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Rajesh Exports (REL), one of the world's largest manufacturers of gold jewellery, plans to enter the domestic market by opening 550 retail outlets over three years with an investment of Rs 6,500 crore.
The company has already opened 73 stores under its brand Shubh Jewellers in Karnataka of which 67 are through associates and six are company-owned. By April next year, it will finalise another 52 associates in Karnataka from over 2,000 applications received from across the country. In the first phase, it will have 550 outlets in Karnataka, Andhra Pradesh, Tamil Nadu and Kerala, before going pan India.
Mr Rajesh Mehta, Chairman, Rajesh Exports, said it has already tied up Rs 2,500 crore through external commercial borrowing, Rs 2,000 crore from supplier credit and the rest from internal accruals. The company has a reserve of Rs 1,500 crore as of March 31, 2011.
REL will garner a retail market share of eight per cent with the completion of rollout in the South and generate revenue of about Rs 25,000 crore, he said.
On the encouraging response from jewellers to become its associates, Mr Mehta said “Shubh Jewellers would supply ornaments and take care of the advertisement and promotional activities while the jeweller has to refurbish his outlet and meet the day-to-day expense. They will be paid a fixed commission of two to three per cent on the sale”. India is the largest consumer of gold in the world, with more than 85 per cent of gold sold as jewellery.
Quoting a BIS survey that finds more than 85 per cent of the gold jewellery sold in India does not confirm to the assured purity standards, he said unlike other jewellers REL imports raw gold and processes it in its own refinery before converting them into jewellery.
COST ADVANTAGE
Besides being a fully integrated player, Rajesh Exports has emerged as a low-cost producer by cutting out intermediaries. It intends to follow a transparent pricing policy that would be about 10 to 20 per cent cheaper than any other jeweller, he said.
Other major retail jewellers such as Gitanjali Gems, PC Jewellers, Tanishq and Tribhovandas Bhimji Zaveri are focusing on tier-II and tier-III cities to tap the vibrant rural markets.
Gold demand in India is estimated at about 900 tonnes, which translates in to a retail business of about Rs 270,000 crore an annum. Consumers are losing Rs 40,000 an annum as they are overcharged 10-20 per cent, he said.
“Despite the spike in gold prices, the demand has remained in tact in the domestic markets, even though it has seen a slight dip in Europe and the US market. But the demand pick up in West Asia has more than compensated for the slowdown in traditional export destinations,” Mr Mehta said.
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