A_project_report_on_opening_up_of_a_jewe.docx

AZIRA BY EDELWEISS

“Pride of the shine”

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A PROJECT REPORT ON OPENING UP OF A JEWELLERY SHOWROOM

SUBMITTED BY: SHARAD KABRA VIKAS SHARMA PAGE 2

ACKNOWLEDGEMENT “THERE IS NO SUCH THING AS A SELF MADE MAN, WE ALL ARE MADE UPTHOUSANDS OF OTHERS” – GEORGE ADAMS. On account of a great learning and valuable project we would like to acknowledge each and everyone who have contributed to making this project possible for us. Firstly we would like to thank EDELWEISS COMMODITIES SERVICES LIMITED for finding the potential in us and giving us a chance to work on this project We are greatful to our project head MR KUNAL PAREKH for guiding us throughout with his knowledge and experience, for letting us make mistakes and learn through it We also would like to thank our fellow INTERNS for their help during our project Last but not the least we would like to thank NLDALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH for helping us associate with the company for an extraordinary internship experience

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EXECUTIVE SUMMARY The project report is divided into three major sections About the jewellery industry To grow and prosper in each and every business change should be the only constant. The unorganized sector leaves a huge opportunity for the branded jewelers to explore and gain their monopoly from the start Like every other industry even the jewellery businesses and industry demands change. There has been a tremendous change from the traditional jewellery designs to new fashion led mixed jewellery over the past years People also build trust on branded jewellery these days. They find the need to be exclusive and different especially the rich and elite class Less of gold and more of mixed is in demand these days which also helps in generating better profit margins to the jewelers makes it completely feasible to open their jewellery businesses

Our jewellery showroom Based on the above factors that support the jewellery business we plan to open the jewellery showroom for the classes in a area that demands for it Financial feasibility of the project Hence after the finding a scope to extend further business into jewellery we also come up with the financial feasibility to support this project. The cost sales and profitability analysis have been carried out after having done a detailed market research and operation

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TABLE OF CONTENTS SR.NO

TOPIC

PAGE NUMBER

1

COMPANY OVERVIEW

6

2

INDUSTRY,MARKET,FACTOR 7-10 ANALYSIS

3

SWOT ANALYSIS

10

4

PROJECT DESCRIPTION

11

5

START UP SUMMARY

12-18

6

STRATEGY FORMATION AND IMPLEMENTATION

18-22

7

PRODUCT COUNT

23-24

8

MANAGEMENT SUMMARY

24-28

9

FINANCIALS

29-47

10

CONCLUSION

47-48

11

APPENDIX

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1) COMPANY OVERVIEW 1.1) ABOUT THE COMPANY Incorporated in october 2004 Edelweiss commodities services limited (ecsl) is a wholly owned subsidiary of edelweiss financial services limited (efsl) that deals in gold and agri commodities Having an upper hand in trading gold as compared to its agri commodities trading with a ratio of 65:35 it further views on expanding its hands into the retail segment for selling gold Edelweiss commodities services limited (ecsl) showing a progressive growth from having started with a loss of 23 crores in the FY13, ecsl had improved to a profit of 12 crores in FY14 to a whooping 35 crores in FY15, making sure it has established a positive image for funding of its future plans 1.2) PROJECT PLAN OF THE COMPANY A thorough and detailed research of the complete gold and diamond industry for checking its feasibility and making “azira” operational in the retail segment of the market 1.3) OBJECTIVE OF THE COMPANY  Primary research - Feasibility study of opening up a jewellery showroom by performing market operations  Secondary research – obtaining knowledge and information from published data by the market players and using them wisely as a helping hand in our business  Having done a complete search of the opportunities in the market favouring our store design  Developing a marketing plan for making “AZIRA” come from reel to real  To carry out a financial feasibility plan for having a view on our profitability concerns

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2) INDUSTRY ANALYSIS 2.1) CURRENT SCENARIO The jewellery industry seems very confident for a glittering future. Annual global sales of rs 10360 billion rupees are expected to grow comfortably at 5-6% every year reaching almost upto 17500 billion rupees by the year 2020 The taste and preference of people all over the world have evolved and if the jewellery businesses have to survive the fierce competition they need to be very innovative Another interesting trend in the jewellery industry is the growth of branded jewellery,though it accounts for a very small percentage. The following chart shows the growth trends and the upcoming future of branded jewellery

The graph shows that estimated growth by the year 2020 the branded jewellery will capture a market of 30-40% of the jewellery industry. Industry expert when interviewed had an optimistic view of it and they think that branded jewellery will cover more market than unbranded There are three types of consumers driving the growth of branded jewelry: 

“new money” consumers who wear branded jewelry to show off their newly acquired wealth (in contrast to “old money” consumers, who prefer heirlooms or estate jewelry) PAGE 7



emerging-market consumers, for whom established brands inspire trust and the sense of an upgraded lifestyle—a purchasing factor quoted by 80 percent of our interviewees



young consumers who turn to brands as a means of self-expression and selfrealization People have now started trusting the new brands on account of their trust associated with the parent company so it is very important to make them feel the safety they desire to while purchasing jewellery  The next thing for the jewellery industry that makes them work is their channel of operation.  Different channels have faced various phases of growth, downfall and stagnation The arrow diagram below shows the future trend that possibly can take place 2.2) JEWELLERY TRENDS 

CHANNEL MONO-BRAND MULTI BRAND OF OPERATION

DEPARTMENTAL

ONLINE

OTHERS

 Mono-brand stores have killed the market and are still growing in the upward trend. this is because people are having faith in the brand name For example Swarovski had only 2 stores in the year 1990 but by now there are approximately 1000 stores all over the globe  Multi brand stores and departmental stores are on a stagnation mode and might even decline in the nearing time People often visit to see some brand but end up buying some other which they might later realize tis not meeting up with their expectations

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 Online jewellery store at present make only a sale of 4-5% of the entire jewellery sales but are expected to grow till only 10% by the year 2020 further which even they might become stagnant  The only probable reason why people chose brick and mortar stores over others is due to the sensory satisfaction they get while purchasing jewellery worth lacs and also drive away with their fear of being cheated 3) MARKET ANALYSIS Analyzing the indian market for our brand  The gems and jewellery sector is a leading contribution to the growth of indian economy of about 6-7% of our gdp  It had a market size of rs 251000 crores and has the potential to double up or more in the coming 5 years to approximately 500000530000 crores  The growth in this industry is based on healthy business environment and support of the government relating to this sector  India is a global hub for dealing in diamonds due to its cheap but high skilled labour as well as low costs  India is the worlds largest cutting and polishing center moreover it exports to almost 95% of the worlds diamonds as per gems and jewellery export promotion council(GJEPC)  It is also helping in contributing to foreign exchange earnings and was able to provide US$ 34747million  The gold consumption jumped up by 8% to 662tonnes as compared to 2013 the year which saw a record breaking accumulation of gold overall Hence at present india market as suggested is the most suitable for dealing in gold and diamond jewellery

