The following discussion of our financial condition and results of operations should be read in conjunction with our "Restated Financial Statements" on page 203.
This Draft Red Herring Prospectus contains forward looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including the considerations described under "Risk Factors" and "Forward Looking Statements" beginning on pages 31 and 23, respectively, and elsewhere in this Draft Red Herring Prospectus.
Unless otherwise indicated or the context otherwise requires, the financial information used in this section is derived from our Restated Financial Statements included in this Draft Red Herring Prospectus. See "Financial Statements" on page 203. Further, unless otherwise indicated or the context otherwise requires, all operational information included herein pertains to Fiscal 2021, 2022 and 2023. Our Companys Fiscal commences on April 1 and ends on March 31 of the immediately subsequent year, and references to a particular Fiscal are to the twelve (12) months ended March 31 of that particular year. Unless the context otherwise requires, in this section, references to "we", "us", "ouf, "the Company" or "our Company" refers to ‘RBZ Jewellers Limited.
Unless otherwise indicated, industry and market data used in this section has been derived from industry publications, in particular, the report titled "Industry Research Report on Indian Gems and Jewellery Sector " dated May 26, 2023 ("Care Edge Report") prepared by CARE Advisory Research & Training Limited ("Care Edge Research") appointed on February 13, 2023 and exclusively commissioned by and paid for by us in connection with the Issue. A copy of the Care Edge Report is available on the website of our Company at http://www.rbzjewellers.com/. There are no parts, data or information (which may be relevant for the proposed Issue), that has been left out or changed in any manner. Unless otherwise indicated, financial, operational, industry and other related information derived from the Care Edge Report and included herein with respect to any particular year refers to such information for the relevant calendar year. For more information, see "Risk Factors - Certain sections of this Draft Red Herring Prospectus disclose information from an industry report commissioned by us from CARE Advisory Research and Training Limited who is an independent third-party entity and is not related to the Company, its Promoters or Directors in manner whatsoever. Any reliance on such information for making an investment decision in the Issue is subject to inherent risks" on page 45. Also see, "Certain Conventions, Presentation of Financial and Market Data and Currency of Presentation " on page 20.
OVERVIEW
We are one of the leading organised manufacturers of gold jewellery in India, specializing in Antique Gold Jewellery and distribute to reputable nation-wide retailers and significant regional players in India. (Source: Care Edge Report) We have a history of more than fifteen (15) years in the jewellery industry. We design and manufacture a wide range of Antique Gold Jewellery which consists of jadau, Meena and Kundan work and sell it on a wholesale and retail basis. We also process and supply Antique Gold Jewellery on job work basis to national retailers.
Our customer base in wholesale business includes reputed national, regional and local family jewellers spread across 19 States and 72 cities within India (Source: Care Edge Report). Our Company also operates its retail showroom under the brand name "Harit Zaveri" and is a leading player in Ahmedabad (Source: Care Edge Report). We offer jewellery for bridal, occasional and daily wear at various price range in our retail showroom. We also export our jewellery to Middle East region. We carry out our manufacturing operations from a well- equipped and modern facility situated at Ahmedabad, Gujarat having advanced technologies in casting, laser and 3-D printing. Our retail showroom is situated in prominent area of Ahmedabad. We own our manufacturing facility as well as the retail showroom premises.
We offer a diverse range of jewellery collections comprising of different manufacturing techniques and varieties. We specialize in antique gold bridal jewellery and are known for our unique designs and exceptional craftmanship. We have a dedicated and experienced in-house design team who supervises the artisans and craftsman to develop new products and unique designs that meet customers demands and requirements basis our own market research in the jewellery industry. We endeavour to cater to our customers unique preferences, which often vary significantly by geography and micro market. Our jewellery designs are inspired by traditional Indian art and culture, and we blend these elements with contemporary designs to create aesthetic pieces that are both classic
and modem. We use a variety of precious and semi-precious stones in our jewellery, including diamonds, emeralds, rubies, and pearls, which are intricately set in gold. Our constant focus on design and technological innovation in jewellery industry and our ability to recognize consumer preferences and market trends, the intricacy of our unique designs and the quality of our products are our key strengths. Our jewellery is manufactured primarily in close collaboration with skilled local craftsman located within our manufacturing facility and in some cases across other states as well. We have developed a manufacturing process wherein we adopt emerging jewellery making techniques wherein we use latest technology and blend it with traditional methods, to bring out the uniqueness of our designs.
Our Companys retail business was established in the year 2014 in the name of "Harit Zaveri Jewellers" under the brand name of "HaritZaveri", with the aim of bringing transparency and ethical practices in maintaining and offering the finest quality and the right price to its customers in the retail market. Our retail division offers range of products like bangles, rings, bracelets and range of jewellery sets including bridal, occasional and daily wear jewellery.
Our experience of more than fifteen (15) years supplemented by our Promoters experience in the jewellery industry has enabled us to build an effective business model. The unique proposition of our business model is complete control over the entire value chain. On the demand side, we sell our products on a wholesale and retail basis. On the supply side, we have an in-house design and manufacturing process, which is highly flexible and customisable. Our business model allows us to monitor and control the quality of our products on the supply side, and provides us the ability to respond quickly to our customers needs and preferences on the demand side. We send all our retail segment jewellery to government-approved hallmarking centers who performs tests and analyses our jewellery in accordance with BIS norms. Our diamond jewellery is certified by various agencies including IGI and GIA.
Our Company is managed by our promoters, Rajendrakumar Kantilal Zaveri, Chairman & Managing Director, who has more than thirty-five (35) years of experience in the jewellery industry, and Harit Rajendrakumar Zaveri, the Joint Managing Director, son of Rajendrakumar Kantilal Zaveri, who has fifteen (15) years of experience in the jewellery industry. Our Promoters relationships with our suppliers, customers and other industry participants have been instrumental in implementing our growth strategies. Our Promoters continues to remain actively involved in our operations and brings to our Company their vision and leadership which we believe has been instrumental in sustaining and growing our business through different economic cycles. We have an experienced and dedicated senior management team who is responsible for the overall strategic planning and business development of our Company and have helped us in the expansion of our geographical spread and developing and managing our manufacturing facility.
KEY FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATION
Our results of operations have been, and will be, affected by many factors, some of which are beyond our control. Our results of operations and financial conditions are affected by numerous factors including the following:
A. Ability to use our brand and catering to changing product range
We derive substantially most of our revenue from manufacturing and job work, which depends significantly on the strength and reputation of our brand. We attribute our strong brand in the jewellery market that our customers associate us with trust and transparency by providing detailed price tags, products certifications and transparency in gold exchange etc. Our reputation and brand image built on trust and transparency are critical to the success of our business and we continue to focus on operational and marketing efforts based on these principles. We undertake numerous marketing initiatives to promote our brand. For Fiscals 2023, 2022 and 2021, our expenses for advertising and other marketing costs were Rs. 330.75 lakhs, Rs. 188.86 lakhs and Rs. 75.23 lakhs respectively. For further details on our marketing and promotion efforts, see "Our Business - Marketing and Promotion " on page 160.
The jewellery industry is ever changing and to satisfy the changing preferences, we have a dedicated and experienced design team who supervises the artisans and craftsman to develop new products and unique designs that meet customers demands and requirements basis our own market research in the jewellery industry. We follow a strong design process to make jewellery that flows from right market research to develop theme, building up forms layouts and developing each and every element of the jewellery to produce right kind of finish and desired designs. We also have launched our website, www.rbzjewellers.com, where we feature our products and our participation in various events.
