Utssav Cz Gold Jewels IPO: Alarmed Fool’s Gold or Real Treasure?

Utssav Cz Gold Jewels Introduction

Utssav CZ Gold Jewels Ltd. is a company that has been making its mark in the jewelry industry.

• Establishment: Founded in 2007, Utssav CZ Gold Jewels Ltd. has always stood for integrity, quality, and craftsmanship.
• Specialization: The company focuses on designing, manufacturing, wholesaling, and exporting 18K, 20K, and 22K CZ gold jewelry. Their specialty lies in lightweight cubic zirconia (CZ) gold and rose gold casting jewelry.
• Product Range: Utssav CZ Gold Jewels offers a delightful range of exquisite CZ-studded 18K yellow and rose gold jewelry with contemporary designs.
• Market Presence: Their revenue primarily comes from the domestic market under a B2B model, and they have a significant presence in the northern region of India.

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Brief about Utssav Cz Gold Jewels

Summary of the business of Utssav Cz Gold Jewels

Utssav Cz Gold Jewels is in the business of designing, manufacturing, wholesaling and exporting of 18Karat 20Karat and 22Karat CZ Gold jewellery. Our Company specializes in light weight production of cubic zirconia (CZ) gold and rose gold casting jewellery. We manufacture and offer wide collection of products such as Rings, Earrings, Pendants, Bracelets Necklaces, Watches and Broaches etc. Our Company was established in 2007 in the name of Utsav CZ Gold Jewels Private Limited. In 2008, we transitioned to a public limited company under the name Utsav CZ Gold Jewels Limited.

Utssav Cz Gold Jewels forte lies in crafting exquisite CZ casting gold jewellery and designer pieces, tailored to the preferences of today’s youth. Whether for daily wear or special occasions, our designed rings, earrings, pendants, bracelets, and necklaces resonate with our target audience. We customize designs to accommodate diverse regional preferences, ensuring that we meet the unique needs of our clientele in every market we serve. Utssav Cz Gold Jewels company’s key strengths lie in our focus on design and innovation, our deep understanding of consumer preferences and market dynamics, and the quality of our products. We cater to a wide range of customers by offering high-end, medium-range and affordable CZ gold jewellery, all hallmarked by the Bureau of Indian Standards (BIS).

History of Utssav Cz Gold Jewels

Utssav Cz Gold Jewels Company was originally incorporated as “Company Limited by Shares” under the name “Utsav CZ Gold Jewels Private Limited” under the provisions of the Companies Act, 1956 and the Certificate of Incorporation was issued by Registrar of Companies, Mumbai, Maharashtra on November 06, 2007, vide certificate of incorporation bearing CIN U36911MH2007PTC175758. Pursuant to a special resolution passed by Shareholders in the Extra-Ordinary General Meeting held on November 19, 2007, our Company was converted from a private limited company to public limited company and consequently, the name of Company was changed to “Utsav CZ Gold Jewels Limited” and a fresh certificate of incorporation dated January 08, 2008 was issued to our Company by the Registrar of Companies, Mumbai, Maharashtra. The Corporate Identification Number of our Company is U36911MH2007PLC175758. Pursuant to a special resolution passed by our Shareholders in the Extra-Ordinary General Meeting held on February 13, 2008, the name of our Company was changed to “Utssav CZ Gold Jewels Limited” and a fresh certificate of incorporation dated February 19, 2008 was issued to our Company by the Registrar of Companies, Mumbai, Maharashtra.

Promoters & Board of Directors of Utssav Cz Gold Jewels

• The Promoter of our company are
  • Mr. Pankajkumar H Jagawat
  • Mr. Shashank Bhawarlal Jagawat
  • Mr. Rakesh Shantilal Jagawat.

Board of directors

Share Holding pattern

Qualitative Factors

• Established in 2007, our Company offers wide range of lightweight jewellery across 18K, 20K and 22K CZ gold and rose gold categories which are prominent categories in the daily and fashion wear jewellery segment.
• Utssav Cz Gold Jewels Company boasts a diverse team of skilled artisans and professionals with varied expertise in jewellery making.
• Utssav Cz Gold Jewels have long standing relationships with established brands in the domestic jewellery retailing market such as D.P. Abhushan Limited, Kalamandir Jewellers Limited, and numerous other esteemed clients. Company has consistently delivered quality services and products, earning the trust and loyalty of customers.
• On the back of high demand of gold jewellery and higher contribution of 18K gold jewellery in the sales mix, our Company reported a strong business growth with improvement in the profitability.
• The experience of promoters holds immense significance. Mr. Pankajkumar H Jagawat and Mr. Shashank Bhawarlal Jagawat each contribute over sixteen (16) years of invaluable expertise, whereas Mr. Rakesh Jagawat brings over twelve (12) years of experience in the jewellery market.