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4) WHY DO WE MAKE A JEWELLERY SHOWROOM Only 20-25% of the Indian jewellery sector is organized. There is a huge opportunity to be explored in the early stages of this sector. The family oriented businesses in jewellery are unorganized and still rule the market but even they feel the need to change with the current trends Mixed jewellery that is jewellery made of gold and diamond offer more profitability than only gold jewellery as diamonds have the capacity to generate almost 100% profits They latest trend that carries on in the market is designer led fashion jewellery. There also has been a shift from investment related mentality to fashion fads. These are the basic reasons why we support the feasibility of this project 5) SWOT ANALYSIS  STRENGHTS 1) 2) 3) 4)

STRONG BRAND NAME ENOUGH FUNDS FOR OPERATION OF BUSINESS OWN REFINERY FOR REFINING GOLD IMPORTING GOLD FROM DUBAI AND SINGAPORE FROM OUR OWN COMPANY

 WEAKNESSES 1) LACK OF EXPERIENCE IN JEWELLERY BUSINESSES 2) NO SUPPLIER BASE FOR SOURCING OF RAW MATERIAL SUCH AS DIAMOND AND GEMS

 OPPORTUNITIES 1) HUGE POTENTIAL IN THE JEWELLERY BUSINESS 2) GOVERNMENT BACKING 3) MULTIPLE STORES CAN BE OPENED

 THREATS 1) COMPETITION FACED BY STRONG FAMILY BUSINESSES IN JEWELLERY BASED FROM A LONG PERIOD OF TIME 2) DIFFICULT TO BUILD TRUST 3) RISKY BUSINESS 4) DEALINGS IN CASH FOR PURCHASING RAW MATERIALS

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5) ABOUT THE PROJECT 5.1) BRAND NAME After having gone through a list of names that made sense to the world of gold and diamond jewellery, azira - by edelweiss having the tagline “pride of the shine” was strategically chosen as a perfect match while giving a brand name to the business a lot of factors are taken to consideration for making it well-versed with the prospect customers as well as everyone, such as  Meaning of the name  Does the name have any conflict with the sentiments of the culture prevailing in the nation  Easy to remember and pronounce  Different market players having similar names to confuse the customers  Acronyms- making a big long name and then making it known to market by use of a short form or acronym After thinking about these factors at every step before naming the b-plan, azira was selected     

Meaning of azira – shine of the diamond No conflicts with the sentiments of Indians Along with being a unique and classy name it is easy to pronounce Not used by any other businesses It has to be pronounced with its original name cant be used in any shortform

5.2) OBJECTIVE 1. To find out the sources for obtaining our operational requirements ie gold and diamond 2. Making people aware of the new brand coming on the same virtue of trust they have in edelweiss 3. Being a unique store and first of its type for the upper-middle and upper sections of the society 4. Using the latest and rarest designs for maintaining exclusivity 5. Maintain a strong position in the segment of retail jewellery PAGE 11

6. To face competition at every level and overcome it from the fellow competitors 5.3) MISSION Aim to open a space and become a leader by offering quality products, customer service and innovation to the cutomers in the segment of retail jewellery business in mumbai 5.4) VISION Changing from a single shop retailer to multi-chain shops all across India

6) START UP SUMMARY 6.1) LEGAL PROCEDURES Edelweiss being a huge brand name in the market needs to take care of each and every minute detail that don’t interrupt the smooth functioning of its various businesses In case of opening a retail jewellery showroom it will require certain legal documentations for making it operational: 1) a) b) c)

Incorporation of the company Memorandum of association Articles of association The agreement if any which the company proposes to enter with any individual for appointment as its managing or whole time director or manager d) A copy of letter of the registrar of companies intimating the availability of proper time e) Documents evidencing payment of prescribed registration and filling fee f) Documents evidencing the directorship and situation of registered office inform 32 and form 18 respectively and declaration of compliance with the requiements of the companies act for giving consent to act as director  POLICY FOR LICENSING OF THE JEWELER 1) GRANT OF LICENSE

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a) Every jewellery retailer has to obtain license from the bureau of indian standards (bis) for selling hallmarked jewellery b) The license will contain the name and address of the jeweler c) A licence will be granted for sale of Hallmarked gold jewellery/artefact conforming to IS 1417 from an outlet. d) Similarly, another licence will be granted for sale of Hallmarked silver jewellery/artefact conforming to IS 2112 from the same outlet. e) The validity of a licence shall be of three years.

2) JURISDICTION a) The licence will be issued by Branch Office of BIS having jurisdiction of the area where the jeweller is located. b) A jeweller organization having at least five retail outlets anywhere in India may either apply for separate license for each of its outlets or opt for Corporate License covering all outlets. The conditions for Corporate License will be as follows: i.

ii.

iii.

The Head Office of the jeweller organization shall apply to the nearest Branch Office (BO) of BIS for grant of Corporate Licence along with a list of retail outlets to be covered in the licence with supporting documents. The BO shall grant licence if all outlets are falling under its jurisdiction. If these outlets are falling beyond the jurisdiction of the BO as at (i) above, may be covering several BOs, the application shall be

forwarded by the BO to DDGR in the Region for grant of licence. This shall be irrespective of the locations of the sales outlets. The licence will be maintained by the BO as at (i) above. BOs having jurisdiction over such licensed retail outlets shall be informed about grant of the Corporate Licence in order to facilitate market surveillances. Inclusion of additional outlets will be done in the same manner as above.

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iv.

Every retail outlet, which has been covered under a Corporate Licence, shall be issued an independent licence document mentioning the address. c) The existing multi-chain licences shall be converted to Corporate Licences, if the organization so desires. Otherwise, individual licence shall be issued for each retail outlet covered under the multi-chain licence. This action shall be taken at the time of next renewal of the License. The Corporate Licensees shall also be given/converted to this methodology at the earliest and certainly at the time of next renewal.

3) FEES & HALLMARKING CHARGES a) The application cum processing fee for grant of fresh licence or its renewal shall be Rs. 2 000 per outlet. b) The fees for grant of a license or its renewal for a period of three years shall be as given in Tables 1 and 2 below in case of a Single License and for a Corporate License. A single licensee shall also have the option to pay the fees on an annual basis as per the rates indicated in the Table 1 below.

