Movement of Gold within India Challenges & Opportunities

1. Movement of Gold within India Challenges & Opportunities IIGC - 2014 12-Sep

2. INDIA’S LOVE FOR GOLD

3. THE BIG FAT INDIAN WEDDING

4. GOLD JEWELLERY PURCHASE PATTERN

5. REGION-WISE GOLD CONSUMPTION

6. GOLD SUPPLY CHAIN Dore Supplier Intl. Bank Intl. Whole-seller Intl. Retailer Intl. Consumer INDIA Domestic Refiner Bullion Importer Bullion Trader Manufacturer Retailer Consumer Dom Mvmt Average no. of domestic movements : 3 to 5 x Vendor / Karighar Imports Exports

7. LOCATIONS THAT MATTER Key Tier-2 Consuming Locations Major Importing / Vaulting Locations Agra Kanpur Varanasi Patna Amritsar Rajkot Indore Bhubaneshwar Raipur Vizag Vijayawada Salem Coimbatore Calicut Thrisoor Madurai Delhi Ahmedabad Mumbai Jaipur Kolkata Hyderabad Bangalore Chennai Cochin

8. EVOLUTION OF SECURED LOGISTICS IN INDIA • SUBSTANTIAL INCREASE IN GEOGRAPHICAL REACH – MORE THAT 200 TOWNS ARE NOW SERVICED BY SECURED LOGISTICS • INCREASED SECURITY RISK, RESULTING IN CUSTOMERS SEEKING PROFESSIONAL & SERIOUS SECURED LOGISTICS PLAYERS. INSURANCE & STATUTORY COMPLIANCE IS MANDATORY • MORE COMPETITION – LOWER LOGISTICS COST – “PER GRAM” & “COST PLUS” BASED COMMERCIAL 2014 • BULLION METAL VAULTING & DOOR DELIVERY WERE RESTRICTED ONLY TO METROS • NON-METRO & TIER-2 CITY BUYERS HAD TO MAKE ‘OWN LOGISTICS ARRANGEMENTS’ • JEWELLERY MOVEMENTS PRE-DOMINANTLY DONE BY ‘ANGADIAS’, ‘EXPRESS & DOCUMENT COURIER COMPANIES’ & ‘SELF-CARRY BY EMPLOYEES’ • MOST MOVEMENTS DONE WITHOUT STATUTORY DOCUMENTS & INSURANCE. RAMPANT NON-COMPLIANCE ON STATUROTY & SECURITY REQUIREMENTS • LESS COMPETITION – VERY HIGH LOGISTICS COST – “VALUE LINKED” COMMERCIAL 2004

9. KEY ELEMENTS OF DOMESTIC LOGISTICS Domestic commercial airline, booked as Valuable Cargo - First mile pickup - Last mile delivery - Vault-Airport connection Typically to non-airport location & less than 500kms

10. KEY COMPONENTS OF SERVICE DELIVERY Need to continuously “maximize”, and not “optimize”

11. ROAD TRANSPORTATION

12. ROAD TRANSPORTATION - SECURITY

13. ROAD TRANSPORTATION - DOCUMENTATION

14. ROAD TRANSPORTATION - DOCUMENTATION

15. ROAD TRANSPORTATION - CASE STUDY • SPECIALIZED & SECURED HANDLING • Transportation of GOLD Plus Nano worth Rs.22 crores (USD 4.5 million), made of 80 Kgs of Gold and Silver & 20 Kgs of Precious stones • Movement across 4 states, covering 30+ Towns and 8000+ Kms • Customized vehicle with most Advanced Security features built in, which includes Night Vision camera, Intruder Alarm, GPS Tracking, Engine immobilizer, Special Ignition Controller, Two way communicator & Hydraulically operated Ramp • Successfully over came the challenges of security, in a high visibility campaign that generated huge foot falls for the client

16. VAULTING STANDARDS • Vehicle loading bay • Sufficient 'layers' between loading bay and vault area • Interlocking doors • 6” RCC walls and ceiling • Vault door with dual control lock controls • Defender safe for storing gold bullion with dual key control • CCTV cameras covering activity in the vault area and inside the vault • CCTV recording held for minimum 30 days • Motion detection sensors, intrusion and smoke alarms • Generator or UPS backup • At least two gunmen placed overnight to provide surveillance

17. OPPORTUNITIES • GST Roll out • Will significantly reduce the commercial, statutory & logistics complexities that currently exists • Substantial reduction in the total supply-chain cost. Reduction in “holding locations / cost”, due to ease of transportation & servicing • Gold Monetization Programs • Simple, effective & implementable solution to the ‘import’ problem • Needs a highly effective & nimble logistics back bone to support this initiative • B2C logistics that is quick, secure, far-reaching & cost competitive • Scrap Gold Collection • Reverse logistics capability • Wide, secured network • Synergize ‘forward’ & ‘reverse’ logistics to offer cost competitiveness • Online Jewellery – ecommerce • Steady increase in the online jewellery sale in the last 2 years • Traditional Jeweller and Online retailers eyeing this ‘profitable’ category

18. CHALLENGES • Security – Armed Guards • Of late, police across different states have initiated a crackdown on persons using arms issued to them in individual capacity for commercial purposes. The reason given for such operations is that the use of arms by persons to gain employment as Armed Private Security guards is illegal as it is deemed as commercial application of weapon license issued for personal security. • Commercial licenses have neither been forthcoming, nor are commercial establishments keen to get the Arms licenses issued in their name, due to the liability it puts on the board members – this stringent liability as per the Arms Act is very unique to India. • As a result, private security agencies have been technically compelled to employ people who hold Arms License in their individual capacity. Also noteworthy fact is that firearms issued to individuals have restrictions in terms of territories in which they can be used. • The Arms Act severely curtails the ability to pool armed guards in an efficient manner to service clients and can be particularly difficult in case of inter-state transfer of goods/personnel leading to hiring of personnel holding licenses from different states.

19. CHALLENGES • Security – Constraints on the ground • Accessibility @ pickup and delivery locations T.Nagar, Chennai Zaveri Bazaar, Mumbai

20. CHALLENGES • Domestic Aircargo • Jet Airways, the ONLY Air-cargo option available for Value cargo movement • Significant reduction & roll back in service to key locations such as Vizag, Vijayawada, Bhbaneshwar, Ahmedabad, Kolkata • Airport infrastructure is woefully inadequate & constrained in handling Valuable cargo • Import restrictions & Duty structure • Continued restrictions in imports & high import duty structure, chocking supply • Increase in smuggling & unaccounted gold movement continues to hurt the large, organized & honest jewellers

21. SEQUEL LOGISTICS Business Gaurav SME Awards 2011 Best Small Enterprise Logistics Sector Innovative 100 Award 2013 One of Top Innovative Companies of India (Mid-size) YES Bank - Business Today Star SME Award 2012 Star SME - Services (Small) ET Now IndiaMARTLeaders of Tomorrow Award 2011 Transport and Logistics GLOBAL ALLIANCE PARTNER Delivering Secured Solutions in 120 countries Sequel Logistics Logo displayed on Mercedes Mclaren Cars

22. THANK YOU E-mail: info@sequel.co.in Website: www.sequel.co.in