A BUSINESS PLAN Of NIMBARK GEMS (Diamond Polishing and Cutting Company) By

PRESENTED BY Manoj Bhalani (12MBA006) IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE COURSE ENTREPRENEURSHIP AND MSMEs (EMSMEs) OF SEMESTER- IV MBA PROGRAMME (2012-14) SUBMITTED TO Krima Patel INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)

Contents
Section I: Executive Summary ................................................................................................ 3 Section II: Business Description ............................................................................................. 4
A. General description of the business................................................................................................ 4 B. Industry Background ...................................................................................................................... 4 C. Goals and potential of the business and milestones ....................................................................... 6 D. Uniqueness of product or service ................................................................................................... 6

Section III: Marketing ............................................................................................................. 8

A. Research and analysis .................................................................................................................... 8 1. Target Market (customers) Identified ......................................................................................... 8 2. Market Size and Trends............................................................................................................... 8 3. Competition ................................................................................................................................ 9 4. Estimated Market Share ............................................................................................................. 9 5. Distribution ............................................................................................................................... 10

Section IV: Operations .......................................................................................................... 11

A. Identify Location .......................................................................................................................... 11 B. Proximity to supplies .................................................................................................................... 11 C. Access to transportation ............................................................................................................... 11

Section V: Management ........................................................................................................ 12

A. B. Management team-key personne............................................................................................... 12 Legal structure-stock agreements, employment agreements, ownership .................................. 12

Section VI: Financial ............................................................................................................. 13

A. Financial forecast ......................................................................................................................... 13 1. Profit and Loss(Estimation) ....................................................................................................... 13 2. Break-even analysis (Estimation) .............................................................................................. 14 3. Cash flow (Estimation) .............................................................................................................. 15 2. Budgeting Plan .......................................................................................................................... 16

Section VII: Critical Risks .................................................................................................... 18

A. B. Potential problems..................................................................................................................... 18 Obstacles and risks .................................................................................................................... 22 Marketing Strategy........................................................................................................................ 24

Section VIII: Harvest Strategy ............................................................................................. 24 Section IX: Milestone Schedule ............................................................................................ 25

Section I: Executive Summary

A present situation of diamond industry is very strong. Shortage of diamond is taken place in future. Price of diamond is continuously growing it is strong point of selecting diamond industry. Availability of aircraft in Surat is creating a great opportunity for diamond industry.

India has always been center stage in the dramatic history of some of the worlds most famous diamonds. India has been the earliest known source of diamonds. Conversely, today India is a pioneer in the gem industry and a world leader in the manufacturing of cut and polished diamonds. The diamonds used in jewelry worldwide, nine out of every ten cut and polished diamond come from India.

The Indian Diamond Industry is currently going through a downturn phase. The total exports of cut and polished diamonds during FY 2011-12 and 2012-13 (Apr-Dec) witnessed decline of 17% and 36% respectively. USA is the major market for diamonds as exports to the USA are pegged at US 6.1 billion higher than that from Belgium and Israel. Though the diamond sales have bottomed out, the industry is expected to witness positive growth in festive months during October-December 2013. Our share in the USA has started declining; the industry strongly believes that the USA will continue to be a strong global trading partner.

Section II: Business Description

A. General description of the business

MANUFACTURING THE DIAMOND

Cut is the only diamond characteristic under human control, and considered by many to be the most important. A good cut can offset a lower color or clarity; however, even a D-color, Internally Flawless stone will not look its best if the cut or "make" is poor. A poor cut actually reduces the brilliance, sparkle and scintillations of a diamond.

The decision to cut a diamond in a particular shape is dictated by the natural shape of the rough stone. Some stones are naturally oblong and are destined to become marquises, ovals or pear shapes. Some rough diamonds occur in near perfect crystal shapes and these will more than likely be cut as princess cuts or some other square cut.