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6.3) STORE DESIGN  Positioning of our brand we want to position our selves as a high level brand for the classes and not the masses for this we need to offer our customers with the latest trending jewellery designs and one of its kind the place of operation is also selected based on ourr positioning also our complete marketing strategy will be based on serving ourselves as high level brand  LOCATION The location chosen for offering the best to the upper middle and upper class people is the so called new zaveri bazaar in the suburbs that is “bandrawaterfield road”  The reasons for chosing this particular location is after taking into consideration the field visit and market research made by our team 1) Type of market 2) Footfall in that location Our team has collected the number of footfall in the area on everyday of the week shown as under SR NO

DAY OF WEEK

1 2 3 4 5 6 7

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

STORE NAME tanishq kalyan om jewelers dhanraj popley joyallukas waman hari pethe

FOOTFALL 25 families 28 families 30 families 23 families 45 families 38 families 41 families

3) The standard of living of people and their purchasing power present in that area 4) Competition that can be faced PAGE 15

5) Future growth expectations in the location After examining these factors carefully “bandrawaterfield road” was chosen as the best place to carry out our operations  STORE OUTLAY Having done a field visit all over mumbai for our store bandra was selected due to the reasons mentioned above. Different brokers were contacted for availability of showroom and retail space and ample of them were available in bandra Location of the showroom – turner road bandra(w)-400050 Description of the showroom- basement-1500sqft ground floor -1500sqft 1st floor -2000 sqft Total area 5500sqft Cost of the showroom- rs 500 per sqft

7) START UP COSTS To start our business the following cost heads are taken that are funded by the debt of rs 65000000we have raised for the first year These are as follows  Property cost - the property we have bought on lease is being quoted at rs500 per sqftfor a 5500 sqft area shop along with an additional deposit to be paid in the first year of rs 12100000  Interior designing cost- after consulting interior designers for well furnished and latest interiors required for a jewellery showroom the price being quoted is 27500000  The insurance premium to be paid for securing our gold and diamond stock is worth rs 1382253  Stock including pure gold, pure diamonds, mixed(gold+diamond) is costing us rs545472900  Owing to opening of the store heavy advertisements and brand visibility has to be done which will give us future benefits are worth rs 46500000  The balance amount left out from the initial debt worth rs17044847 is used as working capital PAGE 16

The following pie chart explains the breakup of costs being funded by the total debt raised Sales

revenue expenditure

assets

debt

deferred revenue expenditure

Table showing breakup of start up costs Srno Cost head 1) Revenue a) Property cost expenditure b) Interior design c) Insurance premium d) Working capital

Cost in Rs 12100000 27500000 1382253 17044847

2) Deferred revenue expenditure 3) Assets Total 4) Liability

Total cost

58027100

Advertising and brand visibility

46500000

Gold, diamond stock

545472900 650000000 650000000

Debt

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6) MARKET SEGMENTATION For purchasing gold and diamond jewellery the market has been segmented on various attributes that help us chose our target customers and market  Segmentation on basis of income a) Upper segment of the society b) Upper middle level segment of the society c) Lower middle level segment of the society  Segmentation on basis of people preferring a) Branded jewellery b) Unbranded jewellery  Segmentation of products a) Gold b) Diamond c) Mix(gold+diamond)  Segmentation of location on basis of taste and preference a) Traditional style of jewellery b) New designer jewellery c) Exclusive jewellery 7) BUYING PATTERNS  Gold bullion as an investment  Jewellery for day to day use  Wedding jewellery  Jewellery as gift  Exclusive showcases 8) TARGET MARKET STRATEGY Out of the made segments the target market is selected as follows  The target market selected on basis of income are the upper segment and the upper middle level segment of the society The reason for targeting them is to maintain our name in the high end jewellery segment and offer exclusive jewellery

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 On basis of peoples preference we offer our own branded jewellery as people have started building trust in branded jewellery as mentioned above  We target to sell all the segments of the product ie offering all the three Gold Diamonds Mixed products  On basis of taste and preferences of people and to make our name in the elite jewelers we give new designer jewellery and exclusive designs only affordable for the upper middle class and the super rich  The customers in todays world have a varied view about how to buy gold for different purposes The buying pattern reflected included a) Gold purchased as an investment b) Casual jewellery people use for daily purposes c) In india wedding is a season where people like to celebrate with jewellery. So we target bridal wear jewellery as well d) It is every womens dream come true to be gifted diamonds and expensive jewellery e) All the elite families like to be unique by showcasing that one rare thing which no one has

9) STRATEGY AND IMPLEMENTATION SUMMARY 

COMPETITIVE EDGE

Competitive edge will be achieved in azira through different mediums such as a) Store operations and human resources The personnel appointed will be highly representable, properly trained,specialized in the jewellery market to add to the aura of our grand flagship showroom b) Merchandising the latest designs PAGE 19

Latest and the most uncommon designs from world renowned and famous designers will give us the edge over others Customized as well as demand driven designs will be presented to our customers c) Marketing plan The marketing plan is developed in such a way that people are aware of our brand through all the mediums without leaving any scope a) Through hoardings in south Mumbai and suburban areas from andheri to bandra where we can target the elite people The cost breakup for such hoardings is given as under PLACE OF HOARDING Worli, near Atria Mall Worli flyover Juhu, Haveli Juhu, Tulip Star Juhu, JW Marriot Bandra, WEH Bandra Station BandraLinkin Road, near KFC Lower Parel, opposite Palladium Lower Parel, Indiabulls Byculla flyover Mahalaxmi, race course Mahalaxmi, Haji Ali Mahalaxmi station Cadbury Junction Babulnath junction Total

COST (PER MONTH) 250,000 750,000 500,000 1,000,000 500,000 500,000 50,000

DIMENSION 40x20 40x20 30x20 40x20 30x50 40x40 20x20

100,000

10x20

250,000 100,000 100,000 125,000 125,000 700,000 400,000 500,000

20x20 15x30 15x35 20x20 20x20 60x20 20x20 20x20

5950000

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b) NEWSPAPER ADVERTISING Through full front page adverting in leading newspapers such as  Times of india  Dna and  Mumbai mirror It is one of the major source of advertising as no ones morning gets completed without newspapers. Majority of the population can be made aware of our brand through it

The cost break up for the advertisements is as follows Store opening full page advertisement, front page

Reach (daily) Times of India DNA Mirror Total

Cost (at Rs 5000 per square cm for 8580000 33*52) 3432000 (at Rs 2000 per square cm) 1350000 (at Rs 1800 per square cm)

810365 601000 715208

13,362,000

The month of October that’s brings indias one of the most auspicious festival of Diwali is a target time where more advertisements need to be done as most of the people in india buy jewellery in Diwali considering it to be a good time for buying gold The wedding seasons in January and april is again a prime time to showcase our new collection which also needs to be told to the people residing in india through the newspapers They incur the following cost PAGE 21

Advertising during the months of October, Januaury and April Half page, front page (at Rs 5000 per square cm for Times of India 4125000 33*25) DNA 1650000 Mirror 720000 Total 6495000 Hence the total cost for the first day advertisement and the special monthly times attract a total cost of rs19,485,000 c) RADIO STATIONS Mumbai is jampacked nowadays due to heavy utilization of vehicles by individuals But this commotion gives a scope of advertisement for new comings in the market through radio stations as most people are stuck in traffic and find it a good way to hear songs,advertisments some news and updates for a little span of time, but also an effective medium Latest radio stations such as radio mirchi,big 92.7 fm,redfmetchave given us the following quotation 1

2

3

radio mirchi 98.3 ( 15 secs, 10 spots a day 30 days) Total Big 92.7 fm 10 secs , 10 spots, 30 days Total

Rs 1200 per 10 secs

540000 Negotiable Rs 1000 per 10 secs

93.5 red fm 10 secs , 10 spots, 30 days Total cost of radio

300000 Negotiable 700000 Negotiable 1500000

Advertising during the first month and the months of october, januaury and April 6,000,000 Cost of radio PAGE 22

advertising d) ONLINE MEDIA MARKETING The most commonly used form of advertising these days. From small to big everyone now a days use online. Online media marketing is very trending effective as well as helps to bring in a lot of people to our brand Even if online methods are used it can be done through certain ways Internet Advertising Search engine optimization pay per click Social media advertising

per month

Total

10)

