Questions: 1) Revenue: A) What is the revenue mix (Domestic: International) at present?

From AR 20121, it mentions over 80% of sales being derived from exports; given your current retail expansion what kind of split (sales mix domestic: export) are you aiming for FY13-15? B) What kind of new geographies are you aiming to export in the next 3 years, given your new manufacturing base in UAE? C) On a consolidated basis SGJH clocked revenues of 5,840 Cr in FY 2011. It has already clocked 10,288 Cr in FY2012. Given the tough macroeconomic scenario, what kind of sales growth do you target for FY13 and FY14? 2) Operating Margins: Give the last 5 quarter results: Consolidated: Revenue EBITDA EBITDA margin Standalone: Revenue EBITDA EBITDA margin Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 2,572.21 2,651.24 2,862.59 2,124.35 3,038.20 111.47 126.06 129.56 262.43 162.25 4.33% 4.75% 4.53% 12.35% 5.34%

2,406.34 1,522.42 1,466.74 1,278.27 2,069.78 97.69 76.8 53.3 218.39 117.77 4.06% 5.04% 3.63% 17.08% 5.69%

As compared to the last 4 financial years, Consolidated: Revenue EBITDA EBITDA margin Standalone: Revenue EBITDA EBITDA margin FY 09 FY 10 FY11 FY12 2,860.09 3,475.52 5,840.16 10,120.97 137.23 176.31 304.6 493.69 4.80% 5.07% 5.22% 4.88%

2,149.99 2,952.25 5,243.15 201.51 251.55 389.72 9.37% 8.52% 7.43%

6,593.61 523.93 7.95%

Kindly take us through what caused this drastic fall in Operating margins. Also as seen in the past, standalone business operated at a better margin than which has now reversed (last 5 quarters). Kindly explain this change.

3) Client Concentration: Page 21/56 of AR 2012 mentions the largest client contributing 13% of sales (down from 17% in FY11); what is the revenue concentration from top 10 customers and top 5 customers? Also what is your strategy to mitigate the geo-political risk at your major export geographies (contingent liabilities arising from the default of largest client)? 4) Contingent Liabilities: We understand it is natural for an exporter to have huge contingent liabilities based on the contingency of a probable payment default from customers abroad. Given the following trend FY09 2860.09 693.49 24% FY10 3475.52 978.31 28% FY11 FY12 5839.91 10120.97 1203.3 1785.89 21% 18%

Shree Ganesh

Revenue Contingent Liabilities %age of Revenue Revenue Contingent Liabilities %age of Revenue Revenue Contingent Liabilities %age of Revenue Revenue Contingent Liabilities %age of Revenue Revenue Contingent Liabilities %age of Revenue

Rajesh Exports

11376.91 17894.96 20045.16 126.89 46.67 139.39 1% 0% 1% 5088.88 425.18 8% 3957.03 38.96 1% 246.84 0 0% 6527.63 1652.9 25% 4808.87 53.61 1% 450.95 0 0% 9456.4 4972.9 53% 6725.72 58.15 1% 657.72 0 0% 8983.15 158.45 2% 1131.51 0 0%

Gitanjali Gems

Titan Industries

Thangamayil Jew

a) As compared to a pure exporter like Rajesh Exports or a pure retailer like Titan Industries in the same business, your contingent liabilities are abnormally high. What kind of business risk does this entails and what is the possible course correction for Shree Ganesh? b) Given your retail foray with ready selling to retail customers, CL as %age of sales should come down with growing retail shops. What kind of CL as %age of revenue to you target for the future?

c) Also given the rise of CL in absolute rise in contingent liabilities how serious a threat in terms of continuation of business and liquidity does it poses on a major customer default?

5) Long Average Collection Period from Debtors: Based on the debtor turnover ratio, the average collection period for Shree Ganesh is pretty high, which implies somewhat inefficient management of debtors or less liquid debtors. Kindly take us through the terms of your credit sales and help us understand this. Debtor Turnover Ratio (x) 4.75 18.28 2.61 63.53 3,650.03 Average Collection Period (Days) 76.84 19.97 139.85 5.75 0.10

Shree Ganesh Rajesh Exports Gitanjali Gems Titan Industries Thangamayil Jew.

Furthermore on the same issue, as seen in the Annual Report of 2012 (Page 47/56), a large part of the debts outstanding are for a period exceeding six months which is a cause of worry, as these might lead to further bad debts and dent the bottom line. What actions are you taking in this regard for faster collection of outstanding debts?

6) Risk of Bill Collection Failure : Based on the data from Annual Report 2012, AR 2012 Page No 42/56 4/56 42/56

Sale of Goods (Rs Cr.) Exports Credit Sales (Rs Cr.) Sundry Debtors (Rs Cr.) Debtor Turnover (x) ACP (days) Bills Discounted (Rs Cr.) %age of Revenue Outstanding

10,120 80% 8,096 3,002 4.75 76.84 1,234 12%

48/56

The average collection period is ~77 days. So we see a huge 12% of the revenue is outstanding (revenue yet to be collected but showing up in the balance sheet as reserves). Kindly take us through the coverage/provisions to mitigate the risk of default on such a huge amount. 7) Retail Expansion: At present there are 46 company-owned Gaja stores and 7 franchisee-run ones. The company has given projections of opening 100 stores by FY 13. It plans to have 50 company-owned stores in two years and 50 franchisee-run stores in one year.

