Turning point

Then came the turning point on 24 February, 1999. Kandaswamy of Lalitha was in tears. He was in deep debt and on the verge of committing suicide to avoid going to jail. “I thought to myself, how could I let this happen. Kandaswamy gave me the much-needed break,” Kumar recalls and says it was at that moment he decided to buy Lalitha Jewellery and help Kandaswamy settle his outstandings. “Contrary to what many think, I am not the founder of Lalithaa,” he says. He added an ‘a’ to Lalitha to give an extra thrust to the brand and thus was born Lalithaa Jewellery.

Then came a big shock as Lalithaa ventured into the retail market. The rest of the traders apparently did not appreciate his enthusiasm to access retail buyers as they saw competition in him. So be it, he thought to himself and strengthened his determination to jump into the retail market, literally wholesale. Kumar’s strategy and tactics worked.

What began as a single showroom with a staff of 200, Lalithaa Jewellery today is 53 showroom-strong with 32,000 employees, including 7,000 permanent staff. Lalithaa runs manufacturing facilities at Chennai which operate efficiently with low wastages which enables the company to pass on the benefits to the customer.

Three of Kumar’s sisters are married and settled down in Mumbai, while two live in Nellore itself. One sister passed away. His brother Hanumanth Kumar runs his own jewellery business in Hyderabad.

South India has the highest percentage of working women and Lalithaa targets them as they seek to invest in gold for their children’s future. They are seen turning to Lalithaa as it offers affordable and trustworthy jewellery, says Kumar’s wife Hemaa, who is also a director in the company looking after ornament business and HR.

The market size of the Indian fine jewellery market, in 2023 was Rs4.5 lakh crore, and is expected to grow in double digits by 2030, according to Gold and Jewellery Export Promotion Council (GJEPC). In India, the branded jewellery market represented a 35 per cent share and is expected to reach 40 per cent by 2027. Top players in the branded segment are expected to grow in the range of 15-18 per cent in 2024 while expansion to spill further from metros to Tier-1, and Tier-2 cities, says the GJEPC report.

Globally, branded jewellery is grabbing market share from unbranded jewellery, a trend that appears secular and to continue in the medium term. Jewellery consumption in India is influenced by multiple factors such as region, income, cultural notions. The buying pattern vastly differs across states, according to Kalyan Jewellers India Limited.

Southern states make up 40 per cent of the gold jewellery market in the country, while the Eastern states account for 15 per cent. Gross weight of gold worn by a bride in Kerala is more than double the weight of gold worn by a bride in Gujarat signifying that cultural factor scores over per capita income when it comes to regional skews observed in jewellery purchase in India, says Kalyan Jewellers.

Customer service expectations also vary from one region to another. Wedding jewellery demand, in particular, is influenced by local traditions and designs. While the gross weight of an average wedding jewellery purchase is 200 gm in Uttar Pradesh, it is 350 gm in Kerala. In the southern states of India, consumer purchasing behaviour gravitates towards traditional plain gold jewellery where margins are typically lower.

Consumers in the Northern and Western regions of India are more receptive to studded jewellery and impulse-led light-weight jewellery purchases (14k, 18k jewellery) viz-a-vis their southern counterparts. Plain gold jewellery typically has gross margins ranging from 10 to 14 per cent, while diamond-studded jewellery has gross margins ranging from 30 to 35 per cent.

Consequently, as the studded ratio (studded jewellery/total revenue) goes up, profitability improves, thereby incentivising the expansion of south-focused retailers towards the north, west and east, says Kalyan Jewellers.

“Our margins speak for themselves, and my challenge remains,” says Kumar. And Lalithaa’s market experience is that there is a variation in the buying pattern between North and South. While North India predominantly prefers light weight jewellery, South India prefers chunky and slightly heavier jewellery. Rapid urbanization notwithstanding, respective regions have retained characteristic design choices.

Each belt, even within South India, has distinct choices. While buyers in AP and Telangana prefer stone-studded jewellery, TN prefers stoneless, solid jewellery, explains Kumar who keeps his tabs on the market relentlessly.

Kumar is very easily accessible, anytime for anything, says D. Padmanaban, GM – Purchase, at Lalithaa Jewellery. “That gives us a lot of confidence in our decision-making, since we know there’s guidance and course-correction available at all times,” he says. “He also takes bold decisions and that helps us solve a lot of challenges immediately, whether it is related to marketing, pricing or operations,” Rajeswaran says.