25000 20000

300000 240000

20000

240000 780,000

PRODUCTS

Azira will offer a varied and unique collection of jewellery in gold as well as diamond The gold jewellery stock is maintained keeping in mind their weights and karats A varied collection of 2860 designs will be offered comprising of different ornaments as shown in the table below 21,21.5,22,24 karat gold will be available in our showroom Approximately 54 kgs of gold be kept in the store for being sold and replenishment will be done according to the demand and new patterns available in the market over the year The pricing strategy adopted is day to day pricing but for an estimation a margin of 15% is charged for preparing our financials The following table shows the product count according to their weights

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Jewellery

1-5

5-10

EARINGS RINGS CHAINS NECKLACES MANGALSUTRAS PENDANTS BRACELETS BANGLES MANGTIKKAS NOSEPINS GOLD COINS PENDANT SETS DESIGNER SETS TOTAL

100 80 50

100 80 50 40 25 100 50 30 15 25 20 30

200

15 25 20

490

565

1015 80 60 50 40 25 100 50 40

1520 60 60 50 50 25 20 40 40

2030 50 30 40 50 25 20 40 40

3040 20 20 30 50 10

4050 10 10 20 40 10

5075

30 40

20 30

10 30

50

20 30 395

20 25 340

30 25 255

20 20 180

10 100

495

20 30

75 AND TOTAL ABOVE 420 340 20 330 20 320 120 440 240 250 30 50 40 170 110 40 2860

The prices of gold as per karat as on 1st july,2015 are as follows a) 24kt- rs26482/10gms b) 22kt- rs24275.17/10gms According to these prices the overall costing of our gold stock totals to rs128735400 approximately and selling the stock worth the above value at approximately 131,729,191.92 will help us give a profit of approximately 15%

Whereas those in diamond are offered according to the price range and affordability of people based on number of karats PRODUCT NAME

PRICE RANGE(RS)

NUMBER OF PRODUCTS

Diamond rings

20000-800000

380

Diamond earrings

10000-450000

420

Diamond pendants

10000-200000

390

Diamond bangles

85000-1000000

130

Diamond necklaces

100000-3000000

330

Diamond nosepin

10000-50000

390 PAGE 24

Total-1740 All the products are offered after having a product count by visiting various jewellery showrooms across Mumbai

11)

MANAGEMENT SUMMARY

The management team for running the jewellery business will have wide expertise and broad knowledge of the jewellery market, the current practices in the industry and the intricacies of the segment. If these activities are planned well, it will help the business realize its goals in a potent and efficient manner. As the business grows, there will be need of additional consultants and market experts who will be able to guide the store on the right path. The primary task of the management team will be to stay in terms with the on going market practices, the shifting trends in the markets, the shift in consumer ideology and to analyze the competitor behaviour. They will have to make sure that the store does not go awry from its pre-decided goals and that it keeps registering continuous growth. The team will also function as an intermediary between the store and its public. Hence, it will fall to the efficiency of the management team that the customers are satisfied with the products and services offered, the creditors are confident of the business being well off, the employees are happy with the working conditions and the store doesn’t indulge in any malpractices. 12)

STORE HIERARCHY

Azira will follow a vertical organisational pattern and at the helm will be the store manager who will be in charge of the daily operations of the store. Moreover, the store manager will make sure that the employees under him are working efficiently and that if any dispute or conflict arises, he will make sure that a solution is reached in the best interest of the business. The store manager will be assisted by 2 floor managers who will be overlook the functions of the two floors of the store. One floor manager will be at the helm of the GOLD section and the other one of the DIAMOND section. The managers will be assisted in operations by 24 well PAGE 25

trained and educated sales personnel, 4 cashiers (2 on each floor), 4 cleaners and helpers and 4 security men. Store Manager

Floor manager (Gold)

Securiy men and Helpers

12 Sales Personnel + 2 Cashiers

13)

Floor manager (Diamond)

12 Sales Personnel + 2 Cashiers

TRAINING AND DEVELOPMENT

Sales Personnel are the patrons of the store, they are the first point of contact for the customers and are the ones whose interaction with the customers can either give the store a loyal customer force or pull the sales down. Hence, it is vital that the sales personnel along with the managers and other staff are always on their best behaviour and make sure that the customers always leave satisfied. The expenses incurred on training and development will help the employees sharpen their skills which would mean that the whole work force is reliable and the store won’t have to be over dependent on only a few employees. A properly trained employee becomes more informed about procedures for various tasks. The worker confidence is also boosted by training and development. This confidence comes from the fact that the employee is fully aware of his/her roles and responsibilities. It helps the worker carry out the duties in better way and even find new ideas to incorporate in the daily execution of duty. Training and development makes the employee also feel satisfied with the role they play in the company or organization. This is driven by the great ability they gain to execute their duties. They feel they belong to the company or the

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organization that they work for and the only way to reward it is giving the best services they can. Employees gain standard methods to use in their tasks. They are also able to maintain uniformity in the output they give. This results with a company that gives satisfying services or goods. Hence, the expenses incurred in training and development of the sales force can only yield returns for the store in the short and long run. It will particularly enhance the customer experience and propel the name of the brand forward. It is necessary that the employees stay in tune with all the current market practices and the amount of training and development will be ushered in from the Reserves that the store has and after a few years, from the Revenue the store makes.

14)

REMUNERATION

The detailed annual personnel plan is included in the appendix. The annual personnel estimates are included here. We believe this plan is an acceptable compromise between fairness and expedience, and meets the commitments of our mission statement. We intend to be an easily recognized and trusted brand and we know that the workforce has to be remunerated fairly for them to enhance the experience of our customers. We want the company to stay lean and flexible so that we can respond to a client's needs quickly. However as we expand and increase in size (increase in the number of footfall and sales) we expect to increase our personnel.

We intend to compensate our personnel well, so as to retain their invaluable expertise and to ensure job satisfaction and enrichment through delegation of authority. In-house training shall be continuous with regular external training being undertaken particularly following any new developments in the market. This is to ensure that we are continuously able to anticipate our customers’ needs. The monthly remuneration plan for the first 3 years as listed below Designation Store Manager Floor managers

No. of employees 1

Monthly Salary (Year 1)

Monthly Salary (Year 2)

Monthly Salary (Year 3)

Rs. 1,20,000

Rs. 1,30,000

Rs. 1,40,000

2

Rs. 1,50,000

Rs. 1,60,000

Rs. 1,70,000 PAGE 27

Sales Personnel

24

Rs. 4,80,000

Rs. 5,28,000

Rs. 6,00,000

Cashiers

4

Rs. 80,000

Rs. 88,000

Rs. 96,000

Security Personnel

4

Rs. 48,000

Rs. 52,000

Rs. 56,000

Cleaners and Helpers

4

Rs. 40,000

Rs. 40,000

Rs. 48,000

Total

39

Rs. 9,18,000

Rs. 9,98,000

Rs. 11,10,000

As per the remuneration package decided by us, the store manager gets the highest pay package of Rs 14, 40,000 annually followed by the store managers who will take home an annual package of Rs 9, 00,000 each. Each Sales representative and cashier will get a monthly salary of Rs 20, 000 each in the first year. The security men and the helpers will get Rs 12,000 each and Rs 10,000 each respectively. Provisions have been made in the cost sheet that will allow the management of the store to pay performance and festive bonuses in each year. Within the next five years in lieu of the growing sales and customer footfall, the sales staff will be expanded to a size of 30 from the first year size of 24 and within the next five years i.e. 10 years of operation, the sales staff will be expanded to a size of 36 with additional staff requirement been fulfilled as and when the need is felt by the store management. The detailed remuneration for 10 years is attached in Appendix 1.

