The Hindu Business Line : Rajesh Exports to go inorganic for retail foray

The Chairman, Mr Rajesh Mehta, told Business Line that the company has decided to take the inorganic route for its Rs 350-crore retail foray and has started acquiring small and medium jewellery stores across the country. He said the company would open 100 stores across the four southern States on a single day, towards the end of the year.

These stores, to be called Shubh Jewellers, will, however, retain the existing staff including the original owners of these businesses. The owners will get commission for every gram of gold sold while the rest of the staff will be paid salaries.

"Through these acquisitions, we will have access to the databank as well as relationships built over the years by the traditional jewellers," Mr Mehta said.

In the second phase, 1,000 stores across the country and abroad will be opened over a period of time.

Financial plan: Consultants Ernst & Young, which advised Rajesh Exports on the project, has in its financial plan for the company, said that two term loans of Rs 70 crore and Rs 180 crore from the banks will be taken to part fund the project while the rest of the investment will be funded through internal accruals.

Out of the money raised, Rs 80 crore will be invested in acquiring the real estate; the rest will be used for working capital requirements and building up an inventory of gold jewellery. The annual requirement for gold for running these stores is projected to be around 22 tonnes while the total installed capacity at the company's Bangalore plant is around 250 tonnes. The company plans to have an inventory of around 10,000 designs.

To rope in brand ambassador: Rajesh Exports also plans to rope in a brand ambassador soon. The company has set an advertising budget of Rs 5 crore for the first year and Rs 8 crore for the subsequent years. It expects sales of Rs 1,000 crore during the first full year of operations; and by 2010, it is expected to rise to Rs 1,500 crore.

Set to acquire 100 pc stake in OyzterBay

RAJESH Exports is set to acquire 100 per cent stake in OyzterBay, one of the leading branded jewellery retail chains in the country, and in turn offer sweat equity or stock options to the retail chain's promoters.

Sources in the industry told Business Line that Rajesh Exports wants to tap the services of OyzterBay promoters because of their experience in retailing jewellery. When contacted, the Rajesh Exports' Chairman, Mr Rajesh Mehta, declined to comment on the deal. "We want to grow inorganically too and are aggressively looking for acquisitions," Mr Mehta said.

More Stories on : Mergers & Acquisitions | Retailing | Gems & Jewellery

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