B. Industry Background
Diamonds account for 54% of the total gem and the Jewellery export basket of the industry and India is the worlds leading exporter of Cut and Polished Diamonds. A major contributor to the creditable performance of the industry is the massive diamond manufacturing sector, which employs nearly one million people across the country. The industry has grown from its small origins in the 50s and has established itself as the worlds largest manufacturing center of cut and polished diamonds for the last many years, contributing 60% of the worlds supply in terms of value, 85% in terms of volume and 92% in terms of pieces. Surat along with Navsari, Bhavnagar, Amreli are known as the diamond manufacturing/processing hub whereas Mumbai is the diamond trading hub.

India is the world leader in diamonds both in quantity and value terms. This pre- eminent position has been achieved through progressive liberalization of Government policies, entrepreneurships and skilled labor. India has achieved global leadership position, in the business of cutting and polishing diamonds also due to its price competitiveness and willingness to work for low margins.

14 out of every 15 diamonds set in jewelry worldwide are processed in India. India has already established itself as International Diamond Manufacturing Hub. Indian diamantaires have gone on to create a marketing network worldwide. Added to this is the strong financial base of the industry and support of financial institutions of the country.

Today, after creating a niche for itself in the diamond world with small diamonds, India is developing skills for cutting and polishing larger stones and fancy cuts. Indian diamond polishing factories are on par with the worlds best employing cutting edge of technology using laser machine, computerized yield planning machines, advanced bruiting lathe, diamond impregnated scarves etc.

Growth rate of diamond industry

Retail diamond prices in the second half of 2008 experienced one of the largest decreases in decades and followed by relatively no price changes up or down in 2009. However, rough diamond prices in 2009 were up by about 15% and they have increased that much already in 2010. As a result, there is significant pressure on polished diamond prices to move upward.

C. Goals and potential of the business and milestones

Be the world largest diamond manufacturing organization with high customer and employee satisfaction.

D. Uniqueness of product or service

By finding the new cutting designing of diamond organization provides new and innovative to the customer. By finding new machinery for diamond cutting we introduce new methods of production and manufacturing.

Nimbark Gems main product is loose diamonds, from emerald-cut to round-cut diamonds, with brilliant color and V VS 1, meaning Very, Very Slightly Included, or an excellent quality diamond. All of NIMBARK GEMS's diamonds are GIA certified (Gemological Institute of America) with laser inscription inside. NIMBARK GEMS was positioned as a diamond wholesaler rather than a retailer in the past. NIMBARK GEMS had been supplying

local jewelers in the area for more than twenty years and maintained very strong relationships. In the diamond business, we determine the price of a diamond according to the "4C" criteria: Clarity The most expensive diamond is the one that is absolutely clear in clarity, but many of them have inclusions (scratches or trace minerals) that can detract from the pure beauty of the diamond. Clarity has several categories that affect the price of a diamond: FL (Flawless, no internal/external flaws), VVS1, VVS2 (Very, Very Slightly Included, an excellent quality of diamond), VS1, VS2 (Very Slightly Included, not visible to the eye), S1, S2 (Slightly Included, may be visible to the eye), I1, I2, I3 (Included, the lowest grades of clarity). NIMBARK GEMS does not carry the last two clarity grades in its inventory. Color A diamond can divide light into a spectrum of colors, and reflect light as more or less colorful, depending on the color grade. The less color in a diamond, the better the color grade. Color grades are categorized into D (absolutely colorless, the highest color grade), E (colorless, only traces of color and only detected by gemologists), F (colorless, slight color detected, still a high quality diamond), G-H (near colorless, color noticeable, but still an excellent value), I-J (near colorless, color slightly detectable), K-M (low grade color), N-Z (low grade color). NIMBARK GEMS does not carry the last three color grades in its inventory to maintain a good selection of diamonds. Cut The roundness, depth, width and uniformity of the facets determine a diamond's brilliance. Cut is the most important characteristic of a diamond; even with perfect color and clarity, a poor cut will affect its brilliance. Carat The weight of a diamond. In the engagement-ring market today, usually the "dowry" is around 1 carat and above.

