Project Proposal

Setting up an Authenticity Centre

for Gold & Mounted Jewelry

By Tehmasp Printer

OBJECTIVES

Tap the entrepreneurial spirit of the Parsi Youth.

Establish a resource for the community to enter a sunrise service industry.

Help develop a Parsi business enterprise in one of the fastest growing segments in India namely - Jewelry industry.

Participate in initiatives aimed at promoting transparency – promoting hallmarking and encouraging consumer activism in matters related to quality, purity, certification etc.

STRENGTHS

Cash in on the trust placed on the Parsi community for its

integrity, honesty, dedication & commitment.

Professional expertise available in the Authenticity services

PRESENTATION FLOW

Part I

Market Potential Huge opportunity in providing an Authenticity service to the

jewelry industry.

Part II

Proposed Authenticity service to be provided: Assaying & Hallmarking of precious metals Identification & Certification of Gem Stones & Mounted

Jewelry mainly diamonds

MARKET UNDERSTANDING

Global Gems & Jewelry industry on the threshold of a large-scale transformation.

Last 5-6yrs the industry has seen more changes than ever before.

Next 10yrs likely to bring in more deeper and far reaching changes across the value chain.

Fascinating industry – traditional on one hand glamorous on the other.

KEY INDUSTRY SEGMENTS

Diamonds Diamond studded jewelry is the largest segment estimated @ USD 69billion

Gold Primary use is in jewelry fabrication which accounted for 67% of total gold demand (volume terms) in 2005.

Platinum often the metal of choice for high-end precious jewelry across the world. Its

showing an increasing trend in India too.

Colored gemstones

0

40

80

120

160

200

Others 5.4 5.3 5.6 5.9 6.5 7.3

Plain Platinum Jewelry 7.3 7.1 8.0 9.1 9.5 9.0

Plain Gold Jewelry 46.4 41.5 44.4 46.3 54.0 60.7

Diamond Jewelry 54 56.7 59.5 62.5 65.7 68.9

2000 2001 2002 2003 2004 2005

113 111 118 124136 146

5.2%

6.4%

4.4%

5.5%

5.0%

US

D B

illi

on

GLOBAL : GROWTH IN JEWELRY RETAIL SALES

CAGR(2000-2005)

World jewelry sales grew at a steady pace

CAGR : Compounded Annual Growth Rate Source : KPMG Analysis

0

2

4

6

8

10

12

14

7.49 7.16 6.4 7.4 9.9 12.2

2000 2001 2002 2003 2004 2005

10.20%

US

D B

illi

on

INDIA :GROWTH IN RETAIL SALES OF JEWELRY

CAGR(2000 – 2005)

India is one of the fastest growing market for Jewelry, growing at a rate of 10.20% per annum over the last 5years.

CAGR : Compounded Annual Growth Rate Source : KPMG Analysis

GLOBAL & INDIAN BREAKUP OF INDUSTRY - 2005

Global India

Plain gold jewelry

42%

Others5%

Diamond jewelry

47%

Plain Platinum jewelry

6%

Diamond jewelry

12%

Others5%

Plain gold jewelry

83%

Plain Platinum jewelry

0%

Source : KPMG Analysis

% Market Share of various jewelry segments

5 5 7

2005 2010 2015

4558

77

2005 2010 2015

U.S.

1221

37

2005 2010 2015

12 9 8

2005 2010 2015

13 1824

2005 2010 2015

1327

43

2005 2010 2015

35

49

66

2005 2010 2015

4 712

2005 2010 2015

7 7 6

2005 2010 2015

U.K. Turkey China

Japan

Italy

Middle EastIndia

RoW

CHANGES IN RETAIL JEWELRY SALES IN KEY MARKETS(USD billion)

2005

2010

2015

Source : KPMG Analysis

INDIAN JEWELRY MARKET – A SNAPSHOT

Indian consumer’s increasing penchant for diamond jewelry and the rekindling of her affair with gold jewelry meant that its share in the world market went up to 8% from a low of 5.5% in 2002

Fastest growing diamond jewelry market growing at the rate of 19% in 2005

Largest player in the polished diamond industry 57% of world produce

Large producer and exporter of various forms of jewelry. output in 2005 USD 12.17billion

India is also the emerging jewelry fabrication centre riding on a number of advantages such as cheap skilled labor, large domestic demand for jewelry & an added advantage of being the largest producer of

polished diamonds.

