Tara Jewels Limited Tara Jewels factory SEEPZ, Mumbai Investor Presentation - May 2013
Safe Harbour This presentation and the accompanying slides (the Presentation ), which have been prepared by Tara Jewels Limited (the Company ), have been prepared solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form the basis or be relied on in connection with any contract or binding commitment whatsoever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company. This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Presentation is expressly excluded. This presentation contains certain forward looking statements concerning the Company s future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, competition (both domestic and international), economic growth in India and abroad, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, our ability to manage our international operations, government policies and actions regulations, interest and other fiscal costs generally prevailing in the economy. The company does not undertake to make any announcement in case any of these forward looking statements become materially incorrect in future or update any forward looking statements made from time to time by or on behalf of the company. 2
Integrated Player in the Jewellery Industry India Retail Designing Manufacturing Facilities Four manufacturing units Mumbai : 1 unit - MIDC & 2 units - SEEPZ China : 1 unit Panyu Employs 35 designers & 1000 craftsmen SAP implemented across all units Brand Expansion Manufacturing India Retail Network of 50 Retail Showrooms in 37 cities Operational : 36 Showroom Launch Stage : 14 Showrooms International Business International Business Direct Selling of Studded Jewellery to Global Retailers Co-brand merchandise to increase brand recognition & repeat orders with experience from Designing to Retailing 3
India Retail
Changing Jewellery Retail Experience Re-Engineer... Redefine...... the Store Format Best practices from International Retail Introduced smaller, full-service format stores for stocks to reflect customer preferences In-store workshops for jewellery servicing... the Jewellery Purchase Experience Purchases more Transparent & Credible Allows the customer to browse through collections Made to Order - Design personalized Jewellery based on Unique Personalities Build...... the Customer Confidence Give adequate knowledge about Diamond Jewellery Customers upgrade from Gold to Diamond Jewellery Special Confidence Building Programs a blend of Cultural Influences with Global Trends 5
Drivers of Success Strong Promoter / Management background in Retail & Branding Rose International was conceptualised in 1981 Jewellery Retail Chain Orra was launched in 1998 Strong Consumer Connect demonstrated across advertising, Media, Fashion and Luxury Benchmark Marketing & Branding case studies created across market segments Learnings from Multi-Industry Exposure being transcreated to Jewellery Retail Experienced Supplier to the Large Global Retailers Implementing the learning from the more matured Global Retail Leaders Creating Global Fashion & Trends Varied Market Insights Store Concept & Marketing Skills High precision jewellery manufacturing technology Fully automated jewellery casting plant State of the art technology: Laser Lithography, Microscopic Precision Setting, Machine made bands, Invisible Settings (patented), Machined Engraving CAD / CAM 6
Our Retail Business Model Pan India Presence Network of 36 Stores, expanding to 50 Stores Span across suburban areas of metro cities, mini metros and Tier I III cities Scalable Format of Stores Small Full Service Stores Jewellery displayed on Browse Walls, Collection Walls and Consultation Tables Targeting the untapped Aspiring Indians at base of the Pyramid Affordable luxury with Great Value Average ticket size of Rs 50,000 Smart, Scalable & Sustainable 7
Smart Stores Smaller, Full-service Format Stores Average size of 1000 sq ft In-store workshops ATTENTION Lower Inventory Requirement VM Board Browse Wall Display (no drawer inventory) ACTION Real-time RFID inventory management Lower Operating Cost Less Sq. Ft. of Selling Space 4 Sales Staff & 1 bench jeweller per Browse Wall INTEREST DESIRE Consultation desk store Lower Inventory Carrying Cost... designed by FITCH, International Brand & Design Consultancy 8
Jewellery Customization High Value and Higher Margin Business Designing CAD Resin Prototype Wax Mould Final Product Large design bank CAD shown to the customer in 48 hours Resin prototype of the jewellery through CAM Wax replica provided to the Customer Final product delivered in 14 days Made to Order constitutes ~30 % of India Retail Business 9