A Dun & Bradstreet study shows daily wear jewellery claims a substantial 40 per cent share of the market due to its practicality and versatility. Unlike bridal jewellery, which is typically worn on special occasions, daily wear jewellery is designed to be comfortable and suitable for everyday use. It includes items like lightweight earrings, simple necklaces, and subtle bracelets that complement a person’s attire without being overly extravagant.

With changing lifestyles and evolving fashion trends, many individuals prefer jewellery that can be effortlessly integrated into their daily routines. This includes professionals, students, and individuals from various age groups who want to add a touch of elegance to their appearance without the need for extravagant pieces.

Regional market

Compared to other regional markets, India’s demand for gold jewellery stands out for its cultural depth and economic relevance. While other markets have their own unique reasons for gold consumption, India’s blend of culture, tradition, and economic factors continues to make it a standout market. This distinctiveness not only reflects the enduring importance of gold in India but also signals its bright and resilient future as the world’ s largest consumer of gold jewellery, a Motisons report says.

As Dun & Bradstreet research report says bridal jewellery captures a significant 50 per cent share of the market due to its substantial demand driven by cultural and traditional factors. In India, weddings hold immense cultural significance, and brides traditionally adorn themselves with intricate and ornate jewellery sets.

Another essential factor contributing to the substantial market share of bridal jewellery is the concept of ‘streedhan’ – property that a woman receives at the time of her marriage, given to her as a form of security and financial independence. This jewellery remains solely hers, and it often comprises a substantial portion of bridal jewellery demand. 

“Yes, weddings are big affairs in India as mothers would like to secure their daughters’ future with some element of gold,” points out Rajeswaran. Akshaya Tritiya that falls in May is one of the biggest festivals that fuels gold buying in the South. Other festivals that influence purchase of the precious yellow metal are Ugadi (Telugu New year) and Tamil New year that occur during the onset of summer months.

Dussehra, Diwali, Dhanteras and Sankranti and Pongal are the other festivals that contribute significantly to gold purchase. But Diwali witnesses the biggest purchase season across the South, while Dhanteras is a major influencing factor in AP and Telangana, says Rajeswaran.

Demand after the harvest season also fuels gold jewellery buying patterns. Following the harvest, rural households often allocate a portion of their earnings to invest in gold. The months following the harvest, such as November and December, witness heightened demand as agrarian communities celebrate their prosperity.

The rural demand for gold jewellery sees an upswing after the harvest season, particularly in November and December. Following a successful harvest, rural households set aside a portion of their earnings to invest in gold to celebrate their prosperity, Motisons narrative says.

This explains for Lalithaa’s focus on Tier-II cities and towns. The company enjoys a strong and consistent double digit return on equity profile and a notable feature is that more than 50 per cent of its revenue comes from Tier II and III cities.

Asked about the secret of his success, Kumar says “I believe in myself and I keep telling my colleagues and today’s youth the same – believe in yourself and work hard”. But he did not realise his popularity when Allu Sirish, the south Indian movie superstar, requested for a selfie with the jeweller. “At Hyderabad airport, I noticed people going head-over-heels for taking selfies with him and I was surprised that he came to me and requested for a selfie with me,” Kumar says with a chuckle.

In the short term, global gold demand is expected to remain robust. This is influenced by ongoing economic uncertainty, low-interest rates, and geopolitical tensions. The recent war between Israel and Palestine in October 2023, has further heightened these tensions, potentially leading to a surge in gold demand as investors seek safe-haven assets.

Over the medium term, growth is underpinned by increasing investment demand, steady jewellery demand from emerging markets, and the ongoing central bank purchases, all contributing to the upward trajectory of gold demand. In the long term, gold demand is projected to stabilize. Thus, gold, with its enduring appeal as both a safe haven and a symbol of wealth, stands to thrive.

In a world of evolving uncertainties, gold’ s resilience and adaptability position it as a reliable asset, suggesting a promising trajectory for its demand on the global stage, Dun & Bradstreet says.

According to the People Research on India’s Consumer Economy (PRICE), India’s middle class is projected to nearly double, reaching 61 per cent of the total population by 2047, a substantial increase from the 31 per cent recorded in 2020-21. This growth is expected to occur in conjunction with political stability, economic reforms, and a sustained annual growth rate of 6 to 7 per cent over the next 25 years, positioning India as one of the world’s largest markets.