Section III: Marketing

A. Research and analysis

1. Target Market (customers) Identified The main reason behind the selection of this target segment is that the engagement ring market has been the largest segment in diamond purchasing in the U.S. for the last three decades. In a patriarchal tradition, men offering their marriage proposal usually accompany it with a gift. The gift has to represent something that is valuable to both families or parties.

The female target market segment had been showing a significant growth in the last three yea This trend has contributed to the NIMBARK GEMS diamond expansion plan by adding innovative cutting design into the sales strategy.

Here target market for NIMBARK GEMS Diamond will be international as well as national jewelry manufacture and investor.

2. Market Size and Trends The US remains the worlds biggest consumer market for diamond jewelry at around 40% of global sales by value. Japan remained resiliently at around 8% despite last Marchs environmental catastrophe. The emerging markets, led by China and India, continue to grow strongly, despite a slowdown in the levels of growth in 2012. Bain estimates Chinese diamond jewelry demand to have grown between 2005 and 2011 at 32% CAGR; and India at 22% CAGR. Chinese consumption for diamond is still predicted to have grown by 10% in 2012, and India at a similar level. Indeed these two markets combined are anticipated to exceed the size of the US market by 2020.

3. Competition K. A. International Blue Nile Diamonds.com Mondera Sanjay Brothers Srp & Sons Diamonds Pvt. Ltd. Hari Krishna Exports Pvt. Ltd. Parul Diamond Bhumika Gems Khodal Star Mazal Diamond Shashi Gems Siddhi Gems Anjali Diam Soham Overseas - India RS Exports - India SANGHAVI JEWELLERY MFG . CO . PVT . LTD - India CLASSIC DIAMONDS (I) LTD., - India Arihant Star - India Al Hussain Fragrances & Jewels India JAGRUTI GEMS & JEWELLERY India Jamuna Dass & Sons - India Dharmanandan Diamonds India Adani Exports Ltd. - India

4. Estimated Market Share

34% in Indian Diamond Market 11% in International market

5. Distribution The products (diamonds) move from diamond mines to diamond cutters, then either directly to large retailers, or to wholesalers, who further distribute them to smaller retaile

In short, major jewelry stores could sell much cheaper diamonds than the mom-and-pop shops, as they purchase larger quantities than their local counterparts. However, the momand-pop jewelry shops do consignment sales with their diamond suppliers to compete with large jewelry chains.

Customers who already have a long-term relationship with their local stores usually trust their local jewelers more than the large brands. The consignment business strategy had enabled mom-and-pop jewelry stores to compete with large, middle-end diamond retailer giants such as Zales Corporation.

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Section IV: Operations

A. Identify Location
1. Advantages The diamond cutting Factory is rural and village area of Gujarat, because this business required more manpower and also woman labor. Office of assorting in city areas like Surat, Bhavnagar, and Mumbai because business required facility like Exporting, banking, and Insurance. 2. Zoning Factory In rural zone Office at urban zone No need manufacturing in to GIDC and Special Industrial Zone 3. Taxes Diamond Cutting Business is Art work business so that there are no required for special taxes saving and Cutting Business has to pay the Taxes of Export and Import.

B. Proximity to supplies
For the diamond polish and cutting business the raw material i.e rough Diamond are to require from the urban country such as Africa, USA. The main supplier for diamond manufacturing is those who have license for rough diamond. We can collect rough diamond from Surat market, Mumbai market and at Bhavnagar Market. importing

C. Access to transportation
For the Transportation of rough Diamond we use Angadiya service because diamond required safety and security.

