Project Proposal Setting up an Authenticity Centre for

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 largescale transformation. Last 5 -6 yrs the industry has seen more changes than ever before. Next 10 yrs 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 69 billion 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

GLOBAL : GROWTH IN JEWELRY RETAIL SALES USD Billion CAGR (2000 -2005) 113 111 118 124 136 146 5. 2% 6. 4% 4. 4% 5. 5% 5. 0% World jewelry sales grew at a steady pace CAGR : Compounded Annual Growth Rate Source : KPMG Analysis

INDIA : GROWTH IN RETAIL SALES OF JEWELRY CAGR (2000 – 2005) USD Billion 10. 20% India is one of the fastest growing market for Jewelry, growing at a rate of 10. 20% per annum over the last 5 years. CAGR : Compounded Annual Growth Rate Source : KPMG Analysis

GLOBAL & INDIAN BREAKUP OF INDUSTRY - 2005 % Market Share of various jewelry segments Global India Source : KPMG Analysis

CHANGES IN RETAIL JEWELRY SALES IN KEY MARKETS (USD billion) 2005 2010 2015 U. K. Turkey China Japan U. S. Italy Ro. W Middle East India 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. 17 billion 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: WORLD JEWELRY FABRICATION SHARE India’s share of world jewelry production output in value terms (2005) Source : KPMG Analysis

GEMS & JEWELRY VALUE CHAIN - INDIA’S PRESENCE Mining Diamond Processing √ Gold Platinum Others √ Fabrication √ √ Consumption √ √ √ Established Presence √ Emerging Centre / Markets

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

INDIAN RETAIL LANDSCAPE 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 -35 year age group.

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

USD Billion 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 Planning Capabilities Strategic sourcing capabilities Managing mergers acquisitions & alliances Marketing capabilities Technology & Product innovation. Rising capital Managing financial & operational Risks Managing operational costs Grow the Jewelry Market Defining robust organization modules Managing Supply Chain Sourcing & Managing Talent Adopting best practices Managing Processes

Growing the Jewelry market involves undertaking initiatives at a Consumer & Industry level 1 4 Promote jewelry as a Category Enhance image of the Industry 5 Enhance talent supply 2 Identify new products & Consumer segments Consumer end Grow the Jewelry Market Industry end 6 Reduce financing Cost 3 Manage a portfolio of markets 7 Professionalize and transform family owned businesses

CURRENT SCENARIO Jewelry Authentication Assaying & Hallmarking Gold Platinum Silver Own Coinage Gemstones & Diamond Verification / Certification Loose Stones Mounted Jewelry Education to Trade & Consumers Mobile Laboratory 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

INDUSTRY STANDARDS, CERTIFICATION & HALLMARKING 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

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 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 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 As per BIS figures number there are 40 Hallmarking Centers across the country

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-5 markings per piece 1, 900, 000 1 1, 900, 000 Analytical Balance 3, 000 3 9, 000 Cupellation (Assaying) Furnace 1, 000 2 2, 000 Melting Furnace 1, 000 1 1, 000 Annealing Furnace 1, 000 1 1, 000 Scrubber for Flu Gases 1, 000 1 1, 000 Miscellaneous Consumables 3, 000 1 3, 000 25, 000 4 1, 000 Computers 2 50, 000 CCTV 4 50, 000 Air Conditioners Biometric System/Metal Detector 50, 000 One time BIS License Fees 1, 000 Consultant/Turn Key Operator 2, 50, 000 Furnishing & Interiors 5, 000 Total 85, 000

BUSINESS PROJECTIONS Business Model Revenue (INR) Investment (INR) Expenses (INR) Gross Profit (INR) Output per day pcs. Case I (Conservative Output) Operating in 1 Shift 21, 600, 000 7, 000 12, 060, 000 2, 540, 000 800 Operating in 2 Shifts 43, 200, 000 7, 000 20, 340, 000 15, 860, 000 1, 600 Case II (Realistic Output) Operating in 1 Shift 32, 400, 000 7, 000 12, 060, 000 13, 340, 000 1, 200 Operating in 2 Shifts 64, 800, 000 7, 000 20, 340, 000 37, 460, 000 2, 400 Projected Income after 5 years

WHY CERTIFICATION & INFORMATION OF GEM STONES? Prices of gem stones are quality sensitive. § 1 carat diamond can cost anywhere from INR 0. 1 million – 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 process is the microscope Each microscope costs USD 2, 500 (INR 1, 15, 000) 10 Gemologists would require 10 microscopes costing USD 25, 000 (INR 11, 50, 000) 5 sets 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 the Gems & Jewelry Industry