a) What is the average contribution to revenue and profitability from each store, both company owned ones and franchise stores? Earlier management mentioned that average domestic profit per show room of SGJHL is around 33 lakh per quarter. b) Kindly update us on the capital expenditure incurred (both store opening as well as inventory pile up) for opening new stores? Apart from utilizing IPO proceeds do you need other sources of funds (internal accruals/debt) to fund these? c) What is the current projection on store count based on Company owned outlets, franchise stores and shop-in-shop stores within Bharti EasyDasy stores? d) What is the revenue projection from retail sales for FY13 and FY14? e) The management earlier announced plans of opening stores and launching the GAJA brand in China, Korea and Japan. What is the update on those plans? 8) Capacity Expansion: Based on the AR 2011, the management produced 15.5 tonnes of Gold Jewellery, 2.08 tonnes of Medallions and 2.74 million carats of Precious/semi-precious stones. Management is said to be targeting 50 tons capacity from existing 20 tonnes (Mar 2012). Facility Manikanchan (SEZ) Mondalpara Current Capacity (As per AR 2012) 42000 of handcrafted jewellery 1,500 kgs of Italian fusion jewellery, 600 kgs of bangle jewellery and 450 kgs of plain and studded gold jewellery 20,000 kgs of handcrafted jewellery and 1.5 lac carat diamond studded jewellery Refining capacity: 35,000 kgs Craftsmen 502 60 400

Domjur

a) What is the target capacity of production by FY2013? What is the target capacity utilization for FY13 and FY14? b) The company has 7 production facilities at Manikanchan SEZ and two scrap gold refineries at Domjur and Mondolpara. With the Domjur facility finally going on-stream what kind of refining capacity (operational) are you expecting from it by end of FY13 and FY14? c) Also as part of the JV with Italian company SALP SPA, the company is targeting a 10 tonnes capacity at Domjur. What is the capital outlay for all these in FY13 and FY14? 9) Gold refinery at Domjur, UAE: Margin booster ? a) As indicated by management earlier, the Domjur refinery apart from augmenting capacity by ~4 tonnes will significantly contribute in reducing cost of gold and enhance margins. What kind of margin impact do you envision from this? b) Also the company plans another 20tonne refinery in UAE to complement the manufacturing facility there. By which period shall this be operational?

10) Gold NBFC: The recent foray into Gold NBFC from the company is a welcome step as it creates a window of opportunity to procure gold at lower costs. The Chairman has announced in magazine about 26 branches operational in Gujarat of NBFC loan against gold. a) What is the expected revenue contribution (in %age terms) from this business? b) Given the recent clampdown on lending against gold by the RBI what is your strategy regarding expansion of this business line? c) What is the average rate of interest in your gold loans? How does it compare to other established players like Muthoot and Mannapuram? 11) Premium Brands: Shree Ganesh has recently forayed into the premium segment with opening the first store in Mumbai (Apr 30, 2012). The management has given guidance of 5 stores by FY14 with an investment of Rs 125 Cr. These stores will be very exclusive catering to a niche clientele, who have to take prior appointment. Initially, it will house GAJA Heritage, GAJA Diamonds, GAJA for Men and GAJA by Sunita Shekhawat collections starting from Rs 10 lakh. The management also plans for 11 such stores in Middle East. a) Given the perceived weakness of the GAJA brand as compared to Tansihq from TITAN and other brands from Gitanjali with their star endorsers, how do you attract the very rich niche clients? b) These stores can help boosting margins by nature of their premiumness and brand value. What kind of revenue and profit projections can we expect from this by FY14? c) Also management has accepted the need for a better brand endorser to significantly improve the brand value. What efforts are being made in this regard? 12) Solar Power: Shree Ganesh Jewellery House Ltd. (SGHJL) has invested nearly Rs80 crore in solar business by buying 55% stake each in two companies, marking its foray into renewable energy space, reports PTI. The company has acquired 55% in Alex Astral Power Ltd which has 25-MW solar power project in Gujarat and Alex Spectrum Radiation Ltd in Rajasthan with a total investment of nearly Rs80 crore; both companies are now its 55% subsidiaries. Alex Green is co-promoted by the Sureka Group.

a) Since your retail expansion and capacity addition in India and UAE entails huge capital what is the justification of such unrelated diversification? b) Give the huge expertise of the management wouldnt it be better to focus your resources at the core business, especially at the time of falling gold sales and declining margins? c) Given the Alex groups plans of massive 500MW solar power what kind of further investments are required from Shree Ganesh in this regards? d) Since both companies are subsidiaries ( >51% stake) what kind of revenue and profit contribution can be expected from Alex group in consolidated results ? 13) Debt sourcing: Recent Bloomberg data shows company sourcing huge loans to the tune of 2770 Cr from a consortium of 21 Indian banks led by SBI and Axis Bank. a) Since your revenues are largely export based, why is the company not looking as ECB financing which would also provide it with natural hedge since the UAE dirham is a much stable currency as compared to INR? b) What kind of debt servicing (in terms of D/E and Interest Coverage) thus the company wants to aim forward for FY13 to FY15? 14) Improving brand GAJA: GAJA hadnt had any star brand endorsers post Mandira Bedi. While Gitanjali is continually pushing for aggressive branding with plethora of star endorsers, SGJH have not roped in any fresh faces yet. a) What kind of brand promotion and endorsements are you planning? What would be your promotion budget (as %age of retail sales) going forward which is critical for the success of retail chain. b) Is there a credibility/visibility issue with the brand which is why star endorsers are unwilling to endorse this? What corrective actions are you looking at? 15) Tax Rate: Regarding the tax front, the company is paying minimal tax due to its EOU status and manufacturing facilities in SEZ. Going forward what effective tax rate do you envision for FY13 and FY14? 16) Dividends: Given the strong cash flows (operating cash of 199.06 Cr in FY12 as compared to -182.57 Cr in FY11) the company maintained the same old dividend of Rs 6 (as in FY11). The dividend payout (Rs 5 on annualized EPS of Rs 75) at 8% is very low. What kind of dividend payout do you envisage that will provide downside support to the stock?