*Damas, Gitanjali Gems to open up to 60 stores by 2014
*The two firms setting up a joint venture
By Tamara Walid
DUBAI, June 21 (Reuters) - Dubai jewellery group Damas International Ltd and India's Gitanjali Gems Ltd plan to open up to 60 stores by 2014 to tap into rising jewel demand in India, a Damas executive said on Sunday.
Nasdaq Dubai-listed Damas said in a regulatory filing it won approval to set up a joint venture with diamond and jewellery maker Gitanjali to trade jewelleries and related accessories.
The partnership will see Damas opening 50 to 60 retail outlets over the next three to five years, Prodyut Banerjee, from Damas' corporate finance department told Reuters in a telephone interview.
"India is really a potential market, where the gems and jewellery market growth is 25 to 30 percent a year," Banerjee said.
The companies will jointly invest up to 3.5 billion Indian rupees ($72.72 million), the minimum requirement by the Indian government, he said.
The establishment of the company, in which Damas will hold a 51 percent stake, will be finalised "as soon as possible", he said.
India's gem and jewellery industry has sought additional dollar financing from the country's foreign exchange reserves to inject liquidity into the sector in June.
The whole industry operates on dollar transactions, while sanctioned limits are calculated by financial institutions in Indian rupees.
The industry has sought to increase the flow of dollar liquidity to the industry, which has a projected need of at least $3 billion to $4 billion, the Gem & Jewellery Export Promotion Council Chairman Vasant Mehta said in June.
Gem and Jewellery exports contribute 12 percent to India's foreign exchange reserves, Mehta said.
DAMAS RETAIL EXPANSION
Dubai has in recent years joined the club of major gold trading centres such as London, New York and Hong Kong, thanks to proximity to the world's biggest gold consumer, India, and an aggressive drive to become a regional commodities hub.
"Damas has been trying to enter the Indian market by establishing something under its own name in India, but we needed permission."
Family-controlled Damas -- the first retail company to list on the Nasdaq Dubai in July -- operates in about 18 countries.
Dubai has the highest concentration of jewellery shops in the world, generating trade worth $35 billion in 2007 -- 20 percent of the $173 billion total global jewellery trade.
Sales volumes at Damas fell 11 percent in the first quarter, compared to the same period last year, Tawid Abdullah, the company's chief executive said in April.
The drop in sales was attributed to a fall in consumer spending on gold, due to high prices in the period, Abdullah added.
Despite Damas' sales drop, its performance was better than the overall Dubai market, which saw a sharp decline of 40 to 60 percent in gold sales in the first quarter, versus volumes between October through December, an official from the Dubai Multi Commodities Centre said in April. (Editing by John Irish and Rupert Winchester)