Strategy

• Enhance our financial capabilities to facilitate the expansion of our business operations
• Expand our geographical presence in domestic as well as export market
• Continued focus on creative designs
• Focus on improving Operating efficiency
• Improve Company’s financial leverage ratio

Industry Outlook

Indian Gems & Jewellery Industry

The Indian Gems and Jewellery (G&J) business has traditionally been fragmented with consumers mainly purchasing from family jewelers. The fragmented nature of this sector makes it difficult to quantify the number of jewelers in India.

However, the industry has seen structural transformation in the recent decade with more G&J players moving up the value chain with a greater focus on branded jewellery. Jewellery retailing is not only profitable and high-margin but also an underpenetrated industry in India, which means there is a lot of room for growth. Moreover, consumers are more predisposed to branded jewellery particularly in metro & tier I cities, given the rising media and Western influences and willingness to pay a premium The long-term demand prospects for the sector are supported by a growing working population, higher disposable income, easier access to credit, and improved living standards. To cater to the changing consumer preferences and design trends, larger stores are offering more variety and a diverse range of jewellery. This continuous adaptation to consumer trends and behavior is likely to further support the shift towards the organized jewellery segment.

Key Segments of Indian Gems and Jewellery Industry:
The Indian G&J industry broadly consists of gold jewellery, studded jewellery and other jewellery types like platinum jewellery, fashion jewellery, and silver jewellery.

Gold Jewellery

The Indian jewellery market is traditionally dominated by gold jewellery. Gold jewellery purchases in India are not just limited to consumption as is the case with fashion jewellery. They have a strong saving significance. This is more evident in rural communities where access, literacy, and acceptance of other financial savings instruments are low. These factors have resulted in gold being a major saving asset class. Cultural differences, religious & trust concerns, and other elements that influence jewellery purchases have all contributed to gold jewellery’s significance.

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Studded Jewellery

Apart from gold jewellery, the other type of jewellery gaining traction is the studded ornaments segment. The key factor contributing to this segment growth is the younger population’s preference for diamond-studded gold jewellery, typically made of 14- or 18- carat gold rather than heavy 22-carat gold. There has also been a noticeable shift towards more informal and everyday use of diamond studded jewellery.

Furthermore, many urban millennials, unlike the previous generations, are drawn to studded jewellery. Such jewellery is easy on the pocket, and therefore, supports multiple purchases. Also, most young population believe that heavy gold jewellery is for the elderly. Similarly, they regard that modern designs cannot be found in pure gold. Studded jewellery comes in a wide range of styles and prices. When paired with white gold, a studded diamond appears to be more expensive, thereby evoking the quality feel of platinum.

Although diamond studded jewellery may not have the same advantages as gold as a store of financial value, increasing price transparency and repurchase guarantees offered by most jewellers have helped persuade customers that their investment would not depreciate.

Cut and Polished Diamonds

India is one of the leading cutting and polishing centres for diamonds, supplemented by government policies. India is deemed a hub for this industry given the low cost and steady availability of highly skilled labor. Due to its potential for growth and value addition, the government considers this segment as a focus area for exports.

Share of Organized Players in the Indian Gems and Jewellery Industry

In contrast to other countries, India’s jewellery sector has a largely unorganized artisan (karigar) driven, traditional skill-based (handcrafted) manufacturing value chain, employing lakhs of workers.
The gems and jewellery industry accounts for around 6-7% of India’s GDP. The interest in jewellery in India extends back 5,000 years. With over 90% of jewellers being family-owned firms, this industry is severely fragmented and unorganized.

While the unorganized segment continues to dominate the jewellery retail industry, with the advent of large retailing chains, the industry is gradually witnessing the transformation from being unorganized to an organized one.

