Gold is uniquely positioned in Indian society and culture, serving as both a symbol of wealth and a traditional form of savings. However, changing consumer preferences, economic uncertainties, and global market fluctuations have impacted the gold sector. Rajesh Exports is a prominent Indian gold jewelry company, and it was also once a Fortune 500 member.
Recently, the company experienced a significant decline in the stock price due to corporate governance, increasing the gold price, and missing financial documents. In this article, we are deeply looking into Rajesh Exports Limited’s financial, company-specific issues, future plans, and key metrics of the company. Let’s dig in!
Industry Overview of the Gold and Gems Industry
India’s gold industry is set for substantial growth and is fueled by demographic trends, economic factors, and changing consumer preferences. India is the world’s second-largest consumer of gold and plays a crucial role in the global gold market. The future of the gold market is influenced by various factors, including inflation, sharp changes in gold prices, and tax regimes.
In FY24, India’s gems and jewellery exports reached from US $37.6 billion in FY23 to US $32.02 billion in FY24, a 14.94% decline compared to the previous year’s period. In April 2024, exports of gems and jewellery stood at US$ 2.07 billion. The cumulative FDI invested in diamond and gold ornaments in India stood at US $1276.52 million during the period between 2000-2024.
Company Overview of Rajesh Exports
Rajesh Exports was established in 1989 by Rajesh Mehta and his brother Prasant Mehta. It is an Indian multinational gold retailer and manufacturer of all kinds of gold products. Rajesh Exports is the first organized gold jewellery manufacturing facility and India’s first R&D facility in the jewellery sector. In 2022, the company was ranked 7th on the Fortune India 500 list with a revenue of ₹ 2.90 trillion and 462nd rank in the Fortune Global 500.
Rajesh Exports Limited was the world’s largest manufacturer of gold jewellery. The company mainly exports its products to various countries around the world and also sells products wholesale and retail in India. It has set up outlets under the brand name of Shubh Jewellers in Karnataka. In 2005, Rajesh Exports acquired the world’s largest gold refinery in Valcambi of Balerna, Switzerland.
Compliance and Corporate Governance Issue
Corporate governance and compliance are critical pillars of business success, safeguarding a company’s reputation, ensuring ethical practices, and mitigating legal risks. They build trust with stakeholders, protect against fraud, and maintain reputation, but they also enhance operational efficiency, foster investor confidence, and ultimately drive sustainable growth. These rules are essential for staying competitive in today’s marketplace.
As come to Rajesh Exports Limited has failed to disclose its cash flow statements and proper audit reports to the National Stock Exchange (NSE). The company has been unable to follow up with the formatting guidelines mandated by the Securities and Exchange Board of India (SEBI).
The company has faced a lot of controversies, such as missing documents during earnings filings and past legal issues with the managing director. It will lead to a lack of compliance with the transparency of financial reports, which has raised red flags among investors and analysts.
How will the increasing gold prices affect Rajesh exports?
Higher gold prices will lead to increased manufacturing and production costs. It will result in an increase in the gold price, which will be borne by customers only. The consumer will be cautious about spending during periods of high gold prices. The price will be impacted by reduced consumer demand for gold jewelry, which can harm sales, and profit margins and negatively impact stock performance.
In Feb 2023, the gold price was around Rs. 56,000, and Rajesh Exports Limited reached an all-time high of Rs. 1030 on Feb 6. Later on, the gold price gradually increased to around Rs. 74000 in 2024, but Rajesh Exports started decreasing its stock prices. It came down by almost Rs. 260, which is 74.75% of an all-time high.