Demographic structure 

Kumar should be credited for his vision and entering the retail sector with his experience in selling to wholesalers. The retail sector in India is largely unorganised. However, the share of organised retail is witnessing continuous growth with about 18 per cent contribution to the total retail market in FY21, a sizable increase from 9 per cent in FY17. The market size for organised retail is estimated to be around Rs8.5-10.5 lakh crore in FY21.

By the end of the decade, India’s demographic structure will transition from an inverted pyramid, symbolizing a small affluent class and a large low-income class, to a rudimentary diamond shape, with a substantial portion of the low-income class moving up to become part of the middle class. As these individuals and families ascend the economic ladder, their inclination towards gems and jewellery intensifies.

For them, jewellery ownership is a manifestation of their improved financial status and a symbol of success. The appeal of wearing exquisite pieces on special occasions and as daily adornments acts as a compelling driver of demand within this demographic.

The burgeoning economic landscape in India is significantly influencing the demand for gold jewellery in the country. With India’s economy recovering from a pandemic-induced contraction and external challenges, such as the Russian-Ukraine conflict and inflation, the gold jewellery market is optimistic.

The growth in disposable income is not restricted solely to the middle class; it spans various income groups. According to data from the Ministry of Statistics & Programme Implementation, Gross National Disposable Income (GNDI) at current prices was approximately Rs191.78 lakh crore in 2018- 19.

However, for the fiscal year 2021-22, it is estimated to have significantly increased to approximately Rs236.07 lakh crore. This financial flexibility empowers a broader spectrum of consumers to make discretionary purchases.

Gems and jewellery, with their blend of aesthetics and investment value, feature prominently in the list of desired acquisitions. The ability to afford jewellery, from simple ornaments to extravagant pieces, becomes a reality for a growing number of Indian consumers.

In 2023, the jewellery sector in India has witnessed a fascinating array of emerging trends that are shaping the choices of consumers, from metals and materials to design and gemstone preferences. In the realm of metals, 18 and 22 karat gold continues to be a preferred choice for many. However, with the rising gold prices, 14-karat gold has found acceptance, especially when coupled with attractive designs. Multicoloured gold combinations, such as yellow, white, and rose gold, have been popular.

Additionally, a growing number of consumers are leaning towards a blend of gold and silver due to the increased cost of gold and the versatility of silver. Surprisingly, when it comes to gem choices, design takes precedence, with 60 per cent of consumers emphasizing unique design over specific gemstones. Notably, platinum and titanium jewellery are not gaining significant traction in the Indian market. 

Non-precious materials like wood, feathers, beads, and leather, despite their popularity elsewhere, are struggling to find acceptance in fine jewellery in India. The trend of daily jewellery wear is on the rise, with stackable bracelets, rings, and layered necklaces being the go-to choices. Ear stacks, a previously famous trend in India, have made a global comeback.

In the bridal jewellery category, brides are gravitating towards multiple layered necklaces that serve multi-utility purposes. Women are also opting for smaller, lightweight pieces that can be worn on various occasions, replacing the chunky earrings of the past. Ring and bracelet stacks are currently the best-sellers, reflecting the trend of layering and stacking in jewellery.

Earrings exhibit remarkable diversity, ranging from small ear studs and drop earrings for everyday wear to jhumkas and hoops for dressier occasions. Single earrings, asymmetric designs, and stacks of earrings are all the rage. Simplicity is key, as complicated mechanisms in modular jewellery are less appreciated. Unsurprisingly, diamond jewellery and bridal jadau jewellery remain in high demand.

Remember, Lalithaa’s Kumar began his business with jhumkas and spread his offerings as he grew step-by-step. A casual visit to a Lalithaa Jewellery showroom at Panagal Park, T Nagar in Chennai, shows a steady stream of buyers – from elders with walking sticks to the youth. “This is because we cater to the cross section as you can see,” says Bhama Subramaniam, CFO, Lalithaa Jewellery.

Incidentally, Lalithaa, is not present in Kerala. But, Malayalees do come to Lalithaa for jewellery purchase and showrooms in TN bordering Kerala like Nagercoil and Coimbatore also see significant footfalls from Malayalees. Lalithaa has a separate collection called the ‘Kerala Jewellery’ with design motifs in solid gold, unique to Kerala that’s preferred by Malayalees a lot, Hemaa Kumar says.