PAGE 28

15)

SALES

Jewellery is viewed with a lot of fervour in India and hence the sale of gold and diamond jewellery is not just related to a pure business transaction. The project required indentifying potential areas in Mumbai where the sale of jewellery has a strong prospect with customers accepting a new brand as well as getting acclimatised to how jewellery is sold in the city and what are the different target markets. To get an estimation of the sales figure at our selected location that is Bandra, we undertook a study of sales figure of influential stand alone stores in the area. With the sales figures based on that of Notandas and Ghanasingh, we derived our sales amount of first year. In lieu of the sales made by the above mentioned influential jewellers, we determined our sales to roughly around 25% of that made by these jewellers. Year Sales

Gold

1 Rs. 18,45,00,000 Rs. 12,91,50,000 2 Rs. 23,06,25,000 Rs. 16,14,37,500 3 Rs. 28,82,81,250 Rs. 20,17,96,875 4 Rs. 36,03,51,563 Rs. 25,22,46,094 5 Rs. 45,04,39,453 Rs. 31,53,07,617 6 Rs. 56,30,49,316 Rs. 36,59,82,056 7 Rs. 70,38,11,646 Rs. 45,74,77,570 8 Rs. 87,97,64,557 Rs. 57,18,46,962 9 Rs. 1,09,97,05,696 Rs. 71,48,08,702 10 Rs. 1,37,46,32,120 Rs. 89,35,10,878 11 Rs. 1,71,82,90,150 Rs. 1,11,68,88,598

Diamond Rs. 5,53,50,000 Rs. 6,91,87,500 Rs. 8,64,84,375 Rs. 10,81,05,469 Rs. 13,51,31,836 Rs. 19,70,67,261 Rs. 24,63,34,076 Rs. 30,79,17,595 Rs. 38,48,96,994 Rs. 48,11,21,242 Rs. 60,14,01,553

The sales in the first year is kept at an estimated Rs 18,45,00,000, with an expected growth rate annually pegged at 25% year on year basis. Sale of gold jewellery will contribute 70% towards the total sales and the sale of Diamond jewellery will be 30% of the total sales for the first 5 years from the start of the store. Once the store establishes itself as an ardent quality manufacturer of jewellery, the share of diamond is to increase by a further 5% to make it 35% overall of the total sales. The margin on gold jewellery is kept at 10% for the first five years and 15% for the next five years. This margin will include all different income heads. The margin on diamond jewellery is kept at 35% for the first five years and 40% for the remainder of the sales data. Since, the cost of selling and storing diamond jewellery is higher compared to that of gold jewellery, the margin on diamond is kept considerably high going with the industry standards PAGE 29

16) IMPORTANT ASSUMPTIONS  The sales figure is derived after considering the annual reports of standalone stores in the proposed area of store operations  First year sales are kept at 25% of the 2014 annual sales recorded by Notandas and Sons  The sales is expected to grow at an annual rate of 25% (year on year basis)  Of the total sales, 70% will be gold and 30% diamond jewellery will be sold for the first five years. The figure for diamond jewellery will increase to 35% after the 5th year and proportionately, the gold jewellery sales will reduce to 65%  The margin on pure gold jewellery is 10% for the first five years and thereafter it will increase by a further 5%  The margin on diamond jewellery is kept at 35% for the first five years and it will increase to 40% from the 6th year of operations. Increase in Sales as shown below (Amounts in Crores) Rs. 200 Rs. 180 Rs. 160 Rs. 140 Rs. 120 Sales Rs. 100

Gold sales

Rs. 80

Diamond Sales

Rs. 60 Rs. 40 Rs. 20 Rs. 0 1

2

3

4

5

6

7

8

9

10

11

No of YEARS - - - - - ->

PAGE 30

17) EXPENSES

The expenses incurred for operating the store, include the interest amount that has to be repaid for the funds borrowed, the lease rental that will be paid on an annual basis, the salaries to be paid to the employees (the breakdown of which is given in the remuneration section), the advertising and marketing expenses, the insurance premium to be paid for the amount of stock insured, maintenance, miscellaneous and other expenses and the depreciation on the furniture and interior design. 18)

INTEREST ON BORROWED FUND

The interest amount to be payable on the borrowed fund is divided into two parts, the amount borrowed for buying gold (interest charged at 7%) and the amount borrowed for all other expenses (interest charged at 12%). The interest amount that will be paid in the first year of operating the store is Rs 5,95,63,230. The schedule of interest payment is shown below: Year

Total amount borrowed Interest liable 1 2 3 4 5 6 7 8 9 10 11

Rs. 55,00,00,000 Rs. 62,06,84,284 Rs. 69,90,43,642 Rs. 76,03,75,434 Rs. 79,96,66,407 Rs. 81,13,50,839 Rs. 81,13,50,839 Rs. 81,13,50,839 Rs. 81,13,50,839 Rs. 81,13,50,839 Rs. 81,13,50,839

Rs. 5,95,63,230 Rs. 6,48,35,527 Rs. 6,44,87,064 Rs. 6,18,63,273 Rs. 5,86,76,969 Rs. 5,48,65,835 Rs. 5,33,21,079 Rs. 5,16,06,366 Rs. 4,97,02,383 Rs. 4,75,87,570 Rs. 4,52,37,863

Since, the store makes part principal payments every year, the interest liability will reduce every year. The store will never default on the interest payment and keep making part principal payments till it is self sustaining. 19)

LEASE RENTAL

The flagship store of Azira will come up at a prime Bandra location on Linking Road. The store will be approximately 5000 sq ft in size and the lease rental amount in the area is Rs 500 per sq ft. Hence, the lease rental every year will be Rs 3,30,00,000 with a deposit of Rs1,21,00,000 to be paid in the first year.

PAGE 31

20)

INSURANCE PREMIUM

The inventory will have to be insured against various hazards like fire and theft. Since, it is a jewellery store all security measures will be in place to make sure that no burglary or theft takes place. Fire clearance certificate will be obtained from the BMC and necessary fire deterrent measures will be in place. The insurance premium for the first year for stock consisting gold jewellery worth Rs 12,87,35,400 and diamond jewellery worth Rs 41,67,37,500 will be Rs 13,82,253. Gold jewellery will be insured with a premium amount of 0.75% per year and diamond jewellery will be insured with a premium amount of 1% per year. With an increase in the stock requirement, the amount will swell up over the years. 21)

MAINTENANCE AND OTHER CHARGES

Every business has to keep provisions for sundry and unforeseeable expenses. This cost head will include all the maintenance and miscellaneous expenses that will be required in operation of the store over the years. This cost head includes items like catalogues, jewellery boxes, weighing machines, purity check machines, cash counting machines, legal expenses, maintenance of electrical equipments, provision for expenses on electricity and pantry expenses among other things.