Financial Analysis of Rajesh Exports
| FY24 | FY23 | FY22 | FY21 | FY20 | |
|---|---|---|---|---|---|
| Revenue (in crores) | ₹280,676 | ₹339,690 | ₹243,128 | ₹258,306 | ₹195,600 |
| Net Profit (in crores) | ₹336 | ₹1,432 | ₹1,009 | ₹845 | ₹1,206 |
| Operating Profit Margin (%) | 0.18 | 0.45 | 0.46 | 0.4 | 0.75 |
| Net Profit Margin (%) | 0.11 | 0.42 | 0.41 | 0.32 | 0.61 |
| ROCE (%) | 3.39 | 10.51 | 9.00 | 9.15 | 13.94 |
| Debt/Equity | 0.04 | 0.05 | 0.07 | 0.09 | 0.12 |
Coming into the financial part of Rajesh Exports Limited, the company’s revenue has fluctuated over the last 5 years. The revenue of the company has increased from ₹243,128 crore in FY22 to ₹339,690 crore in FY23. In FY24, the revenue decreased to ₹280,676 crore, which is down by 17.37% as compared to the previous year. The company’s revenue has grown at a CAGR of 9.45% over the last four years.
Rajesh Exports Limited’s net profit has decreased massively from ₹1,432 crore in FY23 to ₹336 crore in FY24, which is to fall by 76.54%. In FY23, the net profit of the company increased from ₹1,009 crore. The company’s net profit has grown at a CAGR of -27.35% over the last four years. Rajesh Exports Limited’s net profit has decreased from the last 5 quarters. It came down from ₹422 crore in Q3 FY23 to a net loss of ₹32 crore in Q4 FY24. Because the manufacturing cost will be 100%.
The company’s OPM will be almost zero. The operating profit margin has dropped from 0.45% in FY23 to 0.18% in FY24. It has been over 0.4% for the last 4 years, until 2023. The net profit margin of the company has dropped from 0.42% in FY23 to 0.11% in FY24. It has been over 0.3% for the last four years, until 2023. Rajesh Exports Limited’s OPM and NPM have very little as compared to the revenue of its business.
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Future plans of Rajesh Exports
- Rajesh Exports plans to invest approximately ₹50,000 crore (around $6 billion) over the next seven years to enter the electric vehicle (EV) market.
- Rajesh Exports Limited has signed an agreement to establish a 5 GWh lithium-ion cell factory in Karnataka. This initiative is part of India’s ₹181 billion production-linked incentive (PLI) program aimed at boosting domestic battery manufacturing capabilities.
- The company is planning to invest around ₹24,000 crore (approximately $3 billion) in setting up semiconductor display fabrication facilities under the Semicon India scheme.
- Rajesh Exports is looking to enhance its retail presence by opening more showrooms and developing an e-commerce platform.
- Rajesh Exports aims to enhance its bottom line in the coming years by focusing on cost management and operational efficiencies to improve profitability metrics.
- Rajesh Exports is focused on increasing its exports to various international markets. Currently, the company exports to over 60 countries and aims to penetrate new markets, enhancing its global presence and sales.
- The reduction in customs duty on gold from 15% to 6% in the union budget for 2024-25. This will boost the gold demand in India. The increase in gold demand will directly benefit gold-related companies. This helps improve the revenue and the financials of Rajesh Exports.
Financial Metrics of Rajesh Exports
Some of the key financial metrics of Rajesh Exports Limited are given below.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹297.45 | Market Cap (Cr.) | ₹8,888.80 |
| EPS (TTM) | ₹11.36 | Stock P/E (TTM) | 26.5 |
| ROE (TTM) | 2.20% | ROCE (TTM) | 3.18% |
| ROA (TTM) | 1.52% | P/B Ratio | 0.58 |
| Debt to Equity | 0.04 | Current Ratio | 3.08 |
| Promoter Holding (%) | 54.55% | FII Holding (%) | 14.72% |
| Operating Profit Margin | 0.18% | Net Profit Margin | 0.11% |
Conclusion
In conclusion, Rajesh Exports Limited is facing big problems with regulatory compliance issues of corporate governance, and controversies. It’s no longer one of the Fortune 500 companies in the world. The company is facing challenges in managing its finances and accounts. It is not making much profit from business, and the margin is low as well, which is a bad sign for the company.
All these problems together make Rajesh Exports Limited’s share decline from Rs.1029.70 to Rs 261. This looks like a risky choice for investing money in Rajesh Exports. The company needs to fix its problems and improve its financial condition. What do you think about Rajesh Exports Limited and its stock price? Will the company turn around? Let us know in the comments below.
Written By Nikhil Naik
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