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India's Rajesh Exports seeks more foreign acquisitions

Rajesh Mehta has built Rajesh Exports into a Fortune Global 500 company with growing ambitions.

NEW DELHI -- After acquiring the world's largest gold refiner in Switzerland for $400 million last year, Indian jeweler Rajesh Exports is scouting for other foreign assets to build its business.

Headquartered in the southern Indian city of Bangalore, the private gem and jewelry company established in 1989 is involved in all aspects of gold procurement, from refining to retailing, and processes 35% of global production.

Rajesh Exports recently appeared on the Fortune Global 500 list of the world's largest companies, which together generated revenues of $27.6 trillion in 2015. At No. 423 in rankings topped by Wal-Mart Stores of the U.S., it is one of only seven Indian companies included.

"When we started, we did not imagine this would happen," Rajesh Exports Chairman Rajesh Mehta told the Nikkei Asian Review. "We definitely set a target to be one of the most respected companies in the world in this product line. We knew that with clean and clear efforts we should be able to grow."

Other Indian companies listed by Fortune last month are Indian Oil Corp., at No. 161; State Bank of India, at No. 232; Bharat Petroleum, at No. 358; and Hindustan Petroleum, at No. 367. All are from the public sector. Reliance Industries, in 215th place, and Tata Motors, in 226th place, hail from the private sector. State enterprise Oil & Natural Gas Corp. was previously placed at No. 449 but did not appear this year.

The journey so far

Rajesh Exports began exporting jewelry from a factory established in 1990. "Today, we are an end-to-end company," said Mehta, now 52. It refines 2,400 tons of gold a year: 2,000 tons at Swiss company Valcambi and 400 tons in a plant in the northern Indian state of Uttarakhand. It has jewelry-manufacturing units in Bangalore and Cochin in India's south, and Dubai and Sharjah in the United Arab Emirates.

It acquired Valcambi's parent company, European Gold Refineries Holding, through a wholly owned subsidiary in Singapore last year in a cash deal. Valcambi is accredited by the London Bullion Market Association, enabling it to have its refined gold accepted by major commodity exchanges and banks globally. The takeover improves access to such major markets as India, the Middle East and China.

Rajesh Exports can manufacture 400 tons of gold products annually, including plain and studded jewelry, medallions and coins. Its main facility in Bangalore produces 250 tons of this. Research and development centers have been set up in Switzerland and India for design and production.

Products are exported worldwide and are sold in India through Shubh Jewellers, a retail chain launched in 2012. There are already 80 Shubh outlets in Karnataka, which has Bangalore as the state capital, and Mehta said expansion is planned.

Future strategy

Rajesh Exports carries no debt and is self-financed. It retails gold products and is involved in mining, refining, manufacturing and distribution through exports and wholesaling. The company is focused on global expansion and is building a retail presence in bricks and mortar as well as online. It is also considering duty-free retail.

"Our strategy for growth is to increase our geographical presence across the world and to increase our presence in retailing," said Mehta, who wants "good geographical strength." This June, the board approved acquisition plans for the Middle East. "We are looking, and once we zero down on something, we will provide information. Australia is our main focus. The U.S., Australia and the Middle East would be ideal for spreading our refining and other activities."

While Southeast Asia remains down the line, Rajesh Exports hopes to cut raw materials costs through acquisitions -- particularly in India, which tops global gold consumption. "Even if the cost-cutting is only 1% of the massive turnover, it does make a difference," Mehta said. The company is already one of the world's most efficient gold producers, with a cost advantage of upward of 4%.

Emerging stronger

Rajesh Exports is well-placed, given growing demand for Indian jewelry overseas. It announced on July 14 an export order worth 7.86 billion rupees ($117.8 million) from the United Arab Emirates to supply gold and diamond-studded jewelry this year. This follows a 10.53 billion rupee order in May for delivery in August. In June, it secured a 6.53 billion rupee export order from Singapore for September. All of these orders are being handled at the Bangalore facility, now the world's largest gold-manufacturing plant.

"We have a mature facility capable of meeting these deadlines," Mehta said. He believes that his company has a competitive edge globally thanks to "integration, discipline and tight management."

Rajesh Exports now earns 70% of its revenue overseas and has ambitious targets. In the January-March quarter, it reported a 20% jump in consolidated net profit to 2.47 billion rupees. Net sales rose to 559 billion rupees, up 192% on the year. For the full year ended March, the company posted a net profit of 10.6 billion rupees, up 63%.

From its modest origins as a first-generation enterprise, Rajesh Exports has become a global player in less than three decades. "We are looking at growing our revenues 20-25% per annum, but profitability is what we will be looking at more aggressively -- 35-40% every year over the next eight to 10 years," Mehta said.

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