India’s share of world jewelry production output in value terms (2005)

RoW86%

India14%

INDIA: WORLD JEWELRY FABRICATION SHARE

Source : KPMG Analysis

√ Established Presence √ Emerging Centre / Markets

Mining Processing Fabrication Consumption

Diamond √ √ √Gold √ √Platinum √ √Others √ √ √

GEMS & JEWELRY VALUE CHAIN - INDIA’S PRESENCE

INDIAN RETAIL LANDSCAPE

Traditionally dominated by small scale local players is rapidly moving towards greater organization as retail channels

mature and obtain greater penetration across the country.

Retail organization will enhance the sales of jeweler in India. World jewelry sales will be positively impacted because of this change.

The increasing levels of consumer sophistication, both in terms of design & product demand as well as a general orientation towards gemstone certification jewellery hallmarking

Experimentation with new retail formats.

Increased emphasis on branding and marketing

Value addition in jewellery will increase due to penetration of brands

Growth of e-retail in India. Most online jewellery purchases fall in the 18-35year age group.

INDIAN RETAIL LANDSCAPE

CHANGING TRENDS IN THE INDIAN RETAIL MARKET

TRADITIONAL PRACTICE EMERGING TREND

Jewelry considered an investment, particularly gold jewelry Wearable’ jewelry as a fashion accessory and gifting.

Marriage and festival season are peak seasons. Wearability and gifting dimensions are distributing demand throughout the year.

22 karat jewelry Acceptance of jewelry of lower karatage, particularly in studded jewelry.

Dependence on the family jeweler in the locality. Growing interest in brands which personify quality and trust.

Traditional and ethnic designs. Demand for fashionable, lightweight and innovative designs.

Predominantly ‘gold-based’ jewelry (particularly yellow gold) Growing interest in white gold and newer precious metals such as platinum, diamond studded jewelry is also generating significant interest across the country.

Reliance on local jeweler’s reputation / trust in local jeweler’s stated karatage.

Introduction of objective means of quality measurements through certification and guarantees.

Jewelry largely sold on the basis of prevailing gold price per gram with additional mark-ups for making charges and profit margins.

Jewelry is being sold at a fixed price basis (maximum retail price) by branded players.

BRANDING – THE NEW MANTRA

Indian consumers are becoming ‘ brand conscious’ and are willing to pay significant premiums for purchasing branded products.

Large-scale marketing and branding campaigns by large diamond marketing companies and industry associations have created brands that in many ways kick started the branding trend in the country. Nakshatra Gold Expression Sangini

23 28.7 31

22.1

30.433.95.5

12.314.9

0

10

20

30

40

50

60

70

80

90

1996 2002 2005

Low Income Mass Affluents High Income Groups

US

D B

illi

on

A representation of rising income levels in India

Increasing disposable incomes and the rising number of affluent/high net worth individuals (HNIs) in the country have

opened up the market for high-end premium brands.

Source : KPMG Analysis

BRANDING AS AN EMERGING TREND

Industry has seen two distinct ‘branding’ waves

Company level in an effort to maximize margins and tap target markets

Industry level pushed by large upstream players for market expansion and

demand generation

BENEFITS OF BRANDING

Increasing awareness and interest in the minds of consumers towards ‘jewelry’ as a whole

Preventing commoditization branding guards against the erosion of the cardinal value proposition

of jewelry – its linkages with traditional values and emotional expression

Impact on consumer confidence branding fulfills the necessary function of demystifying the

process of purchasing jewellery including quality parameters to watch out for

Impact on retail margins given that the added value of brands in other luxury goods

categories (such as watches and perfumes) ranges between a whopping 70-90% the jewellery industry has a lot to catch up

INCREASING TRANSPARENCY

Vicious circle of low transparency – low growth.