22) EXPENSES COMPARED WITH SALES AND PROFIT (AMOUNT IN CRORES) Rs. 200 Rs. 180 Rs. 160

Rs. 140 Rs. 120 Sales (Revenue)

Rs. 100

Expenses Rs. 80

Profit (Balance)

Rs. 60 Rs. 40 Rs. 20 Rs. 0 -Rs. 20

1

2

3

4

5

6

7

8

9

10

11

PAGE 32

23)

NO OF YEARS

Breakdown of expenses Year 1 0.33

0.9 0.6 Interest Payment lease Rental

1.1 5.95

Salaries Depreciation Maintenance Principal repaid

3.3

(Amount mentioned in crores)

Break down of expenses year 11 0.48 Interest Paid 2.43 4.52

Lease Rental Salaries

0.09

Advertising

0.62

Insurance

0.3

Depreciation Principal Repaid

2.3 3.3

Maintenance

(Amount mentioned in crores)

PAGE 33

As is seen from the above pie chart analysis of year 1 and year 11, the interest expenses have reduced over the years and the principal repaid has increased. This is because the store meets its timely instalment payments.

PAGE 34

24)

INVENTORY AND BREAK EVEN ANALYSIS

The store will start with inventory levels refurbished to full capacity i.e. Rs 54,54,72,900 comprising of gold and diamond jewellery. This is the maximum capacity of inventory the store can carry in the first year. Out of the total requirement, Rs 44,12,88,525 worth of inventory would be taken on loan and the rest on credit. Since, the amount of Diamond stock that will be taken on credit will bear no interest expenditure, it is a cost saving avenue for the store. Interest will only be paid on the sum borrowed for gold purchases, a part of diamond jewellery purchases and other expenses like advertising and lease rental. The following table shows the breakdown of the borrowed fund essential to support expenses in the 1st year. PARTICULARS Property Lease Interior Design Stock Advertising & Marketing Insurance Premium Working Capital

Total Borrowed Fund

BORROWED FUND Rs. 1,21,00,000 Rs. 2,75,00,000 Rs. 44,12,88,525 Rs. 4,65,00,000 Rs. 13,82,253 Rs. 2,12,29,222 Rs. 55,00,00,000

The following table provides the breakdown of total stock Gold Jewellery (7% interest) Diamond Jewellery on loan (12% interest) Diamond Jewellery taken on credit Total Stock Inventory taken on loan

Rs 12,87,35,400 Rs 31,25,53,125 Rs 10,41,84,375 Rs 54,54,72,900 Rs 44,12,88,525 PAGE 35

The estimated sales in the first year as mentioned above is Rs 18,45,00,000 but, the actual cost of goods sold in the year is Rs 15,84,09,091 which is inclusive of the Rs 1,02,50,000 worth of diamond jewellery that will be re-stocked on credit. For the first six years, in order to save the amount spent on maintaining the inventory levels and also to make sure that the store never under stocks, it is recommended that the store only refill 90% of the actual sales made in the next year. For instance if the cost of goods sold in the 2nd year is Rs 18,51,98,684, the store will only replenish 90% of the sales made i.e. Rs 16,66,78,977. This model can be continued till the 6th year because 90% inventory levels take care of the projected demand for the next year. But, since the sales forecast is progressive, the store will have to maintain 100% levels from 7th year onwards, sometimes even refurbishing the sock multiple times in the same year.

25)

HEADS OF INCOME

For running a jewellery business, it is important that certain factors like the heads of income are predetermined. Normally for a jewellery business there are a few heads of income as mentioned below:     

Cost Hedge Making Charges Buy back of gold jewellery Selling under 24 carat gold at 24 carat prices Certain instalment and gold purchase schemes

The amount of income administered from buy back of jewellery and the instalment schemes are negligible for the store as it is hardly enough to sustain a fraction of the sales. Selling under 24 carat gold at 24 carat prices is unethical, not to mention that the customers are now educated through various means and only seek gold jewellery with purity mark that signifies the carats of gold in the jewellery. This leaves cost hedge and making charges as the two primary heads of income via which jewellers earn their revenues.

PAGE 36

26)

COST HEDGE:

Generally, jewelers buy gold/ready-made ornaments in bulk and at the current market rate in the form of gold-bars. They stock this gold and sell at a time when the prices have increased. Normally, gold’s rate increase and they make money selling it to you at a higher current gold rate than what they purchased it on. This source of margin is not a big one unless there is huge increase in gold prices over the period of buy and sell. Historically, price of gold has always moved in upwards direction over the period of time. There may be some price fluctuations across short span of time, but gold price trends suggest that its price has only gone up over the long period of time. 27)

MAKING CHARGES

The amount of making charge that has to be accounted in the final price of the jewellery is determined on the basis of the labour charges paid and the intricacies of the design. During our research duration, we found various jewellers charging different making charges in the range of Rs 250 – Rs 400 on per gram of gold used in making the ornament. This income forms a substantial part of the margin that a jeweller charges and normally jewellers negotiate on the making charges. In keeping with the industry standards, the margin on gold jewellery is kept at 10% for the first 5 years and 15% for the next 5 years. The margin on diamond jewellery is normally kept high with jewellers claiming to earn returns in excess of 100% over the selling price on a few categories of diamond ornaments. The margin on the diamond jewellery is kept at 35% with a plan to shift it upwards to almost 40% when the consumers have gained trust in the brand. Year Sales

Gold

1 Rs. 18,45,00,000 Rs. 12,91,50,000 2 Rs. 23,06,25,000 Rs. 16,14,37,500 3 Rs. 28,82,81,250 Rs. 20,17,96,875 4 Rs. 36,03,51,563 Rs. 25,22,46,094 5 Rs. 45,04,39,453 Rs. 31,53,07,617 6 Rs. 56,30,49,316 Rs. 36,59,82,056 7 Rs. 70,38,11,646 Rs. 45,74,77,570 8 Rs. 87,97,64,557 Rs. 57,18,46,962 9 Rs. 1,09,97,05,696 Rs. 71,48,08,702 10 Rs. 1,37,46,32,120 Rs. 89,35,10,878 11 Rs. 1,71,82,90,150 Rs. 1,11,68,88,598

Diamond Rs. 5,53,50,000 Rs. 6,91,87,500 Rs. 8,64,84,375 Rs. 10,81,05,469 Rs. 13,51,31,836 Rs. 19,70,67,261 Rs. 24,63,34,076 Rs. 30,79,17,595 Rs. 38,48,96,994 Rs. 48,11,21,242 Rs. 60,14,01,553

