TBZ shines on Glittering pedigree

Tribhovandas Bhimji Zaveri Ltd (TBZ),  a well-known and trusted jewellery retailer in India, plans to open an additional 42 showrooms (25 large format high street showrooms and 17 small format high street showrooms) by the end of Fiscal 2015, which would give TBZ a total of 57 showrooms (with a total carpet area of approximately 150,000 sq. ft.) in 43 cities across 14 states. TBZ currently has 15 showrooms in nine cities across five states.

TBZ was established in 1864 by Mr Tribhovandas Bhimji Zaveri in Zaveri Bazaar, the jewellery district of Mumbai. it was subsequently headed by his son, Mr Gopaldas Tribhovandas Zaveri, and now Mr Shrikant Zaveri, is the present Chairman and Managing Director of the group, has more than 30 years of experience in the gems and jewellery industry.  

Mr Shrikant Zaveri’s two daughters Binaisha Zaveri and Raashi Zaveri are also involved actively in the business contributing to TBZ growth.  His elder daughter Binaisha Zaveri, (Director, TBZ) who joined TBZ in 2004, heads strategy and oversees HR, operations, finance, business development, marketing & merchandising, expansion activities.

Mr Zaveri's second daughter Raashi Zaveri (Director, TBZ) joined TBZ in 2008 and is engaged in implementation of enterprise resource planning systems, accounting, merchandising and general corporate management

TBZ’s century-old presence in the retail jewellery business has helped it create a strong brand recall. TBZ was one of the first to offer buy-back guarantee on its jewellery way back in the 1930s. The company’s track record reflects consumers’ trust in the quality and purity of TBZ products.

Prospects

Retailing gold and diamond jewellery through self-owned stores is working capital intensive as compared to franchisees and shop-in-shops. Among the leading names in jewellery retailing, TBZ, Joyalukkas and Thangamayil operate through own stores while Gitanjali and Tanishq have a mix of franchisees and shop-in-shops. TBZ’s working capital days are in line with its peers, Joyalukkas and Thangamayil, at around 75 days (FY09-FY11 average). TBZ’s inventory days are higher at 79 days due to higher proportion of diamond-studded jewellery, which has lower inventory churn as compared to gold jewellery, and also because of its own diamond manufacturing facility. 

In larger cities, especially in western and southern India, the jewellery retailing market is getting increasingly competitive, evidenced by slow growth and decline in the company’s same store sales. This is necessitating more store openings and entry into tier-2 and tier-3 cities.

With many regional and national jewellery retailers as well as jewellery manufacturers and exporters lining up aggressive expansion plans, the competition is expected to intensify. While this pans out, the shift from unbranded jewellery to branded jewellery will likely provide some room for the players to co-exist and compete on customer loyalty and variety, underlined by quality assurance. On the flip side, this will likely lead to higher spending on advertising, lower volumes and realisations and/or suppressed margins on gold jewellery.

TBZ wants to leverage its brand and is, thus, focusing on opening new stores across the country. The company’s strategy is to open large stores in major cities followed by small to medium stores in nearby towns, which will ensure volume growth. It is planning to add 43 new showrooms under the Tribhovandas Bhimji Zaveri brand in the next three years, which is around three times its current size.

TBZ’s revenues grew around 40% CAGR between FY08 and FY12 to Rs 1385 cr, largely driven by branch additions and a steady increase in gold prices. A higher proportion of diamond-studded jewellery helped maintain EBITDA margin at around 5.8% between FY08 and FY10. EBITDA increased at 52% CAGR during FY08-11. During the same period, PAT increased at a CAGR of 73%.

TBZ posted a 45% growth in Net Profit amounting to Rs. 571.93 million for the year ended March 31, 2012, as compared to Rs. 394.24 million for the year ended March 31, 2011.

TBZ also posted a 16% growth in Total Income (standalone ) from Operations amounting to Rs. 13,854.70 million for the year ended March 31, 2012, as compared to Rs. 11,939.31 million for the year ended March 31, 2011.

Industry

Jewellery retailing has been a fragmented business, with a presence of large number of small retailers across the markets in the world. However, branded retail chains are expanding their presence at rapid pace by creating growth opportunities in emerging key jewellery markets of India and China. As per industry reports, US holds ~29% of the sales in 2008 followed by China, India, the Middle East and Japan as the biggest consumers. In Europe, the UK and Italy are the largest consumers, and Italy is also one of the world's largest jewellery fabrication centers. These seven key markets account for about 80% of the total worldwide sales. 

According to World Gold Council, the Indian gold jewellery sector accounted for 61% of total domestic gold demand in 2011. The growth outlook for the gems and jewellery sector in India is stable and it is expected that domestic industry to grow at a CAGR of 10-12% up to 2015. The key drivers for growth will be higher disposable income, rising young population with the urge to spend, higher number of working women investing her savings in gold/diamonds jewellery as an asset class and conscious marketing efforts of companies are the key drivers for growth. These factors have kept India’s gold demand resilient over the past few years, despite steady rise in gold prices across global markets.