03/10/2008

By Astrid Wendlandt Reuters

* Gitanjali in talks to buy Milan-based jewellery group
* MD says Gitanjali looking to become No. 1 jeweller * Aiming to triple annual sales within 3 years to $3 billion

PARIS: Indian jewellery giant Gitanjaliis on the hunt for foreign rivals weakened by the credit crunch as it aims to become the world’s biggest jeweller, Managing Director Mehul Choksi told Reuters.

Gitanjali is in talks to buy an unlisted Milan-based jewellery group and hopes to complete the deal within four months, he said in an interview.
The Indian company is one of several cash-rich, emerging markets luxury goods groups that industry executives and bankers predict could profit from the current credit squeeze to snap up prestigious brands.

These groups will have a freer hand to make strategic acquisitions since they face less competition from leveraged Western luxury companies and private equity firms that will struggle to raise debt to fund purchases.

The crisis “will help in the sense that there will be more opportunities … and valuations will go down,” Choksi said.

“Next year, the luxury market will be very slow as many people will have lost their jobs.

“We are receiving many offers to buy companies, particularly in the United States and Britain,” he added. The group is also looking at possible purchases in China.

Choksi’s comments echoed those from a division head of one of the world’s biggest luxury goods groups who told Reuters this week he expected several high-profile brands to end up in Russian, Chinese and Indian hands over the next few months.
That executive declined to be identified because the group was in its quiet period and not allowed to make public statements about mergers and acquisitions.

“With this crisis, certain established Western luxury groups are going to need cash … and emerging markets groups are going to accelerate their shopping,” the executive said.

The financial crisis will end sellers’ hopes of a return to valuations of a year ago, said Pierre Mallevays, managing partner at luxury investment bank boutique Savigny Partners.

He said some emerging market luxury groups could be looking to make acquisitions now to take advantage of growing retail space at home as luxury malls and multi- branded shops were mushrooming in cities across China, India and Russia.

NUMBER ONE
“Now they are starting to be able to take advantage of their growing retail infrastructure,” Mallevays said. “So they can immediately leverage a brand when they acquire it.”

Choksi said he expected Gitanjali’s annual sales to grow to more than $3 billion within three years from over $1 billion currently and the company become bigger than world leaders Signetof Britain and U.S. group Tiffanyin terms of annual sales.

“We are striving to become the number one in the world and we will make it,” he said. Choksi said the targeted Italian company was not joint-venture partner Morellato & Sector Group. He added his company supplied leading branded Italian jewellery groups.

Gitanjali has already snapped up several jewellers in India over the past few years and this year completed the acquisition of Rogers Jewellers, one of the oldest U.S. family- run chains.

He said the group had more than $200 million in cash and would get Indian financial institution support to fund buys if needed.

He aimed to lift its operating margin to 10-12 percent in the current financial year from about 8-9 percent last year.