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Section V: Management
A. Management team-key personnel
Mr.Nagjibhai Bhalani(Founder) Mr.Pradip Bhalani (Partner) Mr.Manoj Bhalani (Partner)

B. Legal structure-stock agreements, employment agreements, ownership

The NIMBARK GEMS GEMS be the Partnership firm. NAME OF PARTNERS Mr.Nagjibhai Bhalani Mr.Pradip Bhalani Mr.Manoj Bhalani

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Section VI: Financial

A. Financial forecast 1. Profit and Loss(Estimation)

2014 Sales Direct Cost of Sales Other Costs of Sales Total Cost of Sales Gross Margin Gross Margin % Expenses Payroll Marketing/Promotion Depreciation Rent @ Brannan Street Utilities @ Brannan Street Warehouse Utilities Payroll Taxes 546,799 48,000 0 36,000 4,200 7,200 0 5,360,000 3,752,000 138,600 3,890,600 1,469,400 27.41%

2015 6,432,000 4,502,800 166,400 4,669,200 1,762,800 27.41%

2016 7,716,900 5,400,400 199,600 5,600,000 2,116,900 27.43%

546,800 48,000 0 36,000 4,200 7,200 0

546,800 48,000 0 36,000 4,200 7,200 0

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Warehouse Rent Web Hosting Database Maintenance Shipping Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales

72,000 480 100 30,000 744,779 724,621 724,621 0 217,386 507,234 9.46%

72,000 480 100 30,000 744,780 1,018,020 1,018,020 0 305,406 712,614 11.08%

72,000 480 100 30,000 744,780 1,372,120 1,372,120 0 411,636 960,484 12.45%

2. Break-even analysis (Estimation)

With monthly fixed costs and variable costs, the table and chart below show what we need to sell in diamonds each month to break even. We are well past the break-even point, even with these lower margins. 206,883

Monthly Revenue Break-even Assumptions: Average Percent Variable Cost Estimated Monthly Fixed Cost

70% 62,065

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3. Cash flow (Estimation)

2014 Cash Received Cash from Operations Cash Sales Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations Cash Spending Bill Payments 546,799 3,791,764 546,800 5,151,736 546,800 6,198,175 0 0 0 0 0 0 0 5,360,000 2006 0 0 0 0 0 0 0 6,432,000 2007 0 0 0 0 0 0 0 7,716,900 2008 5,360,000 5,360,000 6,432,000 6,432,000 7,716,900 7,716,900 2015 2016

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Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance

4,338,563

5,698,536

6,744,975

0 0 0 0 0 0 0 4,338,563 1,021,437 3,308,437

0 0 0 0 0 0 0 5,698,536 733,464 4,041,902

0 0 0 0 0 0 0 6,744,975 971,925 5,013,827

3. Budgeting Plan
Future Performance(Estimation)
2014 Sales Gross Margin Gross Margin % Operating Expenses Inventory Turnover Balance Sheet 2014 Current Assets 16 2015 2016 3,300,000 1,320,000 40.00% 900,000 0.00 2015 3,630,000 1,452,000 40.00% 900,000 0.00 2016 3,993,000 1,597,200 40.00% 900,000 7.99

Cash Inventory Other Current Assets Total Current Assets Total Assets Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities (interest free) Total Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Capital and Liabilities Other Inputs Payment Days

3,080,000 0 600,000 3,680,000 3,680,000

2,752,000 0 200,000 2,952,000 2,952,000

2,287,000 600,000 30,000 2,917,000 2,917,000

260,000 0

200,000 0

120,000 0

0 260,000 0 260,000 3,000,000 420,000 0 3,420,000 3,680,000

0 200,000 0 200,000 2,200,000 552,000 0 2,752,000 2,952,000

0 120,000 0 120,000 1,500,000 1,297,000 0 2,797,000 2,917,000

30

30

30

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Section VII: Critical Risks

A. Potential problems
The PESTEL Analysis The macro environment includes all relevant focus outside a companys boundaries relevant in the sense that they are important enough to have brought on the decision. An industry ultimately makes about its business model and strategy. Why many forces in the micro environment are beyond a companys sphere of influence? Companys strategy may be needed for answer it. Micro environment includes all general force that do not directly touch on the short run activities of the organization but that can and often does, indulgence its also ran decisions.