For further details, see "Risk Factors - The strength of our brand is crucial to our success and we may not succeed in continuing to maintain and develop our brand" on page 31.
B. Product mix and innovation in our product range
We operate on the core philosophy of creating new, innovative and unique designs in our product offerings. Based on our research, knowledge and expertise, we believe that we have been able to create a unique and diversified range of designs and product range to cater to all genre of customers keeping in mind their taste and preference. One of our unique selling propositions is creating an inventory of varied designs products for our showroom, which enables and ensures repeat customers seeking varied type of designs and products in our retail space as we have a wide range of options to offer. The revenue from sale of gold jewellery accounted for 87.93%, 90.38% and 88.40% of our total revenue from operations for the Fiscals 2023, 2022 and 2021, respectively.
Our results of operations are dependent on our strength continue to create unique and diversified range of designs and products. Our ability to grow our consumer base is directly depend on our ability to better our product mix and innovate our product range.
Our future growth shall depend on our ability to identify emerging market trends, offer new products and new designs to customers and inculcate strong culture of innovation which will enable us to expand the range of our offerings to customers and improve the delivery of our products along with growing our portfolio of various sized products to increasingly represent our revenue from operations, widened the customer base that we cater to, and typically have a higher margin profile.
For further details, see "Risk Factors-Our inability to respond to changes in demands and market trends in a timely manner and failure to expand our product offering in a diversified manner may have an adverse effect on our business, results of operations and financial condition " on page 33 and "Risk Factor - Our revenues have been significantly dependent on sale of gold jewellery and gold jewellery processed, which accounted for 87.93 %, 90.38 % and 88.40 % of our total revenue from operations for the Fiscals 2023, 2022 and 2021, respectively. Any factors adversely affecting the procurement of gold or our sales of gold jewellery may negatively impact our business, financial condition, results of operations and prospects" on page no 35.
C. Formal arrangements and quality control
We ensure at all times to undertake quality control at every stage of our manufacturing process to ensure that the final products are in accordance with the designs provided by our designers. Further, we ensure that all our jewellery is hallmarked as prescribed by BIS at all times. If our final products do not match the designs provided by our designer and desired quality, we may not get good market response. Our sales, results of operations and future growth is dependent on such market response to continue to grow.
Further, we have not established formal arrangements with our third party manufacturers, wherein any unscheduled, unplanned or prolonged disruption of operations at such third-party manufacturing facilities, including on account of power failure, fire, mechanical failure of equipment, performance below expected levels of output or efficiency, obsolescence of equipment or manufacturing processes, non-availability of adequate labour or disagreements with workforce, lock-outs, earthquakes and other natural disasters, industrial accidents, any significant social, political or economic disturbances or infectious disease outbreaks, could affect our vendors ability to meet our requirements, and could consequently affect our operations.
For further details, see "Risk Factors- Any failure in our quality control processes, our inability to maintain or establish formal arrangements with third party manufacturers, and any disruptions at such third-party manufacturing facilities, or failure ofsuch third parties to adhere to the relevant quality standards may have an adverse effect on our business, brand, results of operations and financial condition" on page 34.
D. Sales mix, capital requirement of each segment and competition
Our revenue from operations is derived from a mix of retail and wholesale sales, as well as provision of job work services. The margins of each of these segments are different and vary based on the client, volume of order and intricacies involved. Further, every segment has a different working capital requirement. We face competition from both organised and unorganised players in the jewellery industry. If we fail to satisfy the working capital requirements for different segments or we face increased competition because of which our certain business from our customers may be procured by our competitors which could result into loss of business. For further details, see "Risk Factor - Our revenue and earnings are dependent on the sales mix consisting of retail and wholesale as well as provision of job work services and working capital requirements of each segment is different. If we are unable to balance or maintain this sales mix or balance capital requirement for every segment in future, there could be an adverse impact on our business, financial condition and results of operations" on page 33.
Our future growth shall depend on our ability to balance the working capital requirements of different segment and retain our customers.
E. Seasonality
Our sales have historically exhibited certain seasonal fluctuations, reflecting higher sales volumes and profit margins during festivals and other occasions. Historically, sales in the third quarter and fourth quarter have typically been higher than the first quarter and second quarter of the fiscal year. We stock certain inventory to account for this seasonality, while our fixed costs such as, employee salaries, showroom operating costs and logistics-related expenses, which form a significant portion of operating costs, are relatively constant throughout the year.
Consequently, lower than expected net sales during any third or fourth quarters or more pronounced seasonal variations in sales in the future could have a disproportionate impact on our operating results for the year, or could strain our resources and impair cash flows. Any slowdown in demand for our jewellery during peak season or failure by us to accurately foresee and prepare for such seasonal fluctuations could have a material adverse effect on our business, financial condition and results of operations. The effect of seasonality is expected to further decrease with greater geographical diversification. For further details, see "Risk Factors- Our income and sales are subject to seasonal fluctuations and lower income in a peak season may have a disproportionate effect on our results of operations" on page 37.
F. Changes in fiscal, economic or political conditions in India
Our results of operations are dependent on the overall economic conditions in the markets in which we operate. Any slowdown in these economies, including due to a global economic slowdown or changes in interest rates, government policies or taxation, social and civil unrest, pandemics and political, economic or other developments could adversely affect our business and results of operations. Even though there are many factors that affect levels of consumer confidence and spending, demand for jewellery can be relatively inelastic in our markets as it is often purchased for wedding-related, religious, cultural and sentimental reasons. For further details, see "Risk Factors- Political, economic or other factors that are beyond our control may have an adverse effect on our business and results of operations"" on page 49.
KEY PERFORMANCE INDICATORS AND CERTAIN NON-GAAP MEASURES
In evaluating our business, we consider and use certain non-GAAP financial measures and key performance indicators that are presented below as supplemental measures to review and assess our operating performance. The presentation of these non-GAAP financial measures and key performance indicators are not intended to be considered in isolation or as a substitute for the Restated Financial Statements. We present these non-GAAP financial measures and key performance indicators because they are used by our management to evaluate our operating performance. These non-GAAP financial measures are not defined under Ind AS and are not presented in accordance with Ind AS. The non-GAAP financial measures and key performance indicators have limitations as analytical tools. Further, these non-GAAP financial measures and key performance indicators may differ from the similar information used by other companies, including peer companies, and hence their comparability may be limited. Therefore, these matrices should not be considered in isolation or construed as an alternative to Ind AS measures of performance or as an indicator of our operating performance, liquidity, profitability or results of operation.
EBITDA and EBITDA Margin
EBITDA is defined as our profit/loss before tax, finance cost and depreciation and amortisation. Profit/loss before tax margin is defined as profit/loss before tax divided by revenue from operations. EBITDA margin is defined as our EBITDA as a percentage of revenue from operations.
