With a view to funding expansion and sustenance, various options vying for attention market include bank loan, venture capitalists, private equity funds and initial public offer (IPO) that the players can tap easily in tune with the needs, reports Sandhya Sutodiya. %% On the lookout for funding your jewellery business? Embrace the Zero Hour to zero in on the right option. %% The crux of the matter lays in business being low corporatised and not so transparent. The trust by the locals is the driving force of the trade. This calls for an urgent need to go the whole hog and fan out the footprints of organised and well-positioned brands to Tier II and III cities through retail showrooms. With a view to funding expansion and sustenance, various options vying for attention in the market include bank loan, venture capitalists, private equity funds and initial public offer (IPO) that the players can tap easily in tune with the needs.%% Funding since time immemorial was limited to internal reserves and bank debts. Interestingly, an internal reserve of promoters is the safest option except there is a fall in the asset prices. In India, venture capitalists and private equity are ideally suited for a tenure ranging from three to four years. It can easily be tapped during the early phase of the company’s growth cycle as most of them look for exit route after meeting their target to some extent.%% It is noteworthy that Chennai-based CaratLane.com, an online jewellery seller, raised around $15 million in its series C round of funding via an arrangement of venture capitalist fund recently.%% “For debutant business jeweller, the favourable and suitable source of fund would be either private equity or venture capital,” said Kaushlendra Singh Sengar, Founder and Director, Dhanpurna Commodities, adding that the reason behind opting such source of funding was based on its benefit.%% “As in case of private equity the businessman is not obliged to repay principle amount as well the interest payment. But in case of a bank loan, one has to repay the principal as well as interest component,” added Sengar. However, venture capital fund is yet to be in vogue in jewellery business, in general, and core sector, in particular.%%

Jewellery business needs pots of money, so an initial public offer (IPO) sooner than later is the best option, said Arun Kejriwal, Director of Mumbai-based KRIS Capital. “The players like Tribhovandas Bhimji Zaveri (TBZ) among others did the right thing by hitting the market. But for investors whether it is right thing or not price tells the story,” added Kejriwal.%% The IPO is always welcome provided the company’s fundamentals are in place and contributive to selling points for the investors. Once the investor has laid a wager, risk is estimated as per usual equity market risk. It is interesting to note that IPO and private equity are gradually gaining ground as the industry is becoming more organised and investors are taking more interest.%% For listed companies, the first preference would be equity which is low-cost, long-term and over a period gives due valuation to the company based on performance, said Colin Shah, Managing Dirtector, Kama Schachter.%% “For a big brand in jewellery section-whosoever meets the eligibility criteria of an initial public offer (IPO), they can raise fund through an IPO as it is currently the best option available,” said Namit Dave, a gold analyst. Last year jewellery retailer Tribhovandas Bhimji Zaveri (TBZ) that raised Rs 200-crore via an IPO intends to use the proceeds to fund expansion plans and meet working capital. The jewellery plans to open an additional 44 showrooms (26 large format high street showrooms and 18 small format high street showrooms) by the fiscal-end of 2014, said a company official during the launch of its IPO.%% On one hand, jewellery manufacturer and retailer PC Jeweller’s public issue was oversubscribed 6.85 times, as per data available on the National Stock Exchange.%% On the other hand, Tara Jewels, a Mumbai-based jewellery manufacturer and retailer, operating under the brand ‘Tara Jewellers’, had planned to use the issue proceeds for establishing retail stores and pay loans, an official added.%% Known companies like Kama Jewellery and Kalyan Jewellers are eyeing IPO too.%% “Long-term funding in form of term loans, $/loans, FCNR (B) (foreign currency non residents (banks) among others is advisable as ours is a working capital intensive industry with raw materials contributing over 80 per cent of the cost,” said Colin Shah, Managing Director, Kama Schachter.%% “For domestic market, short-term working capital requirements cash credit/PCFC facilities provided for exporters are used, while bank loans are a way to grow business but interest paying burden and sustainability of business is what promoter should look into”, said Suvanker Sen, Executive Director of Senco Gold, a Kolkata headquartered jeweller.%% IPOs and PEs have the risk lesser than bank loan, but they demonstrate greater responsibility to give return to investors and meet market expectations, added Sen.%% A Canara Bank official on the condition of anonymity said some brands take loan from a consortium. “Banks fund together and it depends on the terms and conditions,”he said.%%

