Pure Gold plans 200 stores in India by 2015

By Karen Remo – Listana  www.business24-7.ae

During the first half of 2008, Pure Gold Group established Pure Gold Properties, targeting a Dh1 billion-strong portfolio of properties in Dubai. Initial plans were for the real estate arm to have a collection of property developments such as Meydan City, the Lagoons and the Dubai Waterfront. But the plan did not get executed as the global financial crisis hit the region and only a small amount of investment, relative to the target, was made.

Firoz Merchant Founder and Chairman, Pure Gold Group. (MUSTAFA KASMI)

“The global scenario has changed, so I didn’t invest in those,” Firoz Merchant, Founder and Chairman of Pure Gold Group, said. He added the company would continue its conservative model – no wholesale, no hedging, no speculation and no diversification. “I am a pure trader. I don’t believe in hedging or in speculation.”

In February 2008, you said your target was to open 100 stores by 2010. Are you nearing that target?

We have 75 outlets in the Gulf Co-operation Council (GCC) states and India. We plan to open 25 stores in India this year, of which, we have already signed 10 stores [and] five of these will open in the next two months. For the other 15, we are searching for good locations. We have expansion plans in Qatar and Saudi Arabia. We also plan to open three to four stores in the UAE. We’ll try to reach 100 by the end of 2010.

You plan to have $1 billion (Dh3.67bn) in sales?

Yes. I plan to open 200 stores in India in the next five years involving an investment of $200 million with a revenue target of $1bn.

From where will you source the $200m?

We have a very good relationship with banks. It will be finalised very soon. I’m looking at syndicated banks.

When do you plan to withdraw the first tranche?

In the next three months.

How much?

It depends. I am opening the five stores with my own money. For the next five, I will talk to the bank. My expansion plan will not stop even if I don’t get money from financial institutions as I have good support from my diamond and gold suppliers.

You saw a minimal four per cent revenue drop from Dh550m in 2008 to Dh528m in 2009. Where did you earn most of the revenue?

About 80 per cent of the sales come from the UAE. We are well established in the UAE, Kuwait and Oman, while in Bahrain we still need some time. We plan to increase the revenue by 20 to 30 per cent this year. In 2008, we achieved the target in September. Unfortunately, the economic crisis came [then]. In 2009, we came into the market with a different module, a different business plan.

We started to work [out] from October [2008] how to survive in 2009 as the recession began. We came up with products with value for money and with price range products – a quarter and a half-carat diamond ring, a solitaire for the price of Dh999. Also, we negotiated with our suppliers and started to buy in bulk. Because we were getting a good deal, we passed it on to customers.

You earlier said Pure Gold would expand into the Asian and Chinese markets with Singapore as the regional hub. Did that happen?

I changed my mind. Now I want to settle in my native India. I want to see the reaction of the Indian market. India and China are very strong in terms of economy and population. Once I settle in India, certainly I will think about China. Trend is your friend, so go with the trend; you cannot fight the trend. You cannot fight change [so] you must change yourself. Things totally changed globally, so it is better [to] believe in reality. In the Middle East, there are plenty of opportunities, [in] Lebanon, Syria, Egypt and Turkey.

You have diversified into real estate.

Out of the profits, I injected 25 to 30 per cent into the property business. All businessmen want to have a portfolio or a basket of investments. But I did not diversify from the core business.

In 2008, Pure Gold announced that it planned to diversify into new properties, including Pure Gold Properties, a collection of developments such as Meydan City, the Lagoons, and the Dubai Waterfront. Have you continued with that plan?

The global scenario has changed, so I didn’t invest in those. I have a very limited and manageable property portfolio. I have one Dh136m plot in Meydan City, another plot in Mirdiff and a small apartment, which I financed with my own funds. [Now] I will look at opportunities but will not move from my core business.

You have manufacturing facilities in India and China. Are you looking at opening a new one here, considering the UAE is your largest market?

China is a joint collaboration. In India I have my own factory in Mumbai. It is feasible to have one here, but for the time being, it is not required. But if I get a good place to set up a manufacturing unit here, I will do so.

Diamonds are your main business but the company’s name is Pure Gold. Why?

When I started the business, I called it Pure Gold because at that time gold was very valuable. Then consumers began to buy diamonds due to the high cost of gold.

Do you hedge?

I don’t believe in hedging or in speculation. I am a pure trader. We buy first and then sell.

PROFILE: Firoz Merchant Founder and Chairman, Pure Gold Group

India-born Merchant comes from a family with interests in real estate. Moving to Dubai in 1989, he set up his own jewellery retailing business, Pure Gold Jewellers. In just two decades, the company has grown to have more than 75 outlets in the UAE, Kuwait, Oman and Bahrain in the GCC and in India, employing more than 500 staff. It also owns two jewellery manufacturing units in India and China. A philanthropist, he has actively supported the Indian community in the UAE and in India and works with the Red Crescent Society and the Sheikh Mohammed Bin Rashid Al Maktoum Charitable Trust.