EBITDA is defined as our profit/loss before tax, finance cost and depreciation and amortisation. Profit/loss before tax margin is defined as profit/loss before tax divided by revenue from operations. EBITDA margin is defined as our EBITDA as a percentage of revenue from operations.
| Category | FY 2022-23 | FY 2021-22 | FY 2020-21 |
| Restated (loss) / profit after tax | 2,233.31 | 1,440.57 | 974.82 |
| Add: Total Tax Expense | 743.39 | 520.82 | 363.02 |
| Add: Finance Costs | 832.56 | 617.61 | 626.18 |
| Add: Depreciation and Amortisation expense | 136.94 | 140.18 | 152.16 |
| Earnings before interest, taxes, depreciation and amortization expenses (EBITDA) | 3,946.20 | 2,719.18 | 2,116.18 |
| Revenue from operations | 28,792.78 | 25,210.67 | 10,699.13 |
| EBITDA Margin (%) | 13.71% | 10.79% | 19.78% |
The following table sets forth certain key performance indicators for the periods indicated:
| Particulars | FY 2022-23 | FY 2021-2022 | FY 2020-2021 | CAGR |
| Quantity sold and processed (Kg.) | 1,058.06 | 940.99 | 622.96 | 30.32% |
| Revenue from Operations (Z in lakhs) | 28,792.78 | 25,210.67 | 10,699.13 | 64.05% |
| EBITDA (Z in lakhs) | 3,946.20 | 2,719.18 | 2116.18 | 36.56% |
| EBITDA Margin (%) | 13.71% | 10.79% | 19.78% | - |
| PAT (Z in lakhs) | 2,233.31 | 1,440.57 | 974.82 | 51.36% |
| PAT Margin (%) | 7.76% | 5.71% | 9.11% | - |
| RoE (%) | 27.49% | 22.94% | 19.11% | - |
| RoCE(%) | 20.08% | 19.06% | 16.82% | - |
Notes:
• Quantity sold and processed refers to the quantum of net gold jewellery which is processed / manufactured / purchased (excluding gold bars and coins) sold to our customers under wholesale and retail segments and also on a job work basis. The quantum of jewellery manufactured by us and sold on wholesale and retail basis is considered as quantity manufactured. Certain items which are purchased from others are considered as quantity purchased. The quantum ofgold jewellery manufactured and processed by us on job work basis which is considered as quantity processed.
• "EBITDA" and "EBITDA margin " are Non-GAAP financial measures. EBITDA refers to our restated profit for the year/period, as adjusted to exclude (i) other income, (ii) depreciation and amortization expenses, (iii)finance costs and
(iv) total tax expenses. EBITDA Margin refers to the percentage margin derived by dividing EBITDA by revenue from operations.
• "RoE" means return on equity, which represents Profit after tax during the relevant year /period divided by Average Equity. Average equity is calculated as average of opening and closing balance of total equity for the year / period.
• "RoCE" means return on capital employed, which represents EBIT (Earnings before Interest and Tax) during the relevant year/period as a percentage of capital employed. Capital employed is the total of all types of capital, other equity, total borrowings, total lease liabilities and deferred tax liabilities (net) less deferred tax assets (net) as of the end of the relevant year/period.
PRESENTATION OF FINANCIAL INFORMATION
These Restated Financial Statements have been complied by the management from:
a) Audited Ind AS Financial Statement of the Company as at March 31, 2023 prepared in accordance with Indian Accounting Standard, specified under section 133 of the Act and other accounting principles generally accepted in India, which have been approved by the Board of Directors at their meeting held on May 20, 2023.
b) Audited Proforma Ind AS Financial Statements of the Company as at and for the years ended March 31, 2022 and March 31, 2021 which have been approved by the Board of Directors at their meeting held on
May 20, 2023. These Proforma Ind AS financial statements have been prepared by making Ind AS adjustments to the audited financial statements of the company as at and for the year ended March 31, 2022 and 2021, prepared in accordance with the Accounting Standards notified under Section 133 of the Act, ("Indian GAAP") which were approved by the board of directors at their meeting held on September 8, 2022 and November 24, 2021 respectively.
These Restated Financial Statements have been:
a) prepared after incorporating adjustments for the changes in accounting policies, material errors and regrouping/reclassifications retrospectively in the financial years ended 31st March, 2022 and 2021 to reflect the same accounting treatment as per the accounting policies and grouping/classifications followed as at and for the year ended March 31, 2023;
b) have been prepared after incorporating proforma Ind AS adjustments to the audited Indian GAAP financial statements as at and for the year ended March 31, 2022 and 2021 as described in Note 43 to the Restated Financial Statements; and
c) have been prepared in accordance with the Act, ICDR Regulations, the Guidance Note and E-mail dated October 28, 2021 from SEBI to Association of Investment Bankers of India.
SIGNIFICANT ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with Ind AS. The notes to the financial statements contain a summary of our significant accounting policies. Set forth below is a summary of our most significant critical accounting policies under Ind AS. See "RestatedFinancial Statements" on page 203.
This note provides a list of significant accounting policies adopted in the preparation of the Ind AS Financial Statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
1. Statement of Compliance
The Ind AS Financial Statements of the Company have been prepared in accordance with and comply in all material respects with Indian Accounting Standards ("Ind AS") notified under Section 133 of the Companies Act, 2013 ("the Act") read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act, as amended.
2. Basis of Preparation
These Ind AS financial statements of the company have been prepared in accordance with Indian Accounting Standards ("Ind AS") notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) and Companies (Indian Accounting Standards) Amendment Rules, 2016. Accounting Policies have been consistently applied except where newly issued accounting standard is initially adopted or revision to the existing standards requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an on-going basis.
3. Basis of measurement
This Ind AS Financial Statements has been prepared on an accrual basis under the historical cost convention except for the following:
- Certain financial assets and liabilities classified as Fair value through Profit and Loss (FVTPL) or Fair value through Other Comprehensive Income (FVTOCI).
- The defined benefit asset/(liability) is recognised as the present value of defined benefit obligation less fair value of plan assets.
The above items have been measured at Fair value and methods used to measure fair value are disclosed further in Note 40(c).
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
4. Functional and presentation currency
Items included in the Ind-AS Financial Statements of the Company is measured using the currency of the primary economic environment in which the Company operates (i.e., the "functional currency"). The Ind AS Financial Statements is presented in Indian Rupee, which is the functional as well as presentation currency of the Company.
All amounts in these Ind AS Financial Statements and notes have been presented in Rs. Lakhs rounded to two decimals as per the requirement of Schedule III of the Companies Act, 2013, unless otherwise stated. Transactions and balances with values below the rounding off norm adopted by the Company have been reflected as "0" in the relevant notes to this Ind AS Financial Statements.
5. Property, Plant and Equipment
All items of property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses.
With respect to Ind AS financial statement for the financial year ended 31st March, 2023, property, plant and equipment had been measured at deemed cost, using the net carrying value as per previous GAAP as at 1st April, 2021.
Capital work in progress is carried at cost, less any recognised impairment loss. Cost includes purchase price, taxes and duties, labour cost and other directly attributable costs incurred upto the date the asset is ready for its intended use. Such Capital work in progress are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Subsequent costs relating to day-to-day servicing of the item are not recognised in the carrying amount of an item of property, plant and equipment; rather, these costs are recognised in profit or loss as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Depreciation methods, estimated useful lives and residual value
Depreciation is recognized so as to write off the cost of assets less their residual values over their useful lives as prescribed under Part C of Schedule II of the Companies Act 2013, using the straight-line method, except in respect of leasehold improvement for which the company has estimated the useful life of nine years based on the initial lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Depreciation for assets purchased / sold during a period is proportionately charged for the period of use.
6. Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses, if any. Amortization is recognized on a straight-line
basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Derecognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from continued use of intangible asset. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in statement of profit and loss when the asset is de-recognized.