“Banks have particular exposure. For individual firm around 15 per cent of the capital fund can be allocated. While for group companies the exposure can be upto 40 per cent. The board of directors can increase exposure upto five per cent on the discretion of board. “If firms need more fund then they can go for consortium or multiple banking arrangement (MBA). In consortium common documentation takes place and in MBA it can be separate,” he further added. %% A State Bank of India official said that the interest depends on the risk rating, which includes internal and external factors. “The market is very volatile and when it will rise or fall, no one knows. Also, the diamond jewellers’ business is going through tough patches as demand depends on season,” he said. %% For diamonds sale, mainly the period from April to June is the peak season and it gets damped during monsoon. It is a slack market and the demand is likely to pick up from September. %% Diamond studded jewellery has higher margins than gold jewellery. It is seen that big companies show huge profit mainly by trading and using a bank guarantee scheme called stand-by-letter-of-credit (SBLC) in India, said another bank official. %% With the RBI making it mandatory for companies to import gold only by paying full cash, Titan Industries may see changes in its financial and business model going forward. Titan’s expansion plans may also get impacted going ahead with debt levels going up, sources said. %% This recent move by RBI would no longer give leeway to jewellers to take gold on lease and utilise the lower cost of funding. They would also not be able to hedge against fluctuation in gold prices. %% On the other hand, Jatin Mehta’s-controlled Winsome Diamond, previously Su-Raj Diamonds, broke down last fiscal in the month of March on the back of its liquidity coming under severe pressure with the volatility in gold prices and Indian currency. It is learnt that the company which mainly caters to the demand of western region, failed to pay its installment to bullion banks. A consortium of bullion banks, foreign banks including the Punjab National Bank and among others issued letters of credit to Winsome for buying gold. However, after the company failed to pay the bullion lenders, they invoked all the guarantees, ballooning the debt 10 times to around Rs 4,000 crore. %% At present the company has asked banks for relief in the form of lower interest rate to 10.5 per cent, whereas the banks charge between 11 per cent to 13 per cent currently. Also the company is mulling to convert working capital loan into working capital term loan, where the repayment is likely spread over 28 quarters. %% Elaborating on other ways for expansion, Sen said franchising and joint ventures could offer some choice in jewellery. However, that needs to be taken with a grain of salt as the Indian rupee depreciating up to more than Rs 59 against the U.S. dollar could throw cold water on the very funding spree, according to analysts. %%

With a view to funding expansion and sustenance, various options vying for attention market include bank loan, venture capitalists, private equity funds and initial public offer (IPO) that the players can tap easily in tune with the needs, reports Sandhya Sutodiya. %% On the lookout for funding your jewellery business? Embrace the Zero Hour to zero in on the right option. %% The crux of the matter lays in business being low corporatised and not so transparent. The trust by the locals is the driving force of the trade. This calls for an urgent need to go the whole hog and fan out the footprints of organised and well-positioned brands to Tier II and III cities through retail showrooms. With a view to funding expansion and sustenance, various options vying for attention in the market include bank loan, venture capitalists, private equity funds and initial public offer (IPO) that the players can tap easily in tune with the needs.%% Funding since time immemorial was limited to internal reserves and bank debts. Interestingly, an internal reserve of promoters is the safest option except there is a fall in the asset prices. In India, venture capitalists and private equity are ideally suited for a tenure ranging from three to four years. It can easily be tapped during the early phase of the company’s growth cycle as most of them look for exit route after meeting their target to some extent.%% It is noteworthy that Chennai-based CaratLane.com, an online jewellery seller, raised around $15 million in its series C round of funding via an arrangement of venture capitalist fund recently.%% “For debutant business jeweller, the favourable and suitable source of fund would be either private equity or venture capital,” said Kaushlendra Singh Sengar, Founder and Director, Dhanpurna Commodities, adding that the reason behind opting such source of funding was based on its benefit.%% “As in case of private equity the businessman is not obliged to repay principle amount as well the interest payment. But in case of a bank loan, one has to repay the principal as well as interest component,” added Sengar. However, venture capital fund is yet to be in vogue in jewellery business, in general, and core sector, in particular.%%

