale faster. Slow moving jewellery at the tail end of seasons is recreated into new designs.

*****

The product mix for jewellery retailers is a key determinant of profitability. Gold margins are standardized

because of adornment+investment factor. However, quest for greater margins is driving diversification

from gold jewellery products.

Demand for gold jewellery remains very strong because of cultural traditions. Gold jewellery sales - for

weddings, in particular - will continue to generate volume growth for jewellery retailers. Platinum and

diamond jewellery sales will generate margin growth.

The shift to more profitable diamond jewellery has been smooth because India is the world's dominant

processor of rough diamonds, with a monopoly position in the processing of small size and small value

diamonds.

The local diamond industry already has massive stocks of polished diamonds therefore it has been easier

to stimulate domestic demand for diamond jewellery.



*****

Industrialization and improvements in the standard of living reduce long-term

consumption of precious jewellery

Industrialization and improvements in the standard of living reduce long-term consumption of precious

jewellery since they also lower the potency of love traditions (marriage) that typically drive jewellery

consumption.

With Industrialization and improved standards of living:

there is reduction in communal economic activity such as subsistence agriculture

there is urbanization and standardization of dwellings

there are increases in wages

there is increase in the status and education of women

there is introduction of superior methods of birth-control that have revolutionized the

sexual habits of human-beings

Industrialization and improvements in the standards of living causes a drastic shift in values from

collectivism/communism to individuality. Unlike collectivism which emphasizes doing things for family

and community, individuality gives priority to personal freedom, self-determination and self-realization.

To those operating in the Indian jewellery industry, you will be pleased to know that India is still a very

long way from being fully industrialized.

From the beginning of time until well into the 20th century, precious jewellery was extremely rare and

costly to access in most regions of the world, making it extremely valuable as a status symbol. For much

of that time, only the very wealthy could afford the luxury of precious jewellery since gold and silver were

also used as circulating currency. It is no wonder then that consumption of precious jewellery receives a

boost as societies become richer. When more and more people around you are becoming wealthier, it is

very important to prove that you are not being left behind.

However, consumption of precious jewellery also loses much of its emotional appeal as wealth becomes

more spread out. When everyone around you can afford a product, it becomes redundant to prove that you

have it too.

- 29 -



To those operating in the jewellery industry, you will be pleased to know that this is the stage at which we

find India today. Despite the Indian's government's efforts to dent growth of the retail jewellery sector in

India, demand for jewellery is naturally structured to grow significantly.

Cultural tradition of precious jewellery consumption

Gigantic population

Gradually growing economy and improving standards of living

Leading global centre for precious jewellery manufacturing

Population regeneration supports sustainable consumption


Appendix: Selected Indian Jewellery Company Data

Source: Company publications, Equity Communications research

Titan Industries Jewellery Division

Largest jewellery retailer in India

Three major brands – Tanishq, GoldPlus and Zoya

Sub-brand - Mia, for the working woman; fq for the teens


Appendix: Selected Indian Company Data continued...


- 32 -




Tara Jewels

Integrated player in the

Indian jewellery industry,

launched and expanding

domestic retail network

Target segment of market -

aspirational luxury shoppers

in India

Average ticket size of Rs

50,000

- 33 -




Tribhovandas Bhimji Zaveri (TBZ)

Specialty retailer with focus on both wedding and fashion segment of the Indian jewellery

market

27 stores - ~88,000 square feet - spread across 20 cities in 7 states.

Expansion plan to increase the number of stores to 57 and retail space to ~150,000 square

feet by 2015 spread over 43 cities in 14 states

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About Diamond Shades and Equity Communications

Diamonds Shades

Diamond Shades is a diamond market research service owned and operated by Equity Communications Private

Limited. Diamond Shades provides breaking news alerts, analysis and commentary on the diamond industry

value chain, precious jewellery markets and the general luxury economy. The service is operated from

Australia, South Africa and Zimbabwe.


Established in 2004, Equity Communications is an investor communications company and premium business

information provider traditionally specializing on Zimbabwean industries that have global significance such as

tobacco, platinum and diamonds. For queries about Equity Communications, its products and services please do

not hesitate to contact us.

Diamond Shades Equity Communications Private Limited Address: 43 Lewisam Avenue, Harare Telephone: +263-(0)772-811317

E-mail: [email protected]

Diamond Shades 605/2 New Quay Promenade Docklands Vic 3008 Australia

E-mail: [email protected]

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Research Reports

Free Reports with download links provided

Rio Tinto Diamonds 2013 - Published May 15, 2013

De Beers Group 2013 – Published July 24, 2013

Alrosa 2013 (excluding Catoca) – Published July 25, 2013

Dominion Diamond Corporation – Published July 25, 2013

Zimbabwe Diamond Mining – Published August 1, 2013

World Diamond Production 2013-2018 – Published August 3,2013

End of year publication schedule

2013-2014 Guide to the Jewellery Market in India

2013-2014 Guide to the Jewelry Market in USA

2013-2014 Guide to the Jewellery Market in China

2013-2014 Guide to Global Consumption of Precious Jewellery

2013-2014 Analysis of Key Materials Used in Precious Jewellery Production (FREE!)

Diamond Report 2013

http://www.diamondshades.com/diamondreport/diamond-report-blog/whats-next-rio-tinto-diamonds/

http://www.diamondshades.com/diamondreport/diamond-report-blog/heres-our-2013-review-de-beers-group/

http://www.diamondshades.com/diamondreport/diamond-report-blog/dominion-diamond-corporation-and-alrosa-2013-reviews-now-available/

http://www.diamondshades.com/diamondreport/diamond-report-blog/dominion-diamond-corporation-and-alrosa-2013-reviews-now-available/

http://www.diamondshades.com/diamondreport/diamond-report-blog/zimbabwe-diamond-industry-2013/

http://www.diamondshades.com/diamondreport/diamond-report-blog/world-diamond-production-2013-2018

2013-2014 guide to the jewellery market in india...2013-2014 guide to the jewellery market in india...

Documents