7. Impairment
i) Financial assets (other than at fair value)
In accordance with Ind AS 109, the Company uses ‘Expected Credit Loss (ECL) model, for evaluating impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected Credit Losses are measured through a loss allowance at an amount equal to:
• The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date), if the credit risk on a financial instrument has not increased significantly; or
• Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument),if the credit risk on a financial instrument has increased significantly.
For trade receivables the Company applies ‘simplified approach which requires expected lifetime losses to be recognized from initial recognition of the receivables.
The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward-looking estimates are analyzed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
A financial asset is ‘credit- impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit- impaired includes the following observable data:
- significant financial difficulty of the borrower or issuer;
- a breach of contract such as a default or being past due for 90 days or more;
- the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
- it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
- the disappearance of an active market for a security because of financial difficulties.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Companys historical experience and informed credit assessment and including forward- looking information.
The Company considers a financial asset to be in default when:
- the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realising security (if any is held); or
- the financial asset is 90 days or more past due.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Companys procedures for recovery of amounts due.
ii) Non-financial assets
Tangible and Intangible assets
Property, Plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is an indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value- in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss.
Reversal of impairment loss
Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized directly in other comprehensive income and presented within equity.
8. Inventories
Inventories comprise of Raw Materials, Work in Progress, Finished Goods and Traded Goods are stated at the lower of cost or net realizable value. The gold wastage salvaged during the course of job work process are recognized at Net realizable value.
The cost of Raw materials and traded goods included in inventory are determined on a weighted average cost basis and the cost of finished goods and work in progress included in inventory is determined on full absorption cost method basis.
Cost comprises all costs of purchase including duties and taxes (other than those subsequently recoverable by the Company), freight inwards and other expenditure directly attributable to acquisition and to bring the inventories to its present location and condition. Cost of finished goods include cost of materials consumed and cost of conversion.
Net realizable value represents the estimated selling price for inventories less estimated cost necessary to make the sale.
9. Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage. Bank overdraft are shown within borrowings in current liabilities in the balance sheet.
10. Borrowing cost
Borrowing costs include
a) Interest expense calculated using the effective interest rate method,
b) Finance charges in respect of finance leases, and
c) Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets is substantially ready for their intended use or sale.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the statement of profit and loss in the period of their accrual.
11. Revenue recognition
Revenue from contract with customer is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
Sale of products:
Revenue from the sale of products is recognized at the point in time when control is transferred to the customer, generally on dispatch/delivery of the goods or terms as agreed with the customer. The company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods, the company considers the effects of customer incentives, discounts, variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any). Additionally, revenue excludes taxes collected from customers, which are subsequently remitted to governmental authorities.
Variable consideration
If the consideration in a contract includes a variable amount, the company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at the time of completion of performance obligation and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
Sale of service:
Revenue from providing services is recognized in the accounting period in which the services are rendered.
Other Income:
Other income comprises of interest income and dividend income.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Dividends are recognised in the Standalone Statement of Profit and Loss only when the right to receive payment is established; it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
12. Foreign currency translation
In preparing the Ind AS Financial Statements of the Company, transactions in currencies other than the entitys functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the date of the transactions.
At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
13. Employee benefits
Short-term employee benefits
Employee benefits such as salaries, wages, bonus and performance linked rewards falling due wholly within twelve months of rendering the service are classified as short-term employee benefits and are expensed in the period in which the employee renders the related service. The obligations are presented as current liability in the balance sheet if the entity does not have an unconditional right to defer the settlement for at least 12 months after reporting date.
Defined benefit plan
The liability or asset recognised in the balance sheet in respect of the retirement benefit plan i.e., gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated by an actuary using projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of the plan assets. This cost is included in the employee benefit expense in the statement of profit and loss.
Remeasurements, comprising actuarial gains and losses and the effect of the changes to the asset ceiling (if applicable), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur and consequently recognised in retained earnings and is not reclassified to profit or loss.
The retirement benefit recognised in the balance sheet represents the actual deficit or surplus in the Companys defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of reductions in future contributions to the plan.
Defined contribution plans
Contributions to retirement benefit plans in the form of provident fund, employee state insurance scheme and pension scheme as per regulations are charged as an expense on an accrual basis when employees have rendered the service. The Company has no further payment obligations once the contributions have been paid.
14. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax
a) Current tax
The tax currently payable is based on estimated taxable income for the year in accordance with the provisions of the Income Tax Act, 1961. Taxable profit differs from ‘profit before tax as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Companys current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
b) Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in Ind AS Financial Statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences, unused tax losses and unused tax credits can be utilized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is recognised in profit or loss, except to the extent that is relates to items recognised in other comprehensive income or directly in equity.
c) Current and deferred tax for the year
Current and deferred tax are recognized in the Statement of profit and loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination
15. Earnings per share
The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares.
Basic EPS is computed by dividing the profit or loss attributable to the ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. Where ordinary shares are issued but not fully paid, they are treated in the calculation of basic earnings per share as a fraction of an ordinary share to the extent that they were entitled to participate in dividends during the period relative to a fully paid ordinary share.
Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares considered for deriving basic EPS and also weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
16. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre tax rates that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
A provision for onerous contract is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with the contract.
Contingent liabilities are not recognized in the Ind AS Financial Statements but are disclosed in notes. A contingent asset is neither recognized nor disclosed in the Ind AS Financial Statements.
17. Financial Instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
a) Financial Assets
Financial Assets comprises of investments in equity instruments, cash and cash equivalents, loans and other financial assets.
Initial Recognition:
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through Profit or Loss, transaction costs that are attributable to the acquisition of financial assets. Purchases or sales of financial assets that requires delivery of assets within a period of time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the company committed to purchase or sell the asset.
Subsequent Measurement:
i) Financial assets measured at amortized Cost:
Financial assets are subsequently measured at amortized cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and where contractual terms of financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
ii) Financial assets at Fair Value through Other Comprehensive Income (FVTOCI):
Financial Assets that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding are subsequently measured at FVTOCI. Fair Value movements in financial assets at FVTOCI are recognized in Other Comprehensive Income.
Equity instruments held for trading are classified as at fair value through profit or loss (FVTPL). For other equity instruments the company classifies the same as FVTOCI. The classification is made on initial recognition and is irrevocable. Fair Value changes on equity instruments at FVTOCI, excluding dividends are recognized in Other Comprehensive Income (OCI).
iii) Fair Value through Profit or Loss (FVTPL):
Financial Assets are measured at FVTPL if it does not meet the criteria for classification as measured at amortized cost or at FVTOCI. All fair value changes are recognized in the Statement of Profit and Loss.
De-recognition of Financial Assets:
Financial Assets are derecognized when the contractual rights to cash flows from the financial assets expire or the financial asset is transferred and the transfer qualifies for de-recognition. On derecognition of the financial assets in its entirety, the difference between the carrying amount (measured at the date of de-recognition) and the consideration received (including any new asset obtained less any new liability assumed) shall be recognized in the Statement of Profit and Loss.
b) Financial Liabilities
The Companys financial liabilities includes following:
- Borrowing from Banks
- Borrowing from Others
- Trade Payables
- Other Financial Liabilities
Classification
The companys financial liabilities are measured at amortized cost.
Initial Recognition and Measurement
Financial Liabilities are initially recognized at fair value plus any transaction costs, (if any) which are attributable to acquisition of the financial liabilities.
