Shree Ganesh Jewellery House Ltd plans to use its proposed acquisition of interest in an Italian jewellery brand to enter the fast expanding Chinese market. The Chinese foray will also safeguard the company from the downside risk of overdependence on the West Asian markets.

Overseas sales contribute nearly 90 per cent of the Rs 5,855-crore revenue of the company. It is planning to acquire controlling interest in a high-end family-owned brand in Italy in the next four to five months. China is the second largest gold market after India, with demand for gold jewellery doubling in the last seven years to 452 tonnes (2010).

In an interview to Business Line , Mr Nilesh Parekh, Chairman, said the company's product currently find its way into the Chinese market through Hong Kong. “We are planning to acquire the Italian brand with an eye on direct entry into the retail jewellery market in China,” he said. The acquisition was slated to cost €150 million or Rs 945 crore.

Huge demand

To start with, he said, the company may enter into a joint venture arrangement with the Italian company. “The €300 million (Rs 1,950 crore at the current exchange rate) Italian brand has a strong presence in Europe and USA. Having entered into a JV (joint venture), we plan to market it in China within next one-and-a-half years,” he said.

“We are currently studying the Chinese market. There is a huge demand for fashionable branded jewellery. We have already been approached by a few Chinese companies for possible joint venture opportunities. However, we haven't taken a call on the same (JV proposals), as yet,” Mr Parekh said.

Interestingly, the company has a long-term plan to tap the brand to expand in a big way in the US, too. “The US market may not be lucrative for the time being. However, I am confident that it will rebound,” he said.

Risk diversification

Elaborating the reasons behind his proposed foray in the Chinese market, he said the company was currently heavily dependent on West Asian markets catered through Dubai.

While the company's sales in Dubai continue to rise, the recent political unrest in large parts of West Asia coupled with several trade restrictions, have driven the company to diversify its export basket. .

“There is some unrest in the region. I want to play safe, by entering the Chinese market,” he said.

Mr Parekh, however, maintained that the company's presence in Dubai will continue to increase. In this direction, the company has already firmed up plans to acquire a retail chain having about 15 stores in the United Arab Emirates. Retailing will also lift the company's current operating margin of 6.5 per cent.

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