Trends in Imports and Exports of Gems and Jewellery in India

Overview

The gems and jewellery sector are a key contributor to India’s total exports. G&J accounted for about 9% (₹ 3.0 trillion) of India’s total exports in FY23. G&J imports accounted for a comparatively smaller share of about 4% (₹ 2.1 trillion) of total imports by the country in the same fiscal.

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Growing Government Focus toward Export Promotion

The Government of India, along with all the stakeholders of the G&J sector, are well committed to aggressively promoting exports, identifying challenges and addressing them with necessary interventions, assisting exporters, especially SME units and exploring new markets while consolidating existing ones. With strong growth prospects, the government of India has also declared the G&J sector as one of the focus areas for export promotion.

With such continuous government support, the superior quality of Indian manufacturers has enabled the Indian gems & jewellery trade market to penetrate markets like the USA, Hong Kong, UAE, particularly Dubai, Israel, and Belgium. The USA market is the largest destination for Indian gems and jewellery exports, accounting for a 35% share of India’s exports in FY23 and around 31% share YTD FY24 (April 2023-December 2023).

Gold Jewellery:

The gold jewellery market holds the second-largest share in G&J exports after the cut and polished diamonds segment. Gold jewellery accounted for 25% and 35% of total exports of G&J in FY23 and 10FY24, respectively.

Exports of Gold Jewellery

Jewellery in India

Weddings and Festivals Drive Domestic Demand:
Seasonality in jewellery buying is a key factor that influences demand heterogeneity in India. Weddings, festivals, and harvests in rural regions are the main drivers of the category, and the seasonal nature of each of these drivers assures that demand for jewellery is tied to the different months and seasons.
Demand for jewellery rises in the months of the wedding season such as May-June, September-November, and January. During the months of November and December, rural households invest their crop money in gold jewellery. Moreover, gold demand in Tier II and Tier III towns is influenced by agricultural output and monsoon. During auspicious religious events like Diwali/Dhanteras in October and November, and Akshaya Tritiya in April and May, demand for gold and silver jewellery increases.

Increase in Income and Savings Levels:
Rising income is the most powerful long-term driver of Indian gold demand because the economy is complimented by a high demographic dividend. The middle-income group in India has the highest level of gold consumption. The wealthy consume the most per capita, but the middle class consumes the most total volume.
Although there is a growing propensity to consume gold as income rises, the proportion of gold in one’s portfolio does not rise at the same rate. A fall in household savings rates, availability of different investment avenues, and agricultural earnings can be hurdles to Indian demand.

Preference for Branded Jewellery:
In the competitive Indian market, branded jewellery has found a significant place. Since branded jewellery has become the new trend in the industry, it has created its place in the hearts of customers over the last few years. With attentive and helpful attendants and well-displayed merchandise, shopping for jewellery has transformed. In the new market, everyone is a prospective customer. The most significant aspect of branded jewellery, however, is the perception of its excellence because a brand is synonymous with quality.
Additional Demand Drivers for Organised Jewellery Retail Transparency in Pricing and Product Quality:
Indian jewellery buyers are becoming more brand-conscious. Their jewellery preferences are becoming more sophisticated. They are exposed to a wide range of worldwide and national premium brands. They expect their jewellers to be transparent and jewellery to be of high quality. They want to grasp the pricing approach (prices of materials such as gold and silver, as well as production charges) and be confident about the end product’s quality, which can only be handled by organised shops. The organised player establishes transparency by adhering to the highest quality standards for jewellery and including price transparency in their offerings.

Retail Store Experience:
Today, organised jewellery retailing entails ready-made jewellery, a broad product range with a variety of designs and options, and a great showroom experience that meets the changing expectations of customers. Jewellery is an asset that may be owned for a lifetime and can be used as an investment. As a result, customers increasingly expect after-sales services such as product buyback at fair market value, billing transparency, and product customisation, among other things. Such expectations involve the provision of services in addition to product selling, and organised players are better positioned to meet these needs. In addition, organised jewellers provide ready-to-wear items, thereby reducing customer waiting time.

Exposure to Gold-Savings Schemes:
The emerging gold investment avenue in India at present is a monthly investment scheme run by organised jewellers. This works as a monthly gold-saving scheme where consumers deposit a specific amount of money with the jeweller for 11 months, with the jeweller then paying the consumer one-month equivalent of their deposit as interest. At the end of the year, the consumer chooses to buy gold jewellery or minted products with accumulated savings and interest. Some schemes provide the benefit of lower making charges also. One of the major benefits of this scheme is that the consumer gets to make the payment in instalments over time instead of lumpsum payment during the purchase.