Subsequent Measurement:
Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate Method.
The Effective Interest Rate Method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including transaction costs and other premiums or discounts) through the expected life of the financial liability.
De-recognition of Financial Liabilities:
Financial liabilities shall be derecognized when, and only when, it is extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expires.
c) Offsetting of Financial assets and Financial Liabilities:
Financial assets and Financial Liabilities are offset and the net amount is presented in Balance Sheet when, and only when, the Company has legal right to offset the recognized amounts and intends either to settle on the net basis or to realize the assets and liabilities simultaneously.
d) Reclassification of Financial Instruments:
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are categorized as equity instruments at FVTOCI, and financial assets or liabilities that are specifically designated as FVTPL. For financial assets which are debt instruments, a reclassification is made only if there is a change in business model for managing those assets. Changes to the business model are expected to be very infrequent. The management determines the change in a business model as a result of external or internal changes which are significant to the Companys Operations. A Change in business occurs when the company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively effective from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
18. Share Capital
Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or share options are recognized as a deduction from equity, net of any tax effects.
19. Leases
The Company assesses at contract inception whether a contract is, or contains, a lease i.e., if the contract conveys the right to control the use of an identified asset for a period in exchange of consideration.
Company as a lessee:
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components.
Lease liabilities:
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the lease payments.
The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the lessees incremental borrowing rate. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets:
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability and lease payments made before the commencement date.
Right-of-use assets are depreciated over the lease term on a straight-line basis. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, and lease payments made at or before the commencement date less any lease incentives received.
Short term leases and leases of low value assets:
Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items of office equipment including IT equipment.
20. Fair Value Measurement
A number of Companys accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair value is the price that would be received on sell of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal market or the most advantageous market must be accessible to the Company.
The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participants ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the Ind As Financial Statements are categorized within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole. The fair value hierarchy is described as below:
a) Level 1 - unadjusted quoted prices in active markets for identical assets and liabilities.
b) Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
c) Level 3 - unobservable inputs for the asset or liability.
For assets and liabilities that are recognized in the Ind AS Financial Statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of fair value hierarchy.
Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
a) Investment in equity and debt securities
The fair value is determined by reference to their quoted price at the reporting date. In the absence of quoted price, the fair value of the financial asset is measured using valuation techniques.
b) Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. However, in respect of such financial instruments, fair value generally approximates the carrying amount due to short term nature of such assets.
c) Non-derivative financial liabilities
Fair Value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.
21. Current / non- current classification
An asset is classified as current if:
a) It is expected to be realized or sold or consumed in the Companys normal operating cycle;
b) It is held primarily for the purpose of trading;
c) It is expected to be realized within twelve months after the reporting period; or
d) It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current if:
a) It is expected to be settled in normal operating cycle;
b) It is held primarily for the purpose of trading;
c) It is expected to be settled within twelve months after the reporting period;
d) It has no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between acquisition of assets for processing / trading / assembling and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
22. Cash flow statement
Cash flows are reported using indirect method, whereby net profits before tax are adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments and items of income or expenses associated with investing or financing cash flows. The cash flows from regular revenue generating (operating activities), investing and financing activities of the Company are segregated.
CHANGES IN ACCOUNTING POLICIES
There have been no changes in our accounting policies during the financial years ending on March 31, 2021, March 31, 2022 and March 31, 2023 except as mentioned below:
1. Appropriate re-groupings have been made in the Restated Statement of Assets and Liabilities, Restated Statement of Profit and Loss and Restated Statement of Cash Flows, wherever required, by reclassification of the corresponding items of income, expenses, assets, liabilities and cashflows, in order to bring them in line with the accounting policies and classification as per the Ind AS financial information of the Company for the financial year ended March 31, 2023 respectively prepared in accordance with Schedule III of Companies Act, 2013, requirements of Ind AS1 and other applicable Ind AS principles and the requirements of the Securities and Exchange Board of India (Issue of Capital & Disclosure Requirements) Regulations, 2018, as amended.
2. The company has prepared the statutory financial statements for the financial year ended March 31, 2022, and 2021 as per accounting standards notifies under Section133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounting) Rules, 2014 ("Previous GAAP"). The company has prepared Proforma Ind AS
financial statements by making Ind AS adjustments to the statutory audited financial statements of the company as per the requirement of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018. The reconciliation for the same has been provided in note 42.
3. The Company bought back its shares in financial year ended March 31, 2021. The Capital redemption reserve relating to the same was created in financial year ended March 31, 2022 instead of March 31, 2021. The same has been considered as prior period adjustment.
PRINCIPAL COMPONENTS OF REVENUE AND EXPENDITURE
Our revenue and expenditures are reported in the following manner:
A) Revenue
Our revenue consists of revenue from operations and other income.
Revenue from operations
Our revenue from operations majorly comprises of sale of products such as gold jewellery, 24 carat gold, silver jewellery and diamond jewellery and sale of services including labour income and repairing income.
Other Income
Our other income primarily includes income from banks and other non-operating income.
B) Expenses
Our expenses primarily consist of cost of materials consumed, purchase of traded goods, change in inventories of finished goods and stock-in-trade, employee benefit expenses, finance cost, depreciation and amortisation expense and manufacturing and other expenses.
Cost of materials consumed
It primarily consists of Opening Stock of Raw Material, Purchases of Raw Material and Closing Stock of Raw Material. Purchase of gold comprises a significant portion of our cost of materials consumed, followed by purchase of diamonds, precious and semi-precious stones.
Purchase of traded goods
Our purchases of stock in trade consists primarily of gold jewellery, gold bullion bars and also includes purchases of platinum, silver and diamond jewellery; as well as daily wear fashion jewellery.
Change in inventories of finished goods and stock-in-trade
The net change in inventories of finished goods, stock-in-trade and work in progress is the difference between our opening stock and closing stock.
Employee benefit expenses
Employee benefit expenses comprise salaries and bonus, contribution to provident and other funds, staff welfare expenses and training & development expenses.
Finance cost
Our finance costs consist primarily of interest expense on bank borrowings and unsecured loans, and also include other borrowing costs, processing fee etc. Our finance cost also includes the impact of the interest on lease liabilities under Ind AS 116.
Depreciation and amortisation expense
Depreciation and amortization expenses primarily include depreciation expenses on our plant, property and equipment and amortization expenses on our intangible assets. Our depreciation and amortisation expenses also includes the impact of the amortisation of right of use assets under Ind AS 116.
Manufacturing and other expenses
Manufacturing expenses primarily include labour charges, tools and consumables and other factory overheads. Other expenses primarily include travelling expenses, legal and professional fees, insurance and advertising and sales promotion expenses, CSR expenses, security & electricity and other miscellaneous expenses.