1.Political Factors
The Government of India (GOI) has been working to develop the Diamond industry in India through several initiatives but under the purview of Diamond industry. The main political factors are as follows. Excise duty: In the budget of year 2008-09 government reduce excise duty from 10% to 5% on cut and polished diamond units. Marketing and control orders: Import of rough diamonds controlled by the Jewelry export Promotion Councils. The Council provides market information to its members regarding foreign trade inquiries, trade and tariff regulations, rates of import duties, and information about Diamond fairs and exhibitions. FDI approval: India is now the third most favored destination for Foreign Direct Investment (FDI), Government of India may permits 49% of FDI in the Diamond industry. FDI of 2 billion are invested in terms of working capital in the industry.

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Trade Policy for Diamond

Replenishment Licenses: The exporters of gem and Diamond products are entitled for REP license as per rates indicated in the Handbook of Procedures. Such licenses are transferable. Diamond Impress License: Diamond Impress Licenses are issued in advance for import of rough diamonds and for export of cut and polished diamonds. These licenses or the materials imported against them may be freely transferred after the export obligation has been fulfilled. Bulk Licenses for Rough Diamonds Bulk licenses for rough diamonds are allowed to any exporter whose annual average f.o.b. value of exports of cut and polished diamonds during the preceding three licensing years was not less than 75 crores and iv) any overseas Company with its branch office in India whose annual turnover in diamond during the preceding three licensing years is not less than 150 crores. Import of raw material (rough diamonds) is highly affected by war and global market conditions. Fund contribution: As per current scenario to ease the liquidity problem in diamond industry the task force constituted by RBI. Task Force may propose asking banks to finance diamond manufacturers especially small and medium ones against their stock of polished diamonds.

2. Economic factors
Per capita consumption: Per capita consumption power of customers may highly affect diamond jewelry purchase. India`s per capita income is likely to grow more than double over the last seven years, to Rs 38,084 in the current fiscal, reflecting improvement in the living standards of the average Indian. Per capita income, according to the advance estimates for national income is expected to grow by 14% during the current fiscal. However, after discounting for inflation, per capita income is expected to rise to Rs 25,661 representing an increase of 5.6%.
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3. Social factors The main social factors of the organization, which are deals as the business are as follows. Emergence of retail org. makes people aware about diamond as a luxury product or an investment option. Emergence of substitute: Diamond Diamond is preferred by consumers with increase in the price gold. Changing consumer preferences: with the increase in standard of living consumer preference change from gold Diamond to diamond Diamond, its also considered for status symbol. organization

4. Technological factors

The main technological are as follows. As diamond industry try to moving up in to the value chain they are focusing more on they use high end equipments. Technology solutions are also available for production control, supply chain and inventory management in the Diamond industry.

The Special Economic Zones and Diamond Parks developed in various states offer technology-enabled environments that are conductive to growth and quality production.

5. Environment Factors
This section draws on literature relating to the general environmental impacts associated with ASM and related processing activities, and where available specific information relating to the production of gemstones. In relation to environmental impacts of ASM and gemstone ASM in particular, the situation in each country varies according to the type of gemstones being exploited, the social and natural environment of the area and cultural and organizational aspects of the mining operation itself.

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Exploration Underground Extraction Surface Extraction River Dredging

Due to the unique geological nature of gemstone deposits, whereby mineralization is localized in small pockets, processing of mined gemstones differs from one gem to another. Generally, however, the processing of gemstones that occur as distinct crystals consists of hand sorting with the aid of the visual characteristics of the gems (fluorescence, shine, color). Typically, no equipment is used in this process. Normally, such pieces recovered during hand-sorting in the pits and trenches still need

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6. Legal Factors

Trade Facilitator: The Council undertakes direct promotional activities like organising joint participation in international Diamond shows, sending and hosting trade delegations.

Advisory Role: A crucial area of activity of the Council has also been aiding better interaction and understanding between the trade and the government.