Margin on Gold Margin on Diamond Rs. 1,17,40,909 Rs. 1,46,76,136 Rs. 1,83,45,170 Rs. 2,29,31,463 Rs. 2,86,64,329 Rs. 4,77,36,790 Rs. 5,96,70,987 Rs. 7,45,88,734 Rs. 9,32,35,918 Rs. 11,65,44,897 Rs. 14,56,81,121

Rs. 1,43,50,000 Rs. 1,79,37,500 Rs. 2,24,21,875 Rs. 2,80,27,344 Rs. 3,50,34,180 Rs. 5,63,04,932 Rs. 7,03,81,165 Rs. 8,79,76,456 Rs. 10,99,70,570 Rs. 13,74,63,212 Rs. 17,18,29,015

PAGE 37

28)

LOAN REPAYMENT SCHEDULE

For setting up the store, initial amount of Rs 55,00,00,000 will be borrowed from the market. The following table gives the breakdown of the amount that will be borrowed for initializing the store. PARTICULARS Property Lease Interior Design Stock Advertising & Marketing Insurance Premium Working Capital

Total Borrowed Fund

BORROWED FUND Rs. 1,21,00,000 Rs. 2,75,00,000 Rs. 44,12,88,525 Rs. 4,65,00,000 Rs. 13,82,253 Rs. 2,12,29,222 Rs. 55,00,00,000

Out of the total borrowed fund of Rs 55 crore, Rs 12,87,35,400 will be borrowed at an interest of 7% for buying gold for the ornaments and remainder of the amount will be borrowed at 12% interest rate. Since in the first few years, the revenue made from sales is not enough to sustain the costs as well as refurbish the inventory levels, the store management will have to borrow additional funds every year till the 6th year i.e. the year the store makes its first profit. With an increase in the additional borrowed funds, the interest liability will also increase as shown in the table below:

PAGE 38

Year

Initial borrowed funds Extra amount borrowed Total amount borrowed 1 2 3 4 5 6

Rs. 55,00,00,000 Rs. 7,06,84,284 Rs. 7,83,59,358 Rs. 6,13,31,793 Rs. 3,92,90,973 Rs. 1,16,84,432

Rs. 55,00,00,000 Rs. 62,06,84,284 Rs. 69,90,43,642 Rs. 76,03,75,434 Rs. 79,96,66,407 Rs. 81,13,50,839

Hence, as shown in the above table by the end of the 6th year, the store would have borrowed capital in addition of Rs 80 crores. The store will keep making part principal payments and try to offload the entire debt fund within 20 years of operations. The following table will show the loan amortization schedule for the first 10 years of debt raised at 7% and 12% separately.

PAGE 39

LOAN TAKEN AT 7% Year 1 2 3 4 5 6 7 8 9 10

Installment Interest Principal Principal Repaid Rs. 1,21,51,711 Rs. 90,11,478 Rs. 31,40,233 Rs. 12,55,95,167 Rs. 1,21,51,711 Rs. 87,91,662 Rs. 33,60,049 Rs. 12,22,35,118 Rs. 1,21,51,711 Rs. 85,56,458 Rs. 35,95,253 Rs. 11,86,39,865 Rs. 1,21,51,711 Rs. 83,04,791 Rs. 38,46,920 Rs. 11,47,92,944 Rs. 1,21,51,711 Rs. 80,35,506 Rs. 41,16,205 Rs. 11,06,76,740 Rs. 1,21,51,711 Rs. 77,47,372 Rs. 44,04,339 Rs. 10,62,72,400 Rs. 1,21,51,711 Rs. 74,39,068 Rs. 47,12,643 Rs. 10,15,59,757 Rs. 1,21,51,711 Rs. 71,09,183 Rs. 50,42,528 Rs. 9,65,17,229 Rs. 1,21,51,711 Rs. 67,56,206 Rs. 53,95,505 Rs. 9,11,21,724 Rs. 1,21,51,711 Rs. 63,78,521 Rs. 57,73,190 Rs. 8,53,48,534

LOAN TAKEN AT 12% Year 1 2 3 4 5 6 7 8 9 10

Installment Interest Principal Principal Repaid Rs. 5,63,98,391 Rs. 5,05,51,752 Rs. 58,46,639 Rs. 41,54,17,961 Rs. 5,63,98,391 Rs. 4,98,50,155 Rs. 65,48,236 Rs. 40,88,69,725 Rs. 5,63,98,391 Rs. 4,90,64,367 Rs. 73,34,024 Rs. 40,15,35,701 Rs. 5,63,98,391 Rs. 4,81,84,284 Rs. 82,14,107 Rs. 39,33,21,595 Rs. 5,63,98,391 Rs. 4,71,98,591 Rs. 91,99,800 Rs. 38,41,21,795 Rs. 5,63,98,391 Rs. 4,60,94,615 Rs. 1,03,03,776 Rs. 37,38,18,019 Rs. 5,63,98,391 Rs. 4,48,58,162 Rs. 1,15,40,229 Rs. 36,22,77,791 Rs. 5,63,98,391 Rs. 4,34,73,335 Rs. 1,29,25,056 Rs. 34,93,52,734 Rs. 5,63,98,391 Rs. 4,19,22,328 Rs. 1,44,76,063 Rs. 33,48,76,672 Rs. 5,63,98,391 Rs. 4,01,85,201 Rs. 1,62,13,190 Rs. 31,86,63,481

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29)

PROFIT & LOSS ACCOUNT

The following table shows the Profit & Loss account for the first, sixth, seventh and ninth years. Year Sales Less:Cost of Goods Sold Opening Stock (+) Purchases (-) Closing Stock Gross Profit Less : Expenses Net Profit/Loss

1

6

7

9

Rs. 18,45,00,000 Rs. 56,30,49,316 Rs. 70,38,11,646 Rs. 1,09,97,05,696 Rs. 44,12,88,525 Rs. 31,96,93,896 Rs. 31,96,93,896

Rs. 31,96,93,896

Rs. 13,33,43,182 Rs. 42,38,17,013 Rs. 52,97,71,266

Rs. 82,77,67,603

Rs. 42,64,72,616 Rs. 31,96,93,896 Rs. 31,96,93,896 Rs. 14,81,59,091 Rs. 42,38,17,013 Rs. 52,97,71,266 Rs. 3,63,40,909 Rs. 13,92,32,304 Rs. 17,40,40,380

Rs. 31,96,93,896 Rs. 82,77,67,603 Rs. 27,19,38,093

Rs. 12,18,41,102 Rs. 13,52,00,644 Rs. 13,46,14,105

Rs. 13,63,13,613

-Rs. 8,55,00,193

Rs. 13,56,24,480

Rs. 40,31,660

Rs. 3,94,26,275

As can be seen from the chart below, the loss incurred on the business is steadily falling and the business registers its first profit in the 6 th year. The store registers a year on year increase in profit of 44.97% from year 9 to year 10 and 39.12% from year 10 to year 11.

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30) THE PROFIT REGISTERED BY THE STORE (AMOUNT IN CRORES) 35 30 25 20 15 Profit 10 5 0 1

2

3

4

5

6

7

8

9

10

11

-5 -10

No of YEARS 31)

CASH FLOW STATEMENT

The following table shows the cash flow statement of the store for the first, sixth, eighth and ninth years.