OUR RESULTS OF OPERATIONS
The following table sets forth a breakdown of our results of operations and each item as a percentage of our total revenue for the periods indicated.
| Particulars | For and as at the Financial Year ended March 31, 2023 | For and as at the Financial Year ended March 31, 2022 | For and as at the Financial Year ended March 31, 2021 | |||
| Amount (Rs. in lakhs) | (% of total income | Amount (Rs. in lakhs) | (% of total income | Amount (Rs. in lakhs) | (% of total income | |
| Revenue | ||||||
| Revenue from operations | 28,792.78 | 99.41% | 25,210.67 | 87.05% | 10,699.13 | 36.94% |
| Other income | 169.84 | 0.59% | 41.99 | 0.17% | 71.52 | 0.66% |
| Total income | 28,962.62 | 25,252.66 | 10,770.65 | |||
| Expenses | ||||||
| Cost of materials consumed | 13,460.01 | 46.47% | 14,387.60 | 49.68% | 4,668.44 | 16.12% |
| Purchase of traded goods | 12,881.95 | 44.48% | 9,243.78 | 36.61% | 3,563.02 | 33.08% |
| Change in inventories of finished goods and stock-in-trade | 3,775.37 | (13.04)% | (2,795.45) | (11.07)% | (695.04) | (6.45)% |
| Employee benefit expenses | 681.39 | 2.35% | 541.33 | 2.14% | 432.93 | 4.02% |
| Finance cost | 832.56 | 2.87% | 617.61 | 2.45% | 626.18 | 5.81% |
| Depreciation and amortisation expense | 136.94 | 0.47% | 140.18 | 0.56% | 152.16 | 1.41% |
| Manufacturing and other expenses | 1,768.44 | 6.11% | 1,156.22 | 4.58% | 685.12 | 6.36% |
| Total expenses | 25,985.92 | 89.72% | 23,291.27 | 92.23% | 9,432.81 | 87.58% |
| Profit/(Loss) before exceptional items and tax from continuing operations | 2,976.70 | 10.28% | 1,961.39 | 7.77% | 1,337.84 | 12.42% |
| Exceptional items | - | 0.00% | - | 0.00% | - | 0.00% |
| Profit/(loss) before tax | 2,976.70 | 10.28% | 1,961.39 | 7.77% | 1,337.84 | 12.42% |
| Tax Expense Current tax | 650.00 | 2.24% | 515.00 | 2.04% | 350.00 | 3.25% |
| Tax in respect of earlier years | 42.56 | 0.15% | 44.06 | 0.17% | 0.17 | 0.00% |
| Deferred Tax | 50.83 | 0.18% | (38.24) | (0.15)% | 12.85 | 0.12% |
| Total tax expenses | 743.39 | 2.57% | 520.82 | 2.06% | 363.02 | 3.37% |
| Profit/ (Loss) for the period/year, net of tax from continuing operations | ||||||
| Other comprehensive income | 2,233.31 | 7.71% | 1,440.57 | 5.70% | 974.82 | 9.05% |
| A (i) Items that will not be reclassified to profit or loss | ||||||
| (a) Remeasurement Gain / (Loss) of the defined benefit plans | 14.42 | 0.05% | (2.29) | (0.01)% | 4.36 | 0.04% |
| (b) Equity Instruments through Other Comprehensive Income | - |
0.00% | 5.77 | 0.02% | 21.96 | 0.20% |
| (ii) Income tax related to Items above | , | 0.00% | _ | 0.00% | _ | 0.00% |
| (a) Tax relating to remeasurement of the defined benefit plans | 4.21 | 0.01% | (2.10) | (0.01)% | (4.47) | (0.04)% |
| (b) Tax relating to measurement of equity instruments at fair value | 0.00% | (1.83) | (0.01)% | 4.16 | 0.04% | |
| Other Comprehensive Income for the period/year | 10.21 | 0.04% | 7.41 | 0.03% | 26.63 | 0.25% |
| Total comprehensive income for the period/year, net of tax | 2,243.52 | 7.75% | 1,447.98 | 5.73% | 1,001.45 | 9.30% |
| Earnings Per Equity Share Basic and diluted earnings per share of face value of Rs.10 each (in Rs.) | 7.44 | 4.80 | 3.12 | |||
Discussion on the Results of Operation
Fiscal 2023 compared to Fiscal 2022
Income
Our total revenue increased to Rs. 28,962.62 lakhs in Fiscal 2023 from Rs. 25,252.66 lakhs in Fiscal 2022, which was an increase by 15%, primarily due to the reasons described below:
• Revenue from Operations: Our revenue from operations increased by 14% to Rs. 28,792.62 lakhs in Fiscal 2023 from Rs. 25,210.66 lakhs in Fiscal 2022. This increase was primarily due to the following:
Sale of Products: The revenue from sale of products increased by 13% from Rs. 24,764.80 lakhs in Fiscal 2022 to Rs. 27,879.15 lakhs in Fiscal 2023. The increase was due to marginal increase in quantity sold coupled with increase in gold prices during the Fiscal.
Sale of Services: The revenue from sale of services increased by 105% from Rs. 445.87 lakhs in Fiscal 2022 to Rs. 913.63 lakhs in Fiscal 2023. The increase was mainly due to increase in job-work services performed for national retailers.
• Other Income: The other income increased by 304% from Rs. 41.99 lakhs in Fiscal 2022 to Rs. 169.84 lakhs in Fiscal 2023. The increase was mainly due to gain of Rs. 134.69 lakhs on derecognition of lease liabilities in Fiscal 2023.
Expenses
Our total expenditure increased by 12% to Rs. 25,985.92 lakhs in Fiscal 2023 from Rs. 23,291.27 lakhs in Fiscal 2022, due to the factors described below:
• Cost of materials consumed: Our cost of materials expenses decreased by 6% from Rs. 14,387.60 lakhs in Fiscal 2022 to Rs. 13,460.01 lakhs in Fiscal 2023. This decrease was primarily due to shift of volume from the wholesale segment to job work segment.
• Purchase of traded goods: Our purchase of traded goods expenses increased by 39% from Rs. 9,243.78 lakhs in Fiscal 2022 to Rs. 12,881.95 lakhs in Fiscal 2023. This increase was primarily due to increase in scale of operations of the retail showroom.
• Change in inventories of finished goods and stock-in-trade: Our change in inventories of finished goods and stock-in-trade expenses increased by 35% from Rs. (2,795.45) lakhs in Fiscal 2022 to Rs. (3,775.37) lakhs in Fiscal 2023. This increase was primarily due to resultant increase in inventory held by the Company due to increase in scale of operations.
• Employee benefit expenses: Our employee benefit expenses increased by 26% from Rs. 541.33 lakhs in Fiscal 2022 to Rs. 681.39 lakhs in Fiscal 2023. This increase was due to increase in number of employees at a higher pay grade along with an average annual increment of 10 -12% in the compensation paid to existing employees.
• Finance cost: Our finance cost expenses increased by 35% from t 617.61 lakhs in Fiscal 2022 to t 832.56 lakhs in Fiscal 2023. This increase was primarily due to increase in interest and processing fees paid due to availment of term loan from ICICI bank and working capital limits from Axis Bank during the year.
• Depreciation and amortisation expense: Our depreciation and amortization expense decreased by 2% from t 140.18 lakhs in Fiscal 2022 to t 136.94 lakhs in Fiscal 2023. This decrease was primarily due to reduction of depreciation and amortisation expense on account of Written Down Method (WDV) followed by the Company.
• Manufacturing and other expenses: Our manufacturing and other expenses increased by 53% from t 1,156.26 lakhs in Fiscal 2022 to t 1,768.44 lakhs in Fiscal 2023. This increase was primarily due to increase in manufacturing and selling and distribution expenses, which is in line with the overall increase in operations of the Company.
• Tax Expense: Our tax expense increased by 43% to t 743.39 lakhs in Fiscal 2023 from t 520.82 lakhs in Fiscal 2022. The increase is in line with the increase in profit before tax for the Fiscal.