Scalable to have 50 Operational Stores by FY2014 Store Network Existing Stores : 30 Stores New Launches : 6 Stores 90 States / UT Existing Stores Launch Stage Advance Stage of Launch : 14 Stores Maharashtra 15 2* Goa 2 - New Delhi 6 - Gujarat 4-50 Madhya Pradesh 3 1 Uttar Pradesh - 5 30 Rajasthan 3 1 Punjab 3 2 Uttarakhand - 1 Chhattisgarh - 1 Haryana - 1 FY13 FY14E FY16E Total 36 14...Pan India presence with ~ 90 stores by FY16 * For Ghatkopar Store only LoI has been signed; Other Stores at advance stage of Launch 10
Sustainable Store Economics Average Store Per Store p.a. (Rs. mn) First Full Year Second Full Year FY2012 FY2013 No. of Stores 29 30 Sales** 63.27 77.05 Gross profit 17.54 19.54 Margin (%) 27.7% 25.4% Employee Cost 2.69 2.95 Administrative Cost 3.86 4.37 Selling & Distribution Cost 2.68 1.95 22% ` 63.27 77.05 LTL Growth of 24% 23% Rs mn Rs mn EBITDA 8.32 10.26 Margin (%) 13.1% 13.3% Depreciation 1.37 1.66 EBIT 6.95 8.60 Net Block 8.17 7.23 Inventory 34.09 44.54 Other Asset/(Liabilities) (17.42) (22.23) Capital Employed 24.84 29.54 ROCE (%) 28.0% 29.1% 8.32 10.26 +1.13% 28.0% 29.1% % ** Including Institutional sales of Rs..3.27 Crs and Rs.3.44 Crs respectively * RoCE = EBIT / Capital Employed 11
Margin Analysis High Gross Margin Gold Diamond 37% 38% 37% Better Product Mix Gold Diamond 59% 56% 53% 14% 14% 12% 41% 44% 47% FY 2011 FY 2012 FY 2013 FY 2011 FY 2012 FY 2013 High EBITDA Margin Lower Operating Cost 12.6% 13.1% 13.3% Employee Cost Admin. Cost Selling & Distribution cost 14.8% 14.6% 3.3% 4.2% 12.0% 2.5% 6.8% 6.1% 5.7% 4.7% 4.3% 3.8% FY 2011 FY 2012 FY 2013 FY 2011 FY 2012 FY 2013 12
India Retail - Performance Sales Gross Profit EBITDA PAT Rs mn 933 1,835 2,312 256 509 586 118 241 308 57 117 149 FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 Inventory Days (Sales) Creditor Days (Sales) Debtor Days (Sales) ROCE (%) 325 119 116 119 11 28% 29% 194 208 3 3 12% FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 * RoCE = EBIT / Capital Employed * FY11 : Stores operation for a period of average 6 mths 13
International Business
Presence in High End of Value Chain Gems & Jewellery Value Addition Ladder Tara Jewels- Operating in The Sweet spot in the Jewelry Value Chain Jewelry Branded Jewelry High End Luxury Jewelry Rough Diamonds Processed Diamonds Job Work Majority Indian Exporters Tara Jewels Presence Parameters Indian Export Industry Where we are positioned Products Dominated by Diamond processing & polishing, followed by Gold Jewelry Diamond studded jewellery, studded jewellery Customers Wholesalers Large Retailers Wal-Mart Inc, JC Penny, Signet, Sterling etc Branding NA Co-brand merchandise to increase brand recognition & repeat orders 15
Global Presence Canada U.S.A. U.K. Europe Russia India China South Africa Australia New Zealand Promoted over 8 brands globally across 7,000 doors Worldwide 16
Across various Segments and Geographies Walmart Kay Zales Jared Largest Departmental Store in US No. 1 Specialty Jeweller in US No. 2 in Specialty Retail jewellery chain in US No. 1 Off-mall Destination Jeweller in US Ernest Jones H Samuels Helzberg JC Penney No. 1 Upper Middle Market Jeweller in UK No. 1 Specialty Jeweller in UK Speciality Retailer of Fine Diamond Jewellery One of biggest Mid-range Department Store in US Blue Nile Sterns American Swiss Angus Coote No. 1 Online Specialty Retailer of Jewellery Leading Regional Dept Store in South Africa Leading Jeweller in South Africa No. 1 Specialty Retailer in Australia 17
Collaborative Branding Efforts A collaboration with renowned bridal designer Monique Lhuillier to bring her sophisticated sense of international chic to Blue Nile with this exclusive collection One-of-a-kind engagement rings and wedding bands reflect the elegance and innovative style of Monique Lhuillier Enchanted Love in collaboration with Erica Courtney who is one of the most recognized and successful jewellery designers in America. A collection of wedding bands with intricate detailing A collaboration with award winning couture designer and jeweller to the stars, Michael Beaudry Exclusively designed by the Master diamond cutter using the industry's most stringent cut, quality and desirability standards Cherished Hearts is a collection of engagement rings and wedding bands launch in J. C Penney Each ring has a heart set in the side set with a diamond Heart2Heart is a collection of stylized heart pendants with diamonds. It was launched in Walmart in 2009 Due to its success, the collection was expanded in 2010 Sattva is an Indian inspired collection of high-end 18 and 22 karat gold studded with diamonds and gemstones It was launched in H. Samuel and Ernest Jones in the UK in order to target the South Asian community living in UK Strategically aligns our offerings with Clients Business Model 18