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Key Challenges for Jewellery in India

• Shortage of Skilled Labor:
  • One of the key challenges to scaling up operations in the jewellery industry is the scarcity of trained people. To have access to a large talent pool, the supply of craftsmen/artisans that come through generations must be supplemented by new talents who have been professionally taught. Moreover, the industry’s on-the-job training strategy results in lengthier training times and gaps in the availability of skilled labor and standardization, particularly in the fragmented sector. This is compounded by infrastructural deficiencies, a lower need for institution-trained personnel in the fragmented sector, and the industry’s limited appeal to the younger generation of workers.
• Short-Lived Fashion and Design Preferences:
  • Exporters do not have enough design development centres or the resources to constantly innovate new designs to keep up with the changing trends among international purchasers. In an era of high diamond, gold, and silver prices, global marketing necessitates changing fashion in the gems and jewellery segment. According to the market demand, manufacturers can produce specific types of gems and jewellery products. However, as a result of the changing trend, demand for certain types of products begins to decline and eventually ceases. The manufacturer’s money is blocked in the older designs and this results in a pile-up of unsold stock.
• Dependency on Imports for Raw Materials:
  • In India, a large percentage of raw materials are imported, as the domestic supply is limited. The raw material is converted into finished goods that are sold in the domestic and international markets. India is a net importer of raw gold and meets over 90% of its gold requirement through imports. The total gold imported (in value terms) by India was ₹ 3,441 billion in FY22 and ₹ 2,805 billion in FY23. In 10MFY24, the total gold imported was Rs 2,977 billion. Gold is imported from Switzerland, South Africa, the United Arab Emirates, and Australia, among other countries

Overview of the Bridal Jewellery Segment

Evolution of the Wedding Industry and Market Trends

Weddings are among the largest industries in India. It is estimated that about 10-13 million weddings, of various sizes and scales, are held in India every year. Indian weddings are heavily influenced by traditions and culture. Weddings have greatly evolved in recent years be it a celebrity wedding, mid-range or low-range Indian wedding. Gold jewellery holds high significance in any type of wedding as a part of the traditions and religious beliefs attached to the wedding ceremony.

It is observed that wedding jewellery accounts for the largest share of the total wedding expenses at 24%, followed by the cost of catering. An average of 30 to 250 grams of gold is consumed in marriages across India on gold bangles, mangal sutra, nose rings, necklaces, etc. The total cost of these ranges between Rs 1,50,000 and Rs 13,00,000.

Segments of the Indian Jewellery Industry

In India, gold jewellery is the most popular type of jewellery because buying gold on important occasions is considered to bring in good fortune. India’s culture is intimately connected to gold, which is associated with festivals, customs, and religious beliefs. Weddings and festivals are the two main occasions for buying gold jewellery in India. South India accounts for 41% of the total jewellery demand followed by West India with 23% share.

Rural and semi-urban regions contribute about 60% of the gold jewellery consumption while urban areas account for 40%. The share of rural and semi-urban regions is higher on account of the larger share of the population residing in these regions. Further, jewellery is a primary form of investment in these areas and is preferred over conventional investments through banks due to limited literacy and banking networks.

• Based on the type, the gold jewellery industry can be segmented into:
  • Bridal gold wear
  • Daily & fashion gold wear

Jewellery Demand Segmentation Based on Wearing Type

Market Opportunity

• The domestic gold jewellery wholesale industry is expected to grow from 378 tonnes (out of 600 tonnes total gold jewellery demand) in 2022 to 402 tonnes by 2025 and 475 tonnes by 2030, at a CAGR of 2.5%. In value terms, the industry size is expected to increase to ₹ 2,340 billion in 2030 from ₹ 1,713 billion in 2022.
• The Indian wholesale market in the bridal segment is expected to register ~3% CAGR for the period, 2022-2030. Whereas, in the non-bridal segment, occasional wear is projected to record ~1.7% CAGR growth for the same period and daily wear is projected to make higher growth of ~3.5%.
• In the competitive Indian market, branded jewellery has found a significant place. Today’s youth have more discretionary income and are ready to spend on their preferred indulgences. Branded jewellery has a higher level of satisfaction among people than non-branded jewellery due to its prestige value, making branded jewellery more popular.
• Gold jewellery is primarily consumed by women. An increase in the number of working and financially independent women especially in the urban areas is likely to boost the demand for gold jewellery in India. Driven by this trend, the gold jewellery industry has witnessed an increase in consumption of daily and fashion-wear jewellery. Further, jewellers have also started focusing on lighter jewellery and jewellery which can be worn with western and office attires.