• Other comprehensive income for the period/year: Our comprehensive income increased by 38% from t 7.41 lakhs in Fiscal 2022 to t 10.21 lakhs in Fiscal 2023. The increase was mainly due to recognition of remeasurement gain of defined benefit plans during the Fiscal.
• Profit/ (Loss) for the period/year, net of tax from continuing operations: Due to the factors mentioned above, our Company earned a profit after tax of t 2,243.52 lakhs in Fiscal 2023 compared to the profit after tax of t 1,447.98 lakhs in Fiscal 2022, which is a 55% increase.
Fiscal 2022 compared to Fiscal 2021
Income
Our total income increased to t 25,252.66 lakhs in Fiscal 2022 from t 10,770.65 lakhs in Fiscal 2021, which was an increase by 134%, primarily due to the reasons described below:
• Revenue from Operations: Our revenue from operations increased by 136% to t 25,210.67 lakhs in Fiscal 2022 from t 10,699.13 lakhs in Fiscal 2021. This increase was primarily due to the following:
Sale of Products: The revenue from sale of products increased by 137% from t 10,455.99 lakhs in Fiscal 2021 to t 24,764.80 lakhs in Fiscal 2022. The increase was mainly due to increase in jewellery sold by us in Fiscal 2022 since in the previous Fiscal, we had to temporarily close our showroom and manufacturing facility in response to the government-mandated lockdown in India as a result of the COVID-19 pandemic.
Sale of Services: The revenue from sale of services increased by 83% from t 243.14 lakhs in Fiscal 2021 to t 445.87 lakhs in Fiscal 2022. The increase was mainly due to increased orders for job-work services from national retailers.
• Other Income: The other income decreased by 41% from t 71.52 lakhs in Fiscal 2021 to t 41.99 lakhs in Fiscal 2022. The decrease was mainly due to presence of profit on sale of office building worth t 41.33 lakhs in the Fiscal 2021.
Expenses
Our total expenditure increased by 147% to t 23,291.27 lakhs in Fiscal 2022 from t 9,432.81 lakhs in Fiscal 2021, due to the factors described below:
• Cost of materials consumed: Our cost of materials expenses increased by 208% from t 4,668.44 lakhs in Fiscal 2021 to t 14,387.60 lakhs in Fiscal 2022. This increase is in line with the overall increase in revenue of the Company.
• Purchase of traded goods: Our purchase of traded goods expenses increased by 159% from t 3,563.02 lakhs in Fiscal 2021 to t 9,243.78 lakhs in Fiscal 2022. This increase was primarily due to increase in scale of operations of the retail showroom.
• Change in inventories of finished goods and stock-in-trade: Our change in inventories of finished goods and stock-in-trade expenses increased by 302% from t (695.04) lakhs in Fiscal 2021 to t (2,795.45) lakhs in Fiscal 2022. This increase was primarily due to resultant increase in inventory held by the Company due to increase in scale of operations.
• Employee benefit expenses: Our employee benefit expenses increased by 25% from t 432.93 lakhs in Fiscal 2021 to t 541.33 lakhs in Fiscal 2022. This increase was due to increase in number of employees at a higher pay grade along with an average annual increment of 10-12% in the compensation paid to existing employees.
• Finance cost: Our finance cost expenses decreased by 1% from t 626.18 lakhs in Fiscal 2021 to t 617.61 lakhs in Fiscal 2022. This decrease was primarily due to decrease in interest paid on unsecured loan paid during the year.
• Depreciation and amortisation expense: Our depreciation and amortization expense decreased by 8% from t 152.16 lakhs in Fiscal 2021 to t 140.18 lakhs in Fiscal 2022. This decrease was primarily due to reduction of depreciation and amortisation expense on account of Written Down Method (WDV) followed by the Company.
• Manufacturing and other expenses: Our manufacturing and other expenses increased by 69% from t 685.12 lakhs in Fiscal 2021 to t 1,156.22 lakhs in Fiscal 2022. This increase was primarily due to increase of 102% in manufacturing expenses and 151% increase in selling and distribution expenses which is in line with the overall increase in revenue and operations of the Company.
• Tax Expense: Our tax expense increased by 43% to t 520.82 lakhs in Fiscal 2022 from t 363.02 lakhs in Fiscal 2021. The increase is in line with the increase in profit before tax for the Fiscal.
• Other comprehensive income for the period/year: Our comprehensive income decreased by 72% from t 26.63 lakhs in Fiscal 2021 to t 7.41 lakhs in Fiscal 2022. The decrease was mainly due to reduction in income from equity instruments during the Fiscal 2022.
• Profit/ (Loss) for the period/year, net of tax from continuing operations: Due to the factors mentioned above, our Company earned a profit after tax of t 1,447.98 lakhs in Fiscal 2022 compared to the profit after tax of t 1,001.45 lakhs in Fiscal 2021, which is a 45% increase.
Liquidity and Capital Resources
Historically, our primary liquidity requirements have been to fund our working capital requirements and capital expenditure. We have funded these primarily through cash generated from operations, issuance of capital, and borrowings from banks and financial institutions.
We expect to meet our working capital and planned capital expenditure requirements for the next 24 months primarily from the cash flows from business operations, borrowings from banks and financial institutions and the proceeds of this Fresh Issue.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
(Z in lakhs)
| Particulars | For the year ended March 31 | ||
| 2023 | 2022 | 2021 | |
| Net Cash from Operating Activities | (1,122.74) | 87.38 | (264.08) |
| Net Cash Used in Investing Activities | (1,104.82) | (65.42) | 100.71 |
| Net Cash Used in Financing Activities | 2,811.00 | (87.80) | 168.90 |
| Net Increase / (Decrease) in Cash and Cash Equivalents | 583.44 | (65.84) | 5.53 |
| Cash and Cash Equivalents at the beginning of the period/year | 5.26 | 71.10 | 65.57 |
| Cash and Cash Equivalents at the end of the period/ year | 588.70 | 5.26 | 71.10 |
Operating Activities
Fiscal 2023
In Fiscal 2023, net cash generated from operating activities was Rs. (1,122.74) lakhs and the operating profit before working capital changes was Rs. 3,775.87 lakhs. The change in working capital amounted to Rs. (4,086.78) lakhs, primarily due to increase in inventories by Rs. 3,018.02 lakhs.
Fiscal 2022
In Fiscal 2022, net cash generated from operating activities was Rs. 87.38 lakhs and the operating profit before working capital changes was Rs. 2,674.66 lakhs. The change in working capital amounted to Rs. (2,096.13) lakhs, primarily due to increase in inventories by Rs. 2,754.54 lakhs and increase in trade payable by Rs. 1,097.47 lakhs.
Fiscal 2021
In Fiscal 2021, net cash generated from operating activities was Rs. (264.08) lakhs and the operating profit before working capital changes was Rs. 2,057.27 lakhs. The change in working capital amounted to Rs. (1,961.53) lakhs, primarily due to increase in inventories by Rs. 888.30 lakhs and decrease in trade payable by Rs. 1,285.13 lakhs.
Investing Activities
Fiscal 2023
Net cash used in investing activities was Rs. (1,104.82) lakhs in Fiscal 2023, primarily on account of purchase of property, plant and equipment of Rs. (1,385.31) lakhs, which is offset by derecognition of right of use assets by Rs. 284.24 lakhs, amongst others.