Huge Growth Potential Sales in USD mn Key Retail Customers Stores* Retail Jewellery Sales * Tara Jewels Sales FY2013 Key Retail Customers Stores* Retail Jewellery Sales * Tara Jewels Sales FY2013 3500 $1,000 $31.48 200 $340 $9.64 1746 $1,900 $10 1100 $690 $4.2 949 $1,953 190 $1,003 193 $309 318 $371 $19.45 $5.3 Online $400 $2.8 153 $52 $1.51 216 $87 200 $598 $0.9 with Key Existing Customers * Latest Available 19
Current Order Book Region -wise Order Book Combined Order Book (Rs. mn) 4,787 (Rs. mn) 5,643 8,875 2,937 3,232 Confirmed Orders Framework Orders Combined Orders USA China (incl. HK) 388 Europe (incl. UK) Australia Others Framework 2,873 1,997 247 311 215 Firm 1,914 940 141 170 67 Order book as on 30 th April 2013 ; USD 1 = Rs. 53.6936 481 282 Strategic alliance with a leading Australian Retailer Bevilles Jewellers Healthy additions in SKUs with US Retailers Increases the share of Tara s Product Showcase with the Client Increases Visibility and boosts Revenue * Framework Orders - Contracts where Metal Prices are Not Fixed 20
International Business - Performance Sales Gross Profit EBITDA PAT Rs mn 9,234 11,335 13,292 1,484 1,701 1,850 851 1,071 1,228 355 420 587 FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 Inventory Days (Sales) Creditor Days (Sales) Debtor Days (Sales) ROCE (%) 139 156 140 86 111 63 62 100 77 20% 19% 17% FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 * RoCE = EBIT / Capital Employed 21
Financials
Consolidated Profit & Loss Rs. mn FY2013 FY2012 YoY growth FY2011 Revenue 15,604 13,169 18% 10,195 Revenue from Bullion 751 822 1,228 Total Income 16,355 13,991 11,423 Raw Material 12,703 10,461 8,056 Purchase of Bullion 749 806 1,226 Employee Expenses 446 433 359 Other Expenses 920 974 810 EBITDA 1,537 1,317 17% 972 - EBITDA excl. Bullion 1,535 1,312 17% 970 - EBITDA Margin excl. Bullion 9.8% 10.0% 9.5% Other Income 49 20 13 Interest 491 471 325 Depreciation 139 142 124 PBT 957 724 536 Tax 220 185 122 PAT 737 539 37% 414 PAT Margin 4.5% 3.8% 3.6% 23
Consolidated Balance Sheet Rs. mn FY13 FY12 Shareholder s Fund 4,929 2,773 Share capital 246 180 Reserves & Surplus 4,683 2,593 Rs. mn FY13 FY12 Non-Current Assets 977 862 Fixed assets 803 810 Non-current investments 31 12 Non-Current Liabilities 98 112 Long term borrowings 63 69 Other Non Current Liabilities 36 43 Current Liabilities 6,639 7,417 Short term borrowings 3,242 3,320 Trade Payables 3,136 3,823 Other current liabilities 261 273 Total Liabilities 11,666 10,302 Long-term loans & advances 143 40 Current Assets 10,689 9,440 Inventories 6,509 5,890 Trade receivables 2,902 3,164 Cash and Bank Balances 1,124 223 Other current assets 155 162 Total Assets 11,666 10,302 24
Utilization of IPO Proceeds Total Fund Infusion: Rs. 1,500 mn Pre-IPO Placement to Swarovski: Rs. 405mn Initial Public Offering in December 2012 Fresh Infusion : Rs 1,095 mn Operational : 36 Stores ; Launch Stage : 14 Stores Particulars (Rs. mn) Finance Establishment of New Retail Stores Utilization Planned Amount Utilized Amount Pending Utilization 665 544 121 Repayment Loans 500 500 - General Corporate purposes & issue related expenses 335 335 - Total 1,500 1,379 121 Gross Debt Reduced by Rs. 1,115 mn 30 36 50 Mar-12 May-12 Mar-13 Net ST Debt 3,320 3,772 3,265 Bills Discounting 2,180 2,239 1,630 Gross ST Debt 5,500 6,011 4,895 Reduction in Gross Debt since IPO 1,115 IPO Proceeds -500 May-12 Current FY14E Internal Accruals -615 25
Hedge against Key Risks Gold Price Hedge Procurement of gold through Gold on Lease structure Gold is brought at a Provisional Price into the company. The Price is fixed at the time of receipt of orders from the Customer and the same is locked on a back to back basis with the Bank Maximum terms allowed by Reserve Bank of India for import of Gold on lease 180 days for Domestic Markets 270 days for Exports (90 days +180 days) Security : Bank Guarantee or SBLC Regulatory Changes 90 days Lease Period Cap State-owned firms Lease period reduced from 180 days to 90 days for gold procured through state-owned firms such as MMTC and STC Gold lease rate linked to Base Rate Proposed to link gold leasing rates to the Base Rate Restriction on Gold on Consignment Imports allowed only to meet the genuine needs of Jewellery Exporters No Significant Impact to Tara Jewels Tara is a designated Nominated Agency - Import Gold Directly from International Suppliers at a Competitive Rate with Better Terms Procure Gold through Gold on lease structure since 14 years to mitigate Gold Price Volatility 26