Jewellery business needs pots of money, so an initial public offer (IPO) sooner than later is the best option, said Arun Kejriwal, Director of Mumbai-based KRIS Capital. “The players like Tribhovandas Bhimji Zaveri (TBZ) among others did the right thing by hitting the market. But for investors whether it is right thing or not price tells the story,” added Kejriwal.%% The IPO is always welcome provided the company’s fundamentals are in place and contributive to selling points for the investors. Once the investor has laid a wager, risk is estimated as per usual equity market risk. It is interesting to note that IPO and private equity are gradually gaining ground as the industry is becoming more organised and investors are taking more interest.%% For listed companies, the first preference would be equity which is low-cost, long-term and over a period gives due valuation to the company based on performance, said Colin Shah, Managing Dirtector, Kama Schachter.%% “For a big brand in jewellery section-whosoever meets the eligibility criteria of an initial public offer (IPO), they can raise fund through an IPO as it is currently the best option available,” said Namit Dave, a gold analyst. Last year jewellery retailer Tribhovandas Bhimji Zaveri (TBZ) that raised Rs 200-crore via an IPO intends to use the proceeds to fund expansion plans and meet working capital. The jewellery plans to open an additional 44 showrooms (26 large format high street showrooms and 18 small format high street showrooms) by the fiscal-end of 2014, said a company official during the launch of its IPO.%% On one hand, jewellery manufacturer and retailer PC Jeweller’s public issue was oversubscribed 6.85 times, as per data available on the National Stock Exchange.%% On the other hand, Tara Jewels, a Mumbai-based jewellery manufacturer and retailer, operating under the brand ‘Tara Jewellers’, had planned to use the issue proceeds for establishing retail stores and pay loans, an official added.%% Known companies like Kama Jewellery and Kalyan Jewellers are eyeing IPO too.%% “Long-term funding in form of term loans, $/loans, FCNR (B) (foreign currency non residents (banks) among others is advisable as ours is a working capital intensive industry with raw materials contributing over 80 per cent of the cost,” said Colin Shah, Managing Director, Kama Schachter.%% “For domestic market, short-term working capital requirements cash credit/PCFC facilities provided for exporters are used, while bank loans are a way to grow business but interest paying burden and sustainability of business is what promoter should look into”, said Suvanker Sen, Executive Director of Senco Gold, a Kolkata headquartered jeweller.%% IPOs and PEs have the risk lesser than bank loan, but they demonstrate greater responsibility to give return to investors and meet market expectations, added Sen.%% A Canara Bank official on the condition of anonymity said some brands take loan from a consortium. “Banks fund together and it depends on the terms and conditions,”he said.%%

“Banks have particular exposure. For individual firm around 15 per cent of the capital fund can be allocated. While for group companies the exposure can be upto 40 per cent. The board of directors can increase exposure upto five per cent on the discretion of board. “If firms need more fund then they can go for consortium or multiple banking arrangement (MBA). In consortium common documentation takes place and in MBA it can be separate,” he further added. %% A State Bank of India official said that the interest depends on the risk rating, which includes internal and external factors. “The market is very volatile and when it will rise or fall, no one knows. Also, the diamond jewellers’ business is going through tough patches as demand depends on season,” he said. %% For diamonds sale, mainly the period from April to June is the peak season and it gets damped during monsoon. It is a slack market and the demand is likely to pick up from September. %% Diamond studded jewellery has higher margins than gold jewellery. It is seen that big companies show huge profit mainly by trading and using a bank guarantee scheme called stand-by-letter-of-credit (SBLC) in India, said another bank official. %% With the RBI making it mandatory for companies to import gold only by paying full cash, Titan Industries may see changes in its financial and business