MANAGEMENT DISCUSSION & ANALYSIS MACRO ECONOMIC ENVIRONMENT The year 2012 had been a year of slow growth world over and as per IMF forecast Global Economy is likely to show a growth of 3.3% during 2013 as compared to growth of 3.2% during 2012. The Global Economies witnessed a subdued growth with diverging growth paths across major economies. US economy which has registered a modest recovery is again subject to the adverse impact of the budget sequestration which will gradually gain pace during 2013. Japan's economy has shown signs of improvement on account of monetary and fiscal stimulus undertaken. The sovereign debt crises and the danger of a banking system meltdown in peripheral euro zone countries coupled with contraction in its major economies like Germany has resulted in negative growth in Euro zone. The growth in the Emerging Market Economies which are viewed as growth engines of the world economy world over; have also slowed down with Brazil and South Africa registering accelerated growth where as Russia, China and India a lower growth. According to the Central Statistics Office's advance estimate of GDP growth, Indian Economy is expected to grow at 5% during the year 2012-13 as compared to a growth of 6.21% registered during 2011-12. This has been mainly on account of week industrial activity compounded by domestic supply bottlenecks and slackening of external demand. This has also slowdown the growth in the service sector which has been the main driver of the growth. The Reserve Bank of India in order to strike a balance in growth- inflation dynamics have initiated various measures during 2012-2013 to provide greater liquidity to financial system. This has resulted in moderating the headline inflation within its acceptable level. The food inflation as measured by new combined (rural and urban) consumer price index (CPI) remains in double digit is a cause of concern. The measures initiated are expected to result in moderate growth in GDP in the second half of 2013-2014. REVIEW OF OPERATIONS During Financial Year 2012-2013, the Company registered a gross sales/income of Rs. 33.57 Lac in comparison to last years' figure of Rs. 14.87 Lac. In term of Net Loss, the same has been widened during the year and was of Rs. 7.05 Lac in comparison to last years' net Loss of Rs. 0.29 Lac. BUSINESS SEGMENT The Company is operating in sole segment i.e. in to the Business of trading of Gold & Diamond Jewellery through its retail outlets. THREATS & OPPORTUNITIES Economic slowdown in the developed world has hit India's exports of cut and polished diamonds, as consumers shift to plain gold and silver jewellery from diamond-studded brcious metal ornaments. Data compiled by the apex trade body, the Gems & Jewellery Export Promotion Council (GJEPC), showed exports of cut and polished diamonds fell 28.92 per cent to Rs. 42,740.15 Crore in the first half (H1) of the current financial year, from Rs. 60,133.84 Crore in the corresponding period last year. Overall exports of cut and polished diamonds plunged in volume terms to 164.80 lakh carats in H1 2013 from 302.92 lakh carat in the same period last year. During the same period, however, shipment of gold Jewellery jumped 129 per cent to Rs. 44,748.59 Crore from Rs. 19,547.14 Crore, while silver Jewellery exports rose 42 per cent to 2,157.32 Crore in the first half of the current fiscal from Rs. 1,516.53 Crore in the same period brvious year. The shift assumes significance as diamond is considered a luxury item, while gold and silver are bought as safe haven investments in the form of protection during times of financial crises. RISK MANAGEMENT The Company has aligned its policy on risk assessment in line with global approach and risk assessment reports are reviewed on regular intervals. The Company has adopted a focused approach towards risk management in the form of a corporate insurance program which has the goal of optimizing the financing of insurable risks by using a combination of risk retention and risk transfer. The Company's business critical software is operated on a server with regular maintenance and back-up of data. The system's parallel architecture overcomes failures and breakdowns. Reliable and permanently updated tools guard against virus attacks. Updated tools are regularly loaded to ensure a virus free environment. INTERNAL CONTROL SYSTEMS AND ADEQUACY The Company has implemented a combrhensive system of internal controls and risk management systems for achieving operational efficiency, optimal utilisation of resources, credible financial reporting and compliance with local laws. These controls are regularly reviewed by both internal and external agencies for its efficiency and effectiveness. Management information and reporting system for key operational activities form part of overall control mechanism. The Company has retained the services of independent firms of professionals to function as internal auditors and provide reports on various activities covering observations on adequacy of internal controls and their recommendations. Findings of internal audit reports and effectiveness of internal control measures are reviewed by top management and audit committee of the Board. During the year, internal audit team of Company performed audits of major operational areas of the Company and carried out elaborate checks and verification and shared their findings with top management for remediation of minor gaps wherever required. HUMAN RESOURCES The Company recognizes that its success is deeply embedded in the success of its human capital. During 2012-2013, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives. The Company believes that learning is an ongoing process. Towards this end, the Company has built a training infrastructure which seeks to upgrade skill levels across grades and functions through a combination of in-house and external programme. CORPORATE SUSTAINABILITY AND SOCIAL RESPONSIBILITY The Company constantly strives to meet and exceed expectations in terms of the quality of its business and services. The Company commits itself to ethical and sustainable operation and development of all business activities according to responsible care and its own code of conduct. Corporate Social Responsibility is an integral part of the Company's philosophy and participates in activities in the area of education and health. CAUTIONARY STATEMENT Certain statements under "Management Discussion & Analysis" describing the Company's objectives, projections, estimates, expectations or brdictions may be forward looking statement within the meaning of applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could materially differ from those exbrssed or implied, since the Company's operations are influenced by many external and internal factors beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events. COMPLIANCE The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company is continued to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Company's Board of Directors and the Company's Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis. New Instructions/Guidelines issued by the regulatory authorities were disseminated across the Company to ensure that the business and functional units operate within the boundaries set by regulators and that compliance risks are suitably monitored and mitigated in course of their activities and processes. New products and process launched during the year were subjected to scrutiny from the Compliance Standpoint and proposals of financial services were screened from risk control prospective. The Company has complied with all requirements of regulatory authorities. No penalties/strictures were imposed on the Company by stock exchanges or SEBI or any statutory authority on any matter related to capital market during the last three years except re-instatement fees paid to BSE for revocation of suspension from trading in the Equity Shares of the Company. By order of the Board For ANUGRAHA JEWELLERS LIMITED ANAND LOGANATHAN Chairman & Managing Director Coimbatore, May 29, 2013 Registered Office : 473, Big Bazaar Street,Coimbatore - 641 001 |