In one of the first global acquisitions by an Indian firm in the retail space, gems and jewellery major Gitanjali Gems has bought US-based Samuels Jewellers for Rs 200 crore (Rs 2 billion).
The Rs 2,500-crore (Rs 25 billion) Gitanjali has acquired 97 per cent in the US speciality retailer from DDJ Capital Management LLC, an investment manager with a majority stake in the firm.
Samuel runs 97 stores in 19 states with revenues of $100 million. The acquisition is being financed through internal accruals and proceeds of the recently concluded $110 million FCCB.
"In the Rs 200 crore investment, Rs 100 crore (Rs 1 billion) would be used for buying the stake and the rest would be utilised for expanding Samuels and replacing the stock," said Gitanjali group chairman Mehul Choksi.
He added that the acquisition would contribute Rs 450 crore (Rs 4.5 billion) to Gitanjali's topline growth and Rs 22 crore (Rs 220 million) to bottomline growth by this fiscal and Rs 700 crore (Rs 7 billion) to topline growth by the next fiscal.
"US forms 35 per cent of the world's gem market. Samuel has the capacity to grow by 100 stores under the same management and we want to improve the margins by 66 per cent from the current 47 per cent. As part of the global sourcing strategy, Samuel will directly source from manufacturers in India and China. We want to take Samuels to other parts of the globe including China, South East Asia and Europe," he said.
Choksi said when DDJ Capital bought Samuels 10 years ago, it had sorted out the bankruptcy case filed by the retailer. The 115-year old US retailer posted a net sales of $97.16 million and a gross profit of $45.84 million with margins of 47 per cent in FY 06.
Samuels is the eighth largest retailer in the US, which focuses on middle and upper middle class consumers. The chain operates under three formats-Samuels, Schubach and Samuels Diamonds.
"Now there are seven to eight steps involved between manufacturing and the time till it is retailed. Gitanjali wants to directly take the produce from the maker/retailer to the final consumer by strengthening the supply chain. We want to totally change the gem and jewellery landscape in India as it contributes only 2 per cent of gem and jewellery sourcing," he said.
On the firm's upcoming 200-acre gem and jewellery SEZ in Hyderabad, he said 1,000 workers have already been working in the project and the firm wants to build 500,000 sq feet of area constructed in 6 months. The talks with L&T are already in the final stages, he said.
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