SET-listed Pranda Jewelry Plc may register a profit for the first time in three years in 2018, driven by the global economic recovery and strong demand from the Indian market.
Advance Opportunity Fund, Pranda's strategic partner, is seeking to inject funds into the embattled jewellery firm to increase liquidity for expansion and refinancing. After the funds are transferred, Advance will own 25% of Pranda.
Pranda, Thailand's leading jewellery exporter, has important exposure to markets in North America, Europe and Asia, and the global economic slowdown resulted in losses over the past three years.
Now the company is closer to breaking even than it has been in years.
"Apart from the global economic slowdown, the demand for gold fashion accessories is down," said Chanat Sorakraikitikul, a group finance and risk management committee chairman of Pranda. "Younger customers are influenced by modern fashion. They like something made with silver and other materials less precious than gold.
"The big exception to this trend is India, where we have seen our sales rising, thanks to India's strong economic growth and Indians' preference for national costumes that include gold ornaments."
Pranda plans to increase sales in India through local dealers, which the company hopes will increase gross margin. There are more than 100 sales units in India, and Pranda plans to add as many as possible.
Mr Chanat said the company also aims to increase production quality and capacity to take advantage of economies of scale and meet rising global demand.
The company operates three factories, one each in Thailand, Vietnam and Indonesia. The factories have a cumulative capacity of 10 million units a year and employ more than 3,500 people.
Pranda traditionally distributes its products through partners in core markets around the world. As the economy improves, the company plans to increase the percentage of products it distributes through television, e-commerce, catalogues, retail operators and modern trade.
The company has more than 200 sales units across Asian and Middle Eastern retail distribution channels. It also owns sales units in four countries -- Indonesia, Vietnam, Thailand and England -- allowing it to connect to customers directly.
Mr Chanat said Pranda will focus on promoting its own product lines, which include Prima Gold (99.9% pure gold for Asian and Middle Eastern markets), Prima Art (99.9% pure gold for Asia and India), Prima Diamond (high-quality diamonds for the Thai market), Julia (18-karat white gold for the Indonesian market), Merli (silver ornaments for the Thai market), Aviva (fashion ornaments for Americans) and Cai, Balsessarini, HGG and ESSE (ornaments for the European market).
Pranda also designs and produces bespoke products through its original design manufacturing business, along with global jewellery operators in the US, Germany, England, France, Spain, Australia, Russia and Japan.
In order to increase liquidity, the board of directors of Pranda last week approved the issuance of 500 million baht of convertible debentures on a private placement basis to Advance Opportunity Fund. In doing so, the company will issue 102.38 million shares, which represent 25% of its equity.
The company will also issue 102 million units of Pranda Warrant 2, Pranda Warrant 3 and Pranda Warrant 4 for existing shareholders, and an employee stock ownership plan warrant of 20 million units. Pranda will increase its registered capital from 410 million baht to 634.77 million.
Pranda Group, led by the Tiasuwan family, will remain the single largest shareholder of the entity with a 30% stake.
The company reported a 127.7-million-baht loss in the first nine months of this year, suggesting it will end the year in the red for the third year in a row.
In 2016, the company logged losses of 283.25 million baht after losses of 55.8 million baht in 2015.
Sales revenue for the first nine months this year stood at 2.12 billion baht, down from 2.83 billion baht and 2.8 billion in 2016 and 2015, respectively.
Revenue derived from global sales continued to decline from a 75% share in 2014 to 57.3% in the first nine months of 2017. As it nears its third year of losses, the company holds a negative cash flow of 298.22 million baht, worsening from 32.46 million in 2016.