VIKRAM RAIZADA NALINI RAJAN SANDRO BRODBECK FRANCOIS ARPELS RAJEEV SHETH Board of Directors FERN MALLIS RAJIV JAIN SHANTI KHINDRIA NIKKHIL VAIDYA RAKESH KALRA
Promoter Background: Rajeev Sheth Rajeev Sheth, a first generation entrepreneur, with over 31 years of jewellery manufacturing & retail experience Certified gemologist from Gemological Institute of America, USA and bench jeweller trained in USA and Japan, practiced this art for 9 years Started his career by promoting Rose International, high-end luxury jewellery boutique in 1981 Promoter and managing director of Intergold India Limited from 1989 to 1999 Set up one of India s first diamond jewellery retail chains currently called Orra Introduced concepts like flexible manufacturing units and turntable technology Only Indian Director of jewellers Board of Trade, USA Received award for the largest exporter for 12 years running Key Milestones Rose International 1981 1989 1996 1999 2001 28
Management Background: Vikram Raizada Rich Marketing & Advertising experience spanning over 22 years across Lifestyle, Consumer, Fashion, jewellery & Media fields Educated in Marketing at the University of Southern Queensland, Australia Won numerous creative and strategy awards for leading advertising agencies viz Trikaya Grey & Ogilvy & Mather Was in the jewellery exports and retail in its early days with then market leader Intergold Helped MTV India Networks attain and consolidate a leadership position as Director Marketing, Communication & Digital Managed luxury and premium brand launches & marketing as Marketing Head with the Murjani Group Gained Fashion business experience as Head of Fashion with IMG. Also managed the Lakme Fashion Week platform Currently Head of Branding and Head of India Retail with Tara Jewels Key Milestones 1991 1994 1997 1999 2006 2007 2010 29
Experienced Management Team - Global Nalini Rajan Director (Finance) Responsible for planning and control of the finance function Associate member of the Institute of Chartered Accountants of India and is a commerce graduate from Mumbai University Approximately 21 years of experience in the field of finance, out of which 14 years have been in the jewellery industry Aarti Sheth General Manager Oversees the strategic alliances with, and new business development for, institutional and retail clients in the United States of America Holds a masters degree in international employment relations and human resource management from London School of Economics and Political Sciences Has approximately 7 years of experience in the jewellery business Matthew Fortgang President Sales at Fabrikant Tara International LLC. Holds a bachelor of arts degree from the San Francisco State University Over 26 years of experience in the jewellery business Responsible for sales, merchandising and customer relations Jeffrey Shlakman President - Merchandising and Product Development Holds a degree in architecture and graduated from The Cooper Union Has 31 years of experience in diamond and jewellery manufacturing business Responsible for providing creative direction to design and merchandising team. Also has direct sales responsibilities Leonard Meyer President Sales (South Africa, Australia and United Kingdom Regions) Holds an honors degree in economics from University of Cape Town, South Africa Responsible for sales and marketing in the Australasian, United Kingdom and South African markets Has 29 years of experience in the field of mail order, direct marketing and the jewellery industry, in both fields of manufacturing and retail Alexandre Olive Vice President - Sales & Business Development (Europe Region) Holds two Bachelors of Science in International Business and in Marketing. Responsible for the business development of our company in Europe involving sales, branding, marketing and partnering with major players. Worldwide experience with a 14 years strong track record in brand building, reorganizing, developing, and managing international sales of notorious highend Watch and jewellery brands Among his positions, he was head of the jewellery and High jewellery Division for Breguet (Swatch Group). 30