PAGE 42

Year Sales Profit Margin Gross Profit (-)Annual Expenditure EBDITA (-)Depreciation EBIT (-)Interest EBT (-)Provision for tax PAT

1

6

8

9

Rs. 18,45,00,000 Rs. 56,30,49,316 Rs. 87,97,64,557 Rs. 1,09,97,05,696 17.50%

23.75%

23.75%

23.75%

Rs. 3,22,87,500 Rs. 13,37,24,213 Rs. 20,89,44,082 Rs. 26,11,80,103 Rs. 4,99,91,000

Rs. 6,38,85,179

Rs. 6,51,66,922

Rs. 6,55,52,869

-Rs. 1,77,03,500 Rs. 6,98,39,034 Rs. 14,37,77,160 Rs. 19,56,27,234 Rs. 33,00,000

Rs. 17,41,515

Rs. 13,48,629

Rs. 11,86,794

-Rs. 2,10,03,500 Rs. 6,80,97,519 Rs. 14,24,28,530 Rs. 19,44,40,440 Rs. 5,95,63,230

Rs. 5,48,65,835

Rs. 5,16,06,366

Rs. 4,97,02,383

-Rs. 8,05,66,730 Rs. 1,32,31,683

Rs. 9,08,22,164

Rs. 14,47,38,057

Rs. 2,27,05,541

Rs. 3,61,84,514

Rs. 6,81,16,623

Rs. 10,85,53,543

Rs. 0

Rs. 0

-Rs. 8,05,66,730 Rs. 1,32,31,683

As shown in the table above, the profit margin that the store has over the years will considerably increase over a period of the predicted 10 years. Though the annual expenses and the interest expenses are increasing considerably, the sales are increasing at a higher pace to register positive Profit after Tax from 6th year onwards.

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32)

PROPOSAL II – THE DEBT : EQUITY MODEL

IMPORTANT ASSUMPTIONS  The sales are the same as the previous model  The store raises capital in the debt : equity ratio of 4:1 i.e. out of the total requirement of Rs 55 crores, the store uses debt fund of Rs 44 crore and equity fund of Rs 11 crore  To maximise the returns from this model, the opportunity cost on equity fund and dividend payment to the owners is avoided

33)

EXPENSES

All expenses under this model will stay the same expect for the interest and principal payments that the store management will make on the borrowed funds. The store will borrow Rs 44 crore on which Rs 4.63 crore will be due as an interest payment in the first year. Since, the store will make regular principal payments; the interest burden will keep on reducing every year. The following table shows the interest liability of the store for the first eleven years Year

Total amount borrowed Interest liable 1 2 3 4 5 6 7 8 9 10 11

Rs. 44,00,00,000 Rs. 49,59,57,618 Rs. 55,82,99,887 Rs. 60,35,01,521 Rs. 62,66,52,428 Rs. 62,66,52,428 Rs. 62,66,52,428 Rs. 62,66,52,428 Rs. 62,66,52,428 Rs. 62,66,52,428 Rs. 62,66,52,428

Rs. 4,63,63,230 Rs. 5,05,28,303 Rs. 5,02,71,950 Rs. 4,78,68,057 Rs. 4,49,38,267 Rs. 4,49,38,267 Rs. 4,26,12,527 Rs. 4,12,59,418 Rs. 3,97,60,429 Rs. 3,80,99,210 Rs. 3,62,57,529

The above table also includes the interest due on the additional borrowed funds as the store borrows in the surplus of Rs 60 crores

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34) EXPENSES COMPARED WITH SALES AND PROFIT (AMOUNT IN CRORES) 200 180 160 140 120 100 80 60 40 20 0 -20

Sales (revenue) Expenses Profit (Balance)

1

2

3

4

5

6

7

8

9

10

11

No of Years

As compared to the previous model, this model establishes that the store can start earning surplus from the 5th year of operations as opposed to the 6th year from the previous model. Moreover, the overall profitability of the business also increases. 35)

COMPARISON OF EXPENSES (AMOUNT IN CRORES)

Expenses Year 1 0.6

0.75

Interest Payment

0.33

Lease rental 4.63

1.1

Salaries Depreciation

3.3

Maintenance Principal Payment

PAGE 45

Expenses Year 11 0.61

0.09

Interest Payment Lease Rental

1.96

3.63

0.48

Salaries Advertisng

0.3

2.3

Insurance Premium 3.3

Principal Payment Maintenenca

36)

USE OF CAPITAL

The following table shows the requirement of capital for the store to initiate operations Particulars

Borrowed fund

Property Lease Interior Design Stock Advertising & Marketing Insurance Premium Working Capital

Rs. 1,21,00,000 Rs. 2,75,00,000 Rs. 44,12,88,525 Rs. 4,65,00,000 Rs. 13,82,253 Rs. 2,12,29,222

Total Borrowed Fund

Rs. 55,00,00,000

THE SOURCE OF CAPITAL Requirement Property Lease Interior Design Advertising & Marketing Insurance Premium Working Capital Diamond Stock Gold Stock (7% Interest) Diamond Stock (12% Interest)

Amount Rs 1.21 crores Rs 2.57 crores Rs 4.65 crores Rs 0.14 crores Rs 2.12 crores Rs 0.13 crores Rs 12.87 crores Rs 31.13 crores

Equity/Debt Equity Equity Equity Equity Equity Equity Debt Debt

PAGE 46

Total debt fund employed Rs 44 crores and total equity fund employed Rs 11 crores. 37) THE PROFIT EARNED THROUGH THIS MODEL (AMOUNT IN CRORES)

Profit Earned 35 30 25 20 15 Profit Earned 10 5 0 -5

1

2

3

4

5

6

7

8

9

10

11

-10

No of Years

38) CONCLUSION  The focus of this project is to sell branded designer jewellery to the upper class and the upper middle class of Mumbai’s highly influential population. The segmentation of this project is highly based on the fact that target market for ‘Azira’ is the elite class of Mumbai  As mentioned above, there is a huge scope for the business to flourish under the organized jewellery sector. The jewellery industry has out high impetus on the performance of the organized sector, to break away from the trend of family oriented businesses dominating the sector.  The jewellery business is highly profitable as in India, gold jewellery is viewed with a lot of sentiment and fervour. It is not just an investment buy but, people attach their self respect and pride with jewelleries. Indian culture promotes the purchase of jewellery through various occasions and the jewellers have been cashing in on this prospect since a long time ago. The PAGE 47

margin on jewellery is really high and the segment heavily relies on trust a customer has with the seller.  With government initiatives like BIS Hallmark etc, the people are waking up to the fact that the jewellery that they purchase has to be of the best certified quality. Consumers are recognising the fact that branded jewellery is more reliable when it comes to quality.  Various equity investors have begun investing not only in bullion but also in gold and diamond jewellery, which highlights that the investor sentiments regarding the jewellery sector is positive and they expect the sector to churn money. And lastly, the buyers of jewellery are really faithful and loyal. They do not look for cost efficiency but target satisfied buying experience. They seek to build trust on the sellers and the market for such branded jewellery is only opening up to new possibilities.

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