model going forward. Titan’s expansion plans may also get impacted going ahead with debt levels going up, sources said. %% This recent move by RBI would no longer give leeway to jewellers to take gold on lease and utilise the lower cost of funding. They would also not be able to hedge against fluctuation in gold prices. %% On the other hand, Jatin Mehta’s-controlled Winsome Diamond, previously Su-Raj Diamonds, broke down last fiscal in the month of March on the back of its liquidity coming under severe pressure with the volatility in gold prices and Indian currency. It is learnt that the company which mainly caters to the demand of western region, failed to pay its installment to bullion banks. A consortium of bullion banks, foreign banks including the Punjab National Bank and among others issued letters of credit to Winsome for buying gold. However, after the company failed to pay the bullion lenders, they invoked all the guarantees, ballooning the debt 10 times to around Rs 4,000 crore. %% At present the company has asked banks for relief in the form of lower interest rate to 10.5 per cent, whereas the banks charge between 11 per cent to 13 per cent currently. Also the company is mulling to convert working capital loan into working capital term loan, where the repayment is likely spread over 28 quarters. %% Elaborating on other ways for expansion, Sen said franchising and joint ventures could offer some choice in jewellery. However, that needs to be taken with a grain of salt as the Indian rupee depreciating up to more than Rs 59 against the U.S. dollar could throw cold water on the very funding spree, according to analysts. %%

With a view to funding expansion and sustenance, various options vying for attention market include bank loan, venture capitalists, private equity funds and initial public offer (IPO) that the players can tap easily in tune with the needs, reports Sandhya Sutodiya. %% On the lookout for funding your jewellery business? Embrace the Zero Hour to zero in on the right option. %% The crux of the matter lays in business being low corporatised and not so transparent. The trust by the locals is the driving force of the trade. This calls for an urgent need to go the whole hog and fan out the footprints of organised and well-positioned brands to Tier II and III cities through retail showrooms. With a view to funding expansion and sustenance, various options vying for attention in the market include bank loan, venture capitalists, private equity funds and initial public offer (IPO) that the players can tap easily in tune with the needs.%% Funding since time immemorial was limited to internal reserves and bank debts. Interestingly, an internal reserve of promoters is the safest option except there is a fall in the asset prices. In India, venture capitalists and private equity are ideally suited for a tenure ranging from three to four years. It can easily be tapped during the early phase of the company’s growth cycle as most of them look for exit route after meeting their target to some extent.%% It is noteworthy that Chennai-based CaratLane.com, an online jewellery seller, raised around $15 million in its series C round of funding via an arrangement of venture capitalist fund recently.%% “For debutant business jeweller, the favourable and suitable source of fund would be either private equity or venture capital,” said Kaushlendra Singh Sengar, Founder and Director, Dhanpurna Commodities, adding that the reason behind opting such source of funding was based on its benefit.%% “As in case of private equity the businessman is not obliged to repay principle amount as well the interest payment. But in case of a bank loan, one has to repay the principal as well as interest component,” added Sengar. However, venture capital fund is yet to be in vogue in jewellery business, in general, and core sector, in particular.%%

Jewellery business needs pots of money, so an initial public offer (IPO) sooner than later is the best option, said Arun Kejriwal, Director of Mumbai-based KRIS Capital. “The players like Tribhovandas Bhimji Zaveri (TBZ) among others did the right thing by hitting the market. But for investors whether it is right thing or not price tells the story,” added Kejriwal.%% The IPO is always welcome provided the company’s fundamentals are in place and contributive to selling points for the investors. Once the investor has laid a wager, risk is estimated as per usual equity market risk. It is interesting to note that IPO and private equity are gradually gaining ground as the industry is becoming more organised and investors are taking more interest.%% For listed companies, the first preference would be equity which is low-cost, long-term and over a period gives due valuation to the company based on performance, said Colin Shah, Managing Dirtector, Kama Schachter.