Nodal Agency for Kimberly Process Certification Scheme: GJEPC has been appointed as the Nodal Agency in India under the Kimberly Process Certification Scheme.

Training and Research: The Gems & Diamond Export Promotion Council runs a number of institutions that provide regular and part-time training in all aspects of manufacture and design in Mumbai, Delhi, Surat and Jaipur.

Boosting Exports: Among the promotional activities GJEPC undertakes for the sector is the organizing of joint participation of member - exporters in some important international exhibitions and puts up promotional stalls in other.

B.

Obstacles and Risks

As entrance of Synthetic diamond which is close substitute of real diamond leads to threats for Indian diamond industry. China, Sri Lanka and Thailands entry in small diamond segment Infrastructural bottlenecks, frequent changes in ex-imp policies, irregular supply of gold. Over dependence on single-channel supply chain. Decisions of De Beers and Argyles terms for renewing their supply contract.

Threats from close substitute:

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High domestic interest rates compared to elsewhere: The overall lending rate in Indian financial market is too high with comparison to financial Market of other countries so it affects the overall investment of country along with the investment in diamond.

Small firms lacking technological/ export information expertise: As small firm not have so much capital fund to invest in technology and research and development because of this they havent get benefit of technological advancement.

Low productivity compared to labor in china, Thailand and Sri lanka: The labours of Indian diamond industry are less productive than the labour of China, Thailand, and Srilanka.

High carring cost: As the major raw material requirements need to be imported, companies normally stock huge quantities of inventory resulting high inventory carrying costs.

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Section VIII: Harvest Strategy

The growth strategy of NIMBARK GEMS will require an expansion of the current divisions inside the organization, a restructuring of the company. Without the benefits of the restructuring, it is likely that the NIMBARK GEMS business will stagnate. The process of restructuring, however, is not without any risk, as the current business practices that had been the foundation of the company will have to be slightly adjusted in response to today's retail environment.

There will be two phases of restructuring the company. First, changes will be made in the current NIMBARK GEMS location. Second, we must revamp the NIMBARK GEMS brand to build and strengthen customers' "emotional" attachment to it. The revised brand messaging will suggest the companys seriousness in increasing its value in serving the customers. Some of the characteristics of the new brand will reflect the sense of:

Sophistication Exclusivity Globalization Professionalism Respect Fashionable/Contemporary Youthful Mysticism

Marketing Strategy The concept of e-marketing is similar to a traditional marketing, which is the process of planning and executing conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy the company's objectives. Marketing does not necessarily mean forms of advertising of products, but fully utilizing all of the company's resources into getting the customers to buy our products. In this case study, we will explore the three marketing strategies for NIMBARK GEMS that are involved in e-commerce marketing, including posting and positioning, and traditional marketing, including advertising and the combination of all.
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Section IX: Milestone Schedule

The milestones program shows the detailed implementation schedule for NIMBARK GEMS's expansion in its product portfolio and distribution strategy. Partner himself will lead the project in finding potential upscale jewelry stores in the area, and control the budget in several strategic areas.

Deadlines and Milestones

Milestone Website Redesign Annual Marketing Program Finding Potential Jeweler Partner Establish Alliance With Internet Vendors Establish Relationship With Outsourcing Workshops Revamp Logo Design Establish Relationship With Banks For Co Branding Upgrade Existing Warehouse Update List of New Local Jeweler Partners 5/1/2015 1/9/2015 0 IT 2/12/2014 20/3/2015 12,000 Operation 22/11/2014 17/1/2015 1,200 Business Dvpmnt 2/12/2014 20/11/2014 12/2/2015 6/6/2015 1,200 800 Business Dvpmnt Business Dvpmnt 15/12/20014 10/2/2015 1,200 Business Dvpmnt 28/10/2014 6/6/2015 1,200 Business Dvpmnt Start Date 20/11/2014 16/11/2014 End Date 12/2/2015 2/1/2015 Budget 500 48,000 Department IT Marketing

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