Experienced Management Team - Retail Jinendra Jain General Manager Retail (Business Head) Holds a bachelors degree of engineering in electronics from Mumbai University Over 21 years of experience in jewellery manufacturing & designing, marketing, human resources and administration functions Responsible for business development Yogesh Sharma General Manager Inventory Holds a bachelors degree in industrial engineering from Pune University and Diploma in Marketing Management from Welingkar Institute, Mumbai Completed certificate course in ISO 9000 Quality systems Over 20 years of experience in jewellery and automotive industry sectors Responsible for materials, inventory and supply chain management Sunayanaa Vora General Manager National Sales Holds graduate degree in commerce from the Mumbai University Over 15 years of experience in the area of jewellery product development and sales Responsible for sales from retail stores across India Ashutosh Gogate Deputy General Manager Sales Holds a bachelors in commerce with specialization in advanced accounting & audit from Shivaji University and Master in Business Administration from SIBER Over 26 years of experience in advertising, automobile, surgical, insurance sectors which includes 2 years of international experience Responsible for operations and sales of 10 retail stores in Maharashtra & Goa Anjuu Koul Deputy General Manager HR Holds a PGDM in HR from University of Jammu and a certification course in Organizational Development and Change Management from IOD (USA) Over 17 years of experience in HR, which includes 9 years of experience in the Indian retail industry Responsible for recruitment, learning and development, performance management and employee engagement initiatives 31
Board Independent Directors Fern Mallis Non-executive Independent Director Francois Arpels Non-executive Independent Director Nikkhil Vaidya Non-executive Independent Director Rakesh Kalra Non-executive Independent Director Rajiv Lochan Jain Non-executive Independent Director Shanti Saroop Khindria Non-executive Independent Director Appointed as Independent Director, September 2010 Appointed as Independent Director, September 2010 Appointed as Independent Director, September 2010 Holds a graduate Degree in Chemical Engineering IIT (Kharagpur) & an MBA from the Whittemore School of Business and Economics 36 years of experience in FMCG, Chemicals & Finance Formerly Managing Director of ICI (India) Appointed as Independent Director, September 2010 Holds a Degree in Fine Arts, University of Buffalo 41 years of experience in the Architecture, Design and Fashion Worked as Senior VP,IMG Fashion & ED, Council of Fashion Designers of America Appointed as Additional Independent Director, May 2013 Appointed as Independent Director, September 2010 He started his career as member of the Executive Committee of Van Cleef & Arpels 25 years of diverse experience in Retail, Investment Banking and Corporate Finance Clients that he has personally advised include Auchan, Bel, Bic, and L Capital (LVMH) Holds a bachelors Degree in Commerce, University of Mumbai. Qualified Chartered Accountant, ICAI 25 years of experience in Tax & Compliance Prior Industry Experience with Bennett Coleman Co & Cable Corporation of India Holds a graduate Degree in Mechanical Engineering, BITS Pilani 31 Years of Experience in the automobile Industry Holds a graduate Degree in Law, Kent University 28 years of experience in the Legal profession. Admitted as a Solicitor England & wales and Solicitor, Incorporated Law Society, Mumbai Founded Lexindia a Law Firm with Global Presence 32
Awards & Achievements
International Business Global Supplier of the Year : Twice Awarded by Wal Mart Overall Excellence award : Second-highest exporter in the category of studded precious Highest Export Performance award for 2009-2010 Highest Export Performance award for 2008-2009 Highest Export Performance Award for 2007-2008 metal jewellery exports in EPZ, by The Gem and Jewellery Export Promotion Council in year 2007, 2008, 2009 Conferred with the status of a Star Trading House by the Ministry of Commerce & Industry "Highest Net Foreign Exchange Earner Award for 2009-2010 Second Highest Net Foreign Exchange Earner Award for 2008-2009 Second Highest Net Foreign Exchange Earner Award for 2007-2008 and have been the highest exporter in gems and jewellery sector for the years FY2009 and FY2010. The second highest exporter of studded jewellery for the year 2008-2009 The second highest exporter of studded jewellery for the year 2007-2008 The Global Supplier of the Year Award for 2007 from Wal-Mart. 34
India Business 35
India Business Nominated for the Best 360 Marketing of the year 2012 The Best Store Design of the year Single Brand category at the ET Retail Awards 2013 Print campaign of the year 2012 Retailers to watch out for
For further information, please contact: Company : Investor Relations Advisors : Tara Jewels Limited Nalini Rajan, Director-Finance nalini@tarajewels.co.in Strategic Growth Advisors Pvt. Ltd. Mr. Gaurang Vasani/Ms. Payal Dave vgaurang@sgapl.net / dpayal@sgapl.net www.tarajewels.in www.sgapl.net 37