Risks & Concern
Gold price movement
An increase and fluctuation in the price of gold in India can lead to volume downturn.A falling rupee will decrease the local gold price and rising rupee will trigger appreciation of gold price.
There are so many variable factors both quantitatively and sentimentally that influence the pricing behavior of gold, internationally. Adding to rupee fluctuations, macro-economic factors such as global demand recession, imposition of GST may have a say on industry growth, in general.
Changes in Government policies
Since 1991, the Government of India has pursued policies of economic liberalization. The company cannot assure you that these liberalization policies will continue to have an effect, in the future. Protest against liberalization could slow down the pace of economic development. The rate of economic liberalization could change; specific laws and policies could change; foreign investment, currency exchange rates and other matters affecting investment in our securities could change as well. There could be political instability, which may have an adverse impact on capital markets and investor confidence.
Impact of competition
Jewellery retailing trade is carried out amid intense competition. Each of the districts or cities have stores of prominent players. In addition to the 7-8 large organized players, the market is also flooded with innumerable small and unorganized retailers. The company is in an inevitable position to stay ahead of the competition by constantly observing the marketing techniques of its competitors and chalking out strategies to counter them.
Recently, Madurai has seen the entry of Alukkas Jewellers, Bhima Jewellers, Kalyan Jewellers, Lalitha Jewellers, Kirtilal Jewellery and GRT, with the majority of them having their presence in 25 to 40 other cities. Such new entrants come in with the financial muscle that comes out of managing a large chain of retail outlets and hence have the ability to spend lavishly on advertising and stock a vast inventory of jewels.
Similar entry by other players in various districts targeted by Thangamayil could make business difficult demanding conscious, prudent , timely managerial decisions and strategies. TMJL faces stiff competition from these major players and lots of small retailers.
TMJL believes that the principal competitive factors in the market are price, quality and consistency in meeting customer requirements. Increasing competition may coerce TMJL into reducing the prices of its products, which may cut down on the revenues and margins and/or also decrease the market share, either of which could have an impact on the business and operations of the company.
Natural calamities and acts of violence
Natural calamities like Floods, earthquakes, terrorist attacks and other acts of violence, war/ destruction ravaging India or other countries could adversely affect the country’s business and economy, and consequently reflect on the company’s business. These acts may also result in the loss of business confidence, make travel and other services more difficult and cause the customer base to recede.
The consequences of any of the above mentioned factors are unpredictable and the company may not be able to foresee events that could have an adverse effect on its business, financial condition and result of operations.
Any drastic change in monsoon could trigger a significant rise in inflation and interest rates,negatively impacting the business. With the company being engaged in the business of gold trading, this will not have a greater impact on the bottom line, as replacement costs will take care of the fluctuation in gold price, even though overall volume growth is dependent on gold price movement.
However, the company is able to counteract this threat to a considerable extent through consistency in maintaining quality of its products and efficient after sales services.
The consequences of any of the above mentioned factors are unpredictable and beyond the reasonable anticipation of the company.
The company is currently operating in 30 outlets in the Southern and Western parts of Tamil Nadu. The company has a deep insight into the tastes and preferences of the rural/semi-urban inhabitants and is confident of catering to their requirements from the simplest locations. However, the project is inseparably associated with a geographical risk inclusive of the following factors:
Tastes and Preferences
The designs which were once vogue went out of fashion in the yesteryears and are again becoming trendy. The taste and preferences may change with respect to the extent of urbanization as well.
Our strategy has been to offer a wide variety of styles in fine jewellery, but there can be no assurance that these styles will continue to be popular with consumers, in the future. If the styles we offer become less popular with consumers and are not able to adjust our inventory in a timely manner, sales might dip.
Demand for gold jewellery
India is the largest consumer of gold jewellery in volume terms, standing next only to China. Gold demand in India is driven by cultural and religious traditions which are not directly linked to global economic trends. Hence the sale of Gold shall never drop to a worst extent.
The 2007-2009 financial crises had a significant negative impact on consumer spending. This resulted in a decline in the volume of gold jewellery sales, particularly in Western markets, with United States being hit the hardest. However, jewellery demand in India and Asia has since been recovering whilst growth in jewellery consumption in China has been continuous. Several countries, including China and India, offer clear and considerable potential for future growth.