Robust financial

Lalithaa Jewellery has recorded a turnover of Rs13,388 crore in FY23 and hopes to touch Rs18,000 crore  for FY24. “A strong brand built on the principles of quality and transparency, Lalithaa has a robust financial performance with significant financial growth that can be attributed to strategic expansion and strong customer retention,” says Subramaniam.

From a turnover of Rs6,083 crore  in FY17, Lalithaa has consistently increased its turnover over the last seven years, and has had a 36 per cent CAGR from FY21 to FY23. “While the EBITDA, PAT and net worth have grown correspondingly, year-wise, the debt-equity ratio has dropped from 1.9 in FY17 to 0.6 in FY 22,” she adds.

With an average age of 29, India has one of the youngest populations globally. As a vast resource of young citizens enters the workforce every year, it could create a ‘demographic dividend’. India is home to a fifth of the world’s youth demographic and this population advantage will play a critical role in economic growth.

With the rise in the number of working women, increasing proportion of the working population and younger age group amongst the urban population in India, the consumer demand is expected to grow in the future. The increasing focus on education among the youth will lead to a decline in dependency ratio and enhanced lifestyles. This, in turn, would enhance consumer spending, according to RBZ Jewellers Limited which too had its public issue recently.

The Indian jewellery market is traditionally dominated by gold jewellery. Gold jewellery purchases in India are not only limited to consumption, as is the case with fashion jewellery, but they do have a strong saving significance. This is more evident in rural communities where access, literacy, and acceptance of other financial savings instruments are low. These factors have resulted in gold being a major saving asset class. Cultural differences, religious and trust concerns, as well as other elements that influence jewellery purchases have all contributed to gold jewellery’s significance, says RBZ Jewellers.

Going forward, the movement in gold prices will depend on the pace of rate hikes announced by the US Fed to tame inflation. A faster rate hike cycle to arrest rising inflation would negatively impact gold prices. The international geopolitical tensions will continue to impact the gold prices as the demand for gold increases on escalations of tensions globally.

Since domestic gold prices mimic international gold prices, decline in gold prices would help support the demand for physical gold in India. In contrast to other countries, India’s jewellery sector has a largely unorganised artisan (karigar) driven,  traditional skill-based (handcrafted) manufacturing value chain, employing lakhs of workers. The gems and jewellery industry accounts for around 6-7 per cent of India ‘s GDP.

The interest in jewellery in India extends back 5,000 years. With over 90 per cent of jewellers being family-owned firms, this industry is severely fragmented and unorganised. While the unorganised segment continues to dominate the jewellery retail industry, with the advent of large retailing chains, the industry is gradually witnessing the transformation from being unorganized to an organized one.

Kumar looks at IPO as one of the fund-raising options for the company’s expansion. “I haven’t finalised anything as yet,” he says. But he is bound to do his due diligence and to his options.

With a pedigree of nearly four decades, Lalithaa has created a trusted brand image in the Southern market. He has been awarded an honorary doctorate by Vels (deemed-to-be) University at Chennai for his outstanding contribution to the jewellery industry.

The organised gold jewellery market has been steadily growing – from a mere 5 per cent in 2000 to a projected 40 per cent  in 2025. The increasing per capita income –from Rs1,05,000 in 2015 to Rs2,43,000 in 2015 and the growing middle-class homes from 13 per cent in 2015 to 31 per cent in 2020 – also augured well for the industry.

Lalithaa aims to expand into Tier II and III cities in South India and provide a trustworthy alternative for unorganised players in smaller cities in South India. The company looks at expanding its business gradually to the rest of India.

Senior employees at Lalithaa say Kumar is often heard saying ‘I can see life in numbers’. “He constantly advises us to keep a continuous tab on numbers and draw successful decisions from the data,” says Shathik, GM-Finance.

Currently, Lalithaa caters to primarily mid-premium varieties of gold and diamond jewellery. The company is looking at providing premium products as well to customers to enhance margins in this growing market which is very much organised now.

Asked if he is worried about the growing competition by big brands, he just smiles and says: “The market is growing and there is enough room for all to grow”.  “And I pray for the well- being of all,” concludes Kumar with folded hands.