Business Data

Verticals

• Watches and Broaches
• Necklaces
• Bracelets
• Pendants
• Earrings
• Rings

Product wise break-up

(In ₹ lakhs)

Revenue contribution from Geography presence

(in ₹ lakhs)

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Customer dependency

(in ₹ lakhs)

Machinery/Plants/Factory

Capacity Utilisation

Competition

Utssav Cz Gold Jewels operate in a highly competitive and fragmented market, and we face competition from both organised and unorganised companies in the Indian jewellery industry. The unorganized sector dominates the wholesale industry, and organized sector’s penetration in the wholesale industry in India is comparatively lower at around 20-25%, less by 10% than a decade earlier. The growth of the organized wholesale segment has been driven by multiple factors including the expansion of organized retailing, rising exports, tightening of the regulatory environment, etc.

Peer companies comparison

(₹ in lakhs, unless stated otherwise)

Group companies

• Shanti Gold International Limited
• Uzuri Jewels Private Limited

Business risk factors

• Significant portion of Utssav Cz Gold Jewels revenues is concentrated from a limited number of clients. The loss of any of our significant clients may have an adverse effect on our business, financial condition and result of operations.
  • Utssav Cz Gold Jewels top ten customers contribute 55.58%, 53.28%, 53.53% and 61.75% of our total revenue from operations for the period ended January 31, 2024 and for the financial years ended on, March 31, 2023, 2022 and 2021 respectively.
• Utssav Cz Gold Jewels CZ gold jewellery business faces risks from market volatility and changing consumer preferences. Fluctuations in commodity prices like gold could impact our costs and profitability. Evolving consumer tastes influence product demand, necessitating continuous adaptation to remain competitive.
• The Debt-to-Equity Ratio of Utssav Cz Gold Jewels Company as on January 31, 2024, and for Financial Years 2023, 2022 and 2021 as per Restated Financial Statements is set-out below

• Utssav Cz Gold Jewels have experienced negative cash flows in the past, and we may have negative cash flows in the future.

(Rs in lakhs)

Financials

Key Financial Ratios

Key Performance Indicators

(₹ in lakhs, unless stated otherwise)

Balance Sheet

(₹ in lakhs, unless stated otherwise)

Profit & Loss

(₹ in lakhs, unless stated otherwise)

Cash Flow

(Rs in lakhs)

Capital structure

(₹ in lakhs)

SWOT ANALYSIS

• Strengths:
  • Quality Craftsmanship: Utssav CZ Gold Jewels is known for its high-quality CZ gold jewelry, meticulously crafted by skilled artisans.
  • Wide Product Range: They offer a diverse collection of CZ-studded 18K yellow and rose gold jewelry, appealing to various customer preferences.
  • Established Presence: With over a decade in the industry, Utssav CZ Gold Jewels has built a strong reputation in the northern region of India.
• Weaknesses:
  • Limited Market Reach: While dominant in the northern region, their market presence outside this area is relatively modest.
  • Dependency on CZ: The company’s heavy reliance on CZ stones may pose a risk if market trends shift away from CZ jewelry.
• Opportunities:
  • Online Expansion: Investing in e-commerce and expanding their online presence could tap into a broader customer base.
  • Diversification: Exploring other gemstones or precious metals could diversify their product offerings.
  • Export Potential: Leveraging international markets for CZ jewelry exports could boost revenue.
• Threats:
  • Competition: The jewelry industry is highly competitive, with established players and emerging brands vying for market share.
  • Fluctuating Gold Prices: Volatile gold prices impact production costs and retail prices.
  • Changing Consumer Preferences: Trends evolve, and Utssav CZ Gold Jewels must adapt to stay relevant.

IPO Details

Utssav Cz Gold Jewels IPO Details

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