Shrenuj: Amalgamation to Boost Competitiveness

The recent move to amalgamate its subsidiary companies Moon Diamonds, Shrenuj Diamonds, and Lavanya Jewels into the parent company, Shrenuj & Co Pvt Ltd has been undertaken with a view to developing synergies in operations at different levels and boost competitiveness of the company, according to Vinod Shetye, Chief Financial Officer.

The amalgamation was approved at an extraordinary general meeting of the company recently. The meeting also approved a resolution allowing the company to raise additional resources of Rs 1,300 million ($29 million) from the market to fund expansion plans.

These steps are being taken as part of an overall plan for restructuring of operations following a review conducted for the company by management consultants KPMG. Shetye explained that Shrenuj Diamonds was a SEEPZ based independent unit manufacturing jewelry for the international markets and its amalgamation with Shrenuj & Co will help integrate the manufacturing systems, reduce costs in various operations, and create a centralized design team.

In the case of Lavanya Jewels, the subsidiary set up for domestic operations, the amalgamation will create a synergy as it has recently begun exports to the Middle East markets.

Shetye also said that similar mergers of some of the international subsidiaries set up by Shrenuj & Co, especially those marketing polished diamonds, may be taken up at a later stage if the company decided to get itself listed on certain international exchanges. He however noted that, “No time frame had been decided for this step.”

The company is also consolidating its operations at the retail level in key markets like Hong Kong and Dubai where it has established its presence via the JV or acquisition route. Shetye said that these ventures are starting to yield results, adding, “JVs in jewelry retailing naturally take time before they begin to contribute to the bottom line”.

During the first half of the Indian fiscal ending September 30, 2006, the company reported a 61.05 percent increase in net profit from Rs 53.4 million ($1.19 million) to Rs 86 million ($1.92 million) on a gross income of Rs 3,790.9 million ($84.82 million), representing a 53.87 percent increase over the Rs 2,463.7 million ($55 million) reported during the corresponding period last year.