Fiscal 2022
Net cash used in investing activities was Rs. (65.42) lakhs in Fiscal 2022, primarily on account of purchase of property, plant and equipment of Rs. (15.29) lakhs, addition of capital work in progress of Rs. (74.34) lakhs, which is offset by sale of investments of Rs. 18.35 lakhs, amongst others.
Fiscal 2021
Net cash generated from investing activities was Rs. 100.71 lakhs in Fiscal 2021, primarily on account of sale of property of Rs. 86.83 lakhs, sale of investments of Rs. 25.95 lakhs, which is offset by purchase of property, plant and equipment of Rs. (21.00) lakhs, amongst others.
Financing Activities
Fiscal 2023
Net cash generated from financing activities was Rs. 2,811.00 lakhs during Fiscal 2023, primarily on account of procurement of long/ short term borrowings of Rs. 3,608.27 lakhs, which is offset by interest payment of Rs. (797.28) lakhs.
Fiscal 2022
Net cash used in financing activities was Rs. (87.80) lakhs during Fiscal 2022, primarily on account of procurement of long/ short term borrowings of Rs. 481.37 lakhs, which is offset by interest paid of Rs. (569.17) lakhs.
Fiscal 2021
Net cash from financing activities was Rs. 168.90 lakhs during Fiscal 2021, primarily on account of repayment of procurement of long/ short term borrowings of Rs. 743.68 lakhs, which is offset by interest paid of Rs. (574.78) lakhs.
Capital and other commitments
The table below details our capital commitments for the stated period.
| Particular | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 |
| Capital Commitments | 40.00 | 20.31 | Nil |
Capital Expenditure
Our capital expenditures primarily relate to the purchase of additions to property, plant and equipment, intangible assets, capital work in progress and intangible assets under development for the financial years ended March 31, 2023, March 31, 2022 and March 31, 2021. During Fiscal 2023, the major addition pertains towards purchase of building (retail showroom) amounting to Rs. 1,313.26 lakhs.
The table below details our capital expenditures incurred for the stated period.
| Particular | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 |
| Property, Plant and Equipments | 1,385.13 | 15.29 | 19.73 |
| Intangible assets | 0.18 | - | 0.85 |
| Capital work in progress | 14.50 | 74.34 | - |
| Intangible assets under development | 1.00 | 5.00 | - |
| Total | 1,400.81 | 94.63 | 20.58 |
Indebtedness
For further details, see "Financial Indebtedness " on page 285.
Off-Balance Sheet Items
We do not have any other off-balance sheet arrangements, derivative instruments or other relationships with any entity that have been established for the purposes of facilitating off-balance sheet arrangements.
Related Party Transactions
We enter into various transactions with related parties in the ordinary course of business. For further details relating to our related party transactions, see "Financial Information - Restated Financial Statements - Note 39- Related Party Disclosures" on page 254.
Material Frauds
There are no material frauds, as reported by our statutory auditor, committed against our Company, in the last three Fiscals.
Contingent liabilities
As of Fiscal 2023, our contingent liabilities total Rs. 500.00 lakhs and are set out below:
| Contingent Liability | As of March 31, 2023 |
| Bank Guarantee | 500.00 |
Quantitative and Qualitative Disclosures about Market Risk
Credit Risk
We are subject to credit risk of financial loss to the Company. Credit risk is a financial loss when a customer or the counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Companys receivables from customers and from its investing activities, including deposits with banks. The carrying amounts of financial assets represent the maximum credit risk exposure. In the Fiscals 2023, 2022 and 2021, we have not recorded any bad debts, however, credit risk is inherent in the business of our Company. Our financial results can be affected if there are any bad debts recorded.
Liquidity Risk
Our Company faces the risk that it may not have sufficient cash flows to meet its operating requirements and its financing obligations when they come due. Our Companys approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companys reputation. The Issue is being launched with the object to use the Issue proceeds for working capital requirements of the Company. Also see "Objects of the Issue" on page 83.
Market Risk
We are exposed to various types of market risks during the normal course of business. Market risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: price risk, currency risk and interest rate risk.
Product Price Risk
Our Company do not have any contracts with any of our suppliers for purchase of gold and other raw materials. We are subject to market risk related to volatility in the price of gold and other raw materials. We do not have any hedging policies in place to protect us from any price fluctuations. Because of this our financial results can be affected by fluctuations in the prices of gold and other raw materials, which in turn depends on various factors, including demand for these materials, changes in economy, worldwide production levels, worldwide inventory levels and disruptions in the supply chain. For further discussion on the effect of fluctuations in prices of gold and other materials, see "Risk Factor- We may be subject to fluctuations in prices or any unavailability of certain raw materials that we use in our products " on page 50.
Currency Risk
Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Companys functional currency. A small portion of products are exported to Middle East due to which our Company is exposed to foreign exchange risk arising from currency transactions.
Interest Rate Risk
The Companys main interest rate risk arises from borrowings with variable rates, which expose the Company to cash flow interest rate risk. The interest rate on the Companys financial instruments is based on market rates. The Company monitors the movement in interest rates on an ongoing basis.
Inflation
We believe that the jewellery industry is, to an extent, resilient to inflation and the impact on our business and results of operations is not significant.
Auditor Observations / Remarks
There have been no reservations, qualifications and adverse remarks in the last three (3) Fiscals.
Significant economic changes that materially affected or are likely to affect income from operations
Other than as described in this section and the section of this Draft Red Herring Prospectus titled "Risk Factors " and "Industry Overview ", there have been no significant economic changes that expect to have materially affected or likely to affect our Companys income from operations.
Known trends or uncertainties
Except as disclosed in this Draft Red Herring Prospectus, to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on the revenues or income of our Company from continuing operations.
Unusual or Infrequent Events of Transactions
Except as described in this Draft Red Herring Prospectus, there have been no other events or transactions that, to our knowledge, may be described as "unusual" or "infrequent".
Future relationships between costs and income
Except as disclosed in this Draft Red Herring Prospectus, to our knowledge there are no known factors that we expect will have a material adverse impact on the operations or finances of our Company.
New Products or Business Segments
Other than as described in this Draft Red Herring Prospectus, there are no new products or business segments in which we operate.
Competitive conditions
We expect competition to intensify from existing and potential unorganized as well as organized pan India jewellers in both wholesale and retail segments. See "Industry Overview", "Our Business" and "RiskFactors" on pages 105, 140 and 31 of this Draft Red Herring Prospectus, respectively for further information on our industry and competition.
Seasonality
Our sales in certain regions have historically exhibited certain seasonal fluctuations, reflecting higher sales volumes during the festival period, wedding season. While we stock certain inventory to account for this seasonality, our fixed costs such as employee salaries and showroom operating costs remains constant. Any failure to accurately anticipate and prepare for such seasonal fluctuations could have a material adverse effect on our business, financial condition and results of operations. For further details, see "Risk Factors -Our income and sales are subject to seasonal fluctuations and lower income in a peak season may have a disproportionate effect on our results of operations" on page 37.
Significant material developments subsequent to the last financial period
In the opinion of the Board of Directors of our Company, since the date of the last financial statements disclosed in this Draft Red Herring Prospectus, there have not arisen any circumstance that materially and adversely affect or are likely to affect the business activities or profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve (12) months.
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Securities Support WhatsApp Number
+91 9892691696
Download The App Now
Follow us on
2024, IIFL Securities Ltd. All Rights Reserved
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.