Lack of transparency has constrained the industry from growing fast.

An aversion to transparency has meant that companies have missed out on access to relatively cheaper capital by not accessing equity markets.

BUILDING ENTERPRISE CAPABILITIES

Strategic & Business PlanningCapabilities

Strategic sourcing capabilities

Managing mergers acquisitions& alliances

Marketing capabilities

Rising capital

Managing financial & operationalRisks

Managing operational costs

Technology & Product innovation.

Managing Supply Chain

Adopting best practices

Defining robust organization modules

Sourcing & Managing Talent

Managing Processes

Grow the Jewelry Market

Grow theJewelry Market

Industry end

Promote jewelry as a Category

Growing the Jewelry market involves undertaking initiativesat a Consumer & Industry level

Consumer end

Identify new products& Consumer segments

Manage a portfolioof markets

Enhance image of the Industry

Enhance talentsupply

Reduce financing Cost

Professionalize and transform family owned businesses

1

2

3

4

5

6

7

CURRENT SCENARIO

Jewelry Authentication

Jewelry Authentication

Assaying & HallmarkingAssaying & Hallmarking Mobile Laboratory Mobile Laboratory Gemstones & Diamond Verification /Certification

Gemstones & Diamond Verification /Certification

GoldGoldPlatinumPlatinum SilverSilver

Own CoinageOwn

Coinage

Loose Stones

Loose Stones

Education to Trade

& Consumers

Education to Trade

& Consumers

MountedJewelry

MountedJewelry

Portable equipment for Hallmarking / Assaying / Diamond Grading

in mounted form at Jeweler’s end

Portable equipment for Hallmarking / Assaying / Diamond Grading

in mounted form at Jeweler’s end

DEFINING THE SERVICES

Assaying – Purity of the precious metal is ascertained.

Hallmarking – Marking of the tested metal.

OUR PROPOSAL

Merger of the two services that will meet the Authentication

needs of mounted jewelry Hallmarking of precious metals and Analysis of gem stones in jewelry mountings

Mobile Laboratory Grading & Hallmarking will be done at the jewelers end

whereby eliminating the logistics of to and fro transportation / security concerns

By & large jewellery industry indifferent to the adoption & establishment of formal or informal industry standards

However, a growing industry with more & more global business transactions, a need has arisen for establishing standards.

India which is one of the largest markets for precious jewelry, quality standards are conspicuous by their absence.

The Indian government has made hallmarking mandatory by 2008

Industry will see an increasing level of adoption of hallmarking in gold and certification in gemstones

INDUSTRY STANDARDS, CERTIFICATION & HALLMARKING

CURRENT STATUS

Diamonds Customers do not usually demand certification of small diamonds,

as it is not cost-efficient. Larger stones are increasingly being sold along with certificates of

authenticity. Consumers in US & Europe rely on certified diamonds and diamond

studded jewelry.

Jewelry Customers do not demand hallmarking for low end jewelry Customers in Europe & US are more ‘insistent’ on hallmarking of

jewelry than customers in India

WHY HALLMARKING AND ASSAYING SERVICE?

Precious metals used in jewelry and giftware are always used as an alloy mainly gold

The most experienced jeweler or chemist cannot tell how much precious metal is there in an alloy

High price of precious metals offers a huge opportunity for fraud

To protect the public & honest suppliers from those who are tempted to cheat them

Hallmarking is mandatory in various countries across the world like UK

India being the largest consumer of gold jewelry, the government of India has declared the hallmarking of precious metals to be mandatory from 2008 onwards

Hallmarking & Authenticity services can mint their own coins for public consumption.

