India's largest jewellery retailer Gitanjali Gems Ltd will acquire a Chinese manufacturing unit and jewellery retail firm by the end of 2011 as it looks to expand its global footprint and boost sales.

Gitanjali, which retails diamond jewellery under the brands Gili, Nakshatra, Asmi and D'Damas in India, recently acquired four Italian jewellery brands from a unit of Dubai's debt-laden jewellery group Damas International.

"We plan to make an announcement by December this year... It will be something mid-sized as we plan to acquire it and then help it attain scale," Abhishek Gupta, head of corporate strategy told Reuters on Tuesday, without giving any financial details about the China deal.

The United States accounts for 35 percent of the total diamond jewellery market, while China, Japan, India and the Middle East each account for 10 percent of the demand globally.

Gitanjali, which the market values at $596.8 million, has a retail presence in the Middle East and the United States.

It plans to open 2-3 more stores in the Middle East in the current fiscal year ending March 2012 and is hoping its business in the U.S., which was affected during the global meltdown, will turn profitable at the operational level.

"We are investing into advertising and a lot of other strategies to boost our U.S. business. It already has started turning around from the middle of last year but we still have some stores which are not profitable yet," Gupta said.

It plans to invest 3.5-4 billion rupees as capital expenditure in FY12 which will meet its working capital requirement, new store additions and cost of inventory.

Gitanjali, which is undergoing a business restructuring, plans to finish the process in the next 2 months, after which it hopes to make an announcement about roping in a private equity partner.

In February, Reuters had reported the company was in talks with L Capital, the investment firm co-funded by luxury group LVMH, to sell stake.

DOMESTIC PLANS

In India, the company plans to invest 2 billion rupees to add 350-400 stores across various retail formats in the current fiscal year. It opened 300 stores in the country in FY11.

"We are going at the rate of a store a day. This includes company owned stores, franchisee stores and shop-in-shops," Gupta said.

Gitanjali also said demand for gold and diamond jewellery in India continues to remain robust despite rising prices and that the company expects to clock in profit growth of 50 percent this fiscal year on a sales growth of 35 percent.

In FY11, net profit stood at 3.55 bln rupees on net sales of 94.56 billion rupees.

The company expects its same-store sales, a key gauge of profitability for retailers, to grow at 30-35 percent in FY12.

The Indian retailer added four new Indian diamond jewellery brands to its offering on Tuesday, on affordable price points, and expects the brands to boost sales this fiscal.

It also said it expects sales of 8 billion rupees from the upcoming India International Jewellery Show.

Shares of the firm, which have risen 45 percent since January against a 12 percent fall in the main index, ended 0.87 percent lower at 308.1 rupees in a weak Mumbai market.