%% “For a big brand in jewellery section-whosoever meets the eligibility criteria of an initial public offer (IPO), they can raise fund through an IPO as it is currently the best option available,” said Namit Dave, a gold analyst. Last year jewellery retailer Tribhovandas Bhimji Zaveri (TBZ) that raised Rs 200-crore via an IPO intends to use the proceeds to fund expansion plans and meet working capital. The jewellery plans to open an additional 44 showrooms (26 large format high street showrooms and 18 small format high street showrooms) by the fiscal-end of 2014, said a company official during the launch of its IPO.%% On one hand, jewellery manufacturer and retailer PC Jeweller’s public issue was oversubscribed 6.85 times, as per data available on the National Stock Exchange.%% On the other hand, Tara Jewels, a Mumbai-based jewellery manufacturer and retailer, operating under the brand ‘Tara Jewellers’, had planned to use the issue proceeds for establishing retail stores and pay loans, an official added.%% Known companies like Kama Jewellery and Kalyan Jewellers are eyeing IPO too.%% “Long-term funding in form of term loans, $/loans, FCNR (B) (foreign currency non residents (banks) among others is advisable as ours is a working capital intensive industry with raw materials contributing over 80 per cent of the cost,” said Colin Shah, Managing Director, Kama Schachter.%% “For domestic market, short-term working capital requirements cash credit/PCFC facilities provided for exporters are used, while bank loans are a way to grow business but interest paying burden and sustainability of business is what promoter should look into”, said Suvanker Sen, Executive Director of Senco Gold, a Kolkata headquartered jeweller.%% IPOs and PEs have the risk lesser than bank loan, but they demonstrate greater responsibility to give return to investors and meet market expectations, added Sen.%% A Canara Bank official on the condition of anonymity said some brands take loan from a consortium. “Banks fund together and it depends on the terms and conditions,”he said.%%

“Banks have particular exposure. For individual firm around 15 per cent of the capital fund can be allocated. While for group companies the exposure can be upto 40 per cent. The board of directors can increase exposure upto five per cent on the discretion of board. “If firms need more fund then they can go for consortium or multiple banking arrangement (MBA). In consortium common documentation takes place and in MBA it can be separate,” he further added. %% A State Bank of India official said that the interest depends on the risk rating, which includes internal and external factors. “The market is very volatile and when it will rise or fall, no one knows. Also, the diamond jewellers’ business is going through tough patches as demand depends on season,” he said. %% For diamonds sale, mainly the period from April to June is the peak season and it gets damped during monsoon. It is a slack market and the demand is likely to pick up from September. %% Diamond studded jewellery has higher margins than gold jewellery. It is seen that big companies show huge profit mainly by trading and using a bank guarantee scheme called stand-by-letter-of-credit (SBLC) in India, said another bank official. %% With the RBI making it mandatory for companies to import gold only by paying full cash, Titan Industries may see changes in its financial and business model going forward. Titan’s expansion plans may also get impacted going ahead with debt levels going up, sources said. %% This recent move by RBI would no longer give leeway to jewellers to take gold on lease and utilise the lower cost of funding. They would also not be able to hedge against fluctuation in gold prices. %% On the other hand, Jatin Mehta’s-controlled Winsome Diamond, previously Su-Raj Diamonds, broke down last fiscal in the month of March on the back of its liquidity coming under severe pressure with the volatility in gold prices and Indian currency. It is learnt that the company which mainly caters to the demand of western region, failed to pay its installment to bullion banks. A consortium of bullion banks, foreign banks including the Punjab National Bank and among others issued letters of credit to Winsome for buying gold. However, after the company failed to pay the bullion lenders, they invoked all the guarantees, ballooning the debt 10 times to around Rs 4,000 crore. %% At present the company has asked banks for relief in the form of lower interest rate to 10.5 per cent, whereas the banks charge between 11 per cent to 13 per cent currently. Also the company is mulling to convert working capital loan into working capital term loan, where the repayment is likely spread over 28 quarters. %% Elaborating on other ways for expansion, Sen said franchising and joint ventures could offer some choice in jewellery. However, that needs to be taken with a grain of salt as the Indian rupee depreciating up to more than Rs 59 against the U.S. dollar could throw cold water on the very funding spree, according to analysts. %%