CURRENT PLAYERS / COMPETITION

As per BIS figures

number there are

40 Hallmarking Centers

across the country

Place No. of Centers

Mumbai 5

New Delhi 5

Kolkata 3

Trichur 3

Chennai 4

Coimbatore 3

Surat 1

Rajkot 1

Vizag 1

Calilut 2

Cochin 5

Pune 1

Baroda 1

Ahmedabad 2

Hyderabad 1

Bangalore 1

Kanpur 1

INFRASTRUCTURE

Manpower & Training

Assaying and Lab training as well as manpower will be provided by the consultant

Place

Space required is ideally around 1000 sq.ft.

WORKINGS OF AN ASSAYING & HALLMARKING CENTRE

List & Cost of Equipments

Particulars Rate (INR) Nos. Amount (INR)

XRF Analyzer 1,900,000 2 3,800,000

Laser Maker-5markings per piece 1,900,000 1 1,900,000

Analytical Balance 3,00,000 3 9,00,000

Cupellation (Assaying) Furnace 1,00,000 2 2,00,000

Melting Furnace 1,00,000 1 1,00,000

Annealing Furnace 1,00,000 1 1,00,000

Scrubber for Flu Gases 1,00,000 1 1,00,000

Miscellaneous Consumables 3,00,000 1 3,00,000

Air Conditioners 25,000 4 1,00,000

Computers 2 50,000

CCTV 4 50,000

Biometric System/Metal Detector 50,000

One time BIS License Fees 1,00,000

Consultant/Turn Key Operator 2,50,000

Furnishing & Interiors 5,00,000

Total 85,00,000

BUSINESS PROJECTIONS

Business Model Revenue

(INR)

Investment

(INR)

Expenses

(INR)

Gross Profit

(INR)

Output per day

pcs.

Case I (Conservative Output)

Operating in 1Shift

21,600,000 7,000,000 12,060,000 2,540,000 800

Operating in

2 Shifts

43,200,000 7,000,000 20,340,000 15,860,000 1,600

Case II (Realistic Output)

Operating in 1Shift

32,400,000 7,000,000 12,060,000 13,340,000 1,200

Operating in

2 Shifts

64,800,000 7,000,000 20,340,000 37,460,000 2,400

Projected Income after 5 years

WHY CERTIFICATION & INFORMATIONOF GEM STONES?

Prices of gem stones are quality sensitive. 1carat diamond can cost anywhere from INR 0.1million –

0.6 million. while the size of the diamond is the same the quality is what

makes the difference.

The most experienced jeweler or manufacturer does not have the expertise to differentiate the quality of the gem stones.

Hence, the importance of an independent gemological laboratory for certifying and educating the various public in the value chain of the international standards of gem stones

WORKINGS OF A GEM STONE LABORATORY AND A TRAINING CENTRE

Gem stone Laboratory entails Grading and analysis of loose gem

stones & diamonds Grading and analysis of mounted

jewelry Training courses in gem stones and

jewelry

CERTIFICATION UNIT

Certification Unit involves certification of : loose stones (Gemstones & Diamonds) mounted Jewelry - Melle sizes identification of treatments to enhance gem stones & diamonds

To start with we shall offer only services for grading mounted jewelry

Costing of the services of the mounted Jewelry - Melle sizes This part of the service is not machinery intensive more important is the human resource and expertise rendered by them

COSTING OF CERTIFICATION UNIT

The main equipment for the identification processis the microscopeEach microscope costs USD 2,500 (INR 1,15,000)

10 Gemologists would require 10 microscopes costingUSD 25, 000 (INR 11,50,000)

5sets of mounted color master sets each costing USD 2,000 (INR 90,000) i.e.. USD 10,000 (INR 4,50,000)

Other Equipment USD 15,000 (INR 6,75,000)

Let’s help create A Unique One- Stop-Shop for all the

Authentication needs of theGems & Jewelry Industry