Elephant God Marks Indian Boom for $12,500 Bridegroom Suits, Titan Watches
S.K. Singhal, head of textiles at India’s biggest fabric maker, bought the finest wool Australia ever auctioned this year to make fifty $12,500 suits. In the wedding and festival season starting tomorrow, he expects to sell the lot.
Singhal’s optimism shows how sentiment has rebounded since 2008 when his company Raymond Ltd. paid a record price for a wool bale that is still partly unused. Analysts forecast this year’s four-month consumer binge will help push sales at companies including watch and jewelry maker Titan Industries Ltd. and carmaker Maruti Suzuki India Ltd. to records.
“This year I should be able to clear everything,” Singhal said in an interview at his office in Mumbai. “The way trade is behaving, and the eagerness to buy my fabric, it tells me that there is a buoyancy in the market.”
The world’s third-fastest growing major economy may expand 8.5 percent in the year to March 31, the most in three years, the central bank said on July 27. That’s encouraged a consumer spree in the second-most-populous nation fueling the second- fastest inflation rate in the Asia Pacific and prompting the bank to raise rates four times in six months to try to damp price gains.
“What we are seeing is a significant and almost dramatic improvement in consumer sentiment,” said Shubhada Rao, chief economist at Yes Bank Ltd. in Mumbai. “This probably would be the best year as far as a strong revival in consumption is concerned” since the collapse of Lehman Brothers Holdings Inc. in 2008.
The celebrations begin with Mumbai’s homage to Ganesh, the elephant god of prosperity, and run through Nov. 5 with Diwali, the festival of lights. That’s followed by the wedding season that runs from November to December and from late March through early May.
The festivals include tomorrow’s Eid-ul-Fitr to mark the end of the Muslim fasting month of Ramadan and Navratri with 10 days of worship and dance culminating in Dussehra.
Shops across the country do half their annual sales in the festival periods, adding extra staff, providing valet parking, and putting up lights and decorations to lure customers, said Kumar Rajagopalan, chief executive officer of the Retailers Association of India.
“We’d expect many of the retailers to be in the region of 25 percent growth,” he said. “The biggest segment of growth is the middle class.”
During these months, Indians traditionally buy gold, white-goods such as fridges and washing machines, and even cars and homes, according to Radhika Gupta, director at Forefront Capital Management Pvt. in Mumbai.
‘Very, Very Strong’
“Retailers are preparing in many ways, whether it’s their merchandising, their inventory, or their employees, for a very, very strong year,” Gupta said. “We see a strong season for consumer spend compared with the last two seasons.”
Consumer demand may also be helped by better monsoon rains, the main source of irrigation for its 235 million farmers. Rain in the June-to-September season is forecast to be normal after the weakest in more than three decades last year.
Sales at Maruti Suzuki, maker of half the cars sold in India, may be 340 billion rupees ($7.3 billion) in the fiscal year ending March 31, 2011, according to the average estimate of 34 analysts complied by Bloomberg, an all-time high. Sales by Titan Industries may reach 59 billion rupees, also a record, according to the average estimate of 15 analysts compiled by Bloomberg.
“The demand is quite sustainable,” said Swati Kulkarni, who helps manage $13.3 billion in assets at UTI Asset Management Co. in Mumbai. “There is the benefit of changing lifestyle, strong brands and sustainable growth rate.”
Gains in consumer prices paid by industrial and farm workers in India are running at more than 11 percent, the highest after Pakistan in the Asia Pacific, according to data from 17 countries in the region tracked by Bloomberg.
Reserve Bank Governor Duvvuri Subbarao may raise rates on Sept. 16 for a fifth time since mid-March, according to HSBC Holdings Plc and Barclays Plc.
“Inflation has ruled,” said Yes Bank’s Rao. “To some extent that is one factor that could be a potential dampener in the overall consumption story.”
So far there’s little sign of a slowdown.
“Every month sales have been improving to record levels,” said Arvind Saxena, Hyundai Motor Co.’s India director for marketing and sales. “There is no doubt that this festive season will see the best ever sales.”
Instead, the constraint on spending may be producers’ inability to keep up with demand. Maruti Suzuki and Hyundai, the top two carmakers in India, had waiting lists on some models as a dearth of batteries, engine castings and other parts curb production.
“We are seeing no let up in demand which is growing in double digits,” said Sunil Khandelwal, chief financial officer of textile maker Alok Industries Ltd. “The real acceleration in demand is yet to come.”
Central to the coming retail bonanza is the hallmark of the traditional Indian wedding -- gold. Retail demand for gold also rises during Diwali, as people buy the metal before worshipping Lakshmi, the goddess of wealth.
“When weddings come, people have to buy gold,” S. Ravi Kant, executive vice president of Titan Industries, said in an interview in Bangalore. “They have no choice.”
Gold imports in 2010 by India, the world’s top consumer, will likely exceed last year as demand picks up in the festival season, the National Spot Exchange Ltd. said. Gold is traditionally bought during the festivals and for marriages as part of the bridal trousseau.
Still, higher gold prices may damp some bullion sales, Forefront’s Gupta said. The metal has gained 15 percent this year in New York and reached a record in June.
Rejith Nair, a sales manager for Bangalore-based car dealer Cauvery Motors Ltd., said he plans to spend 10,000 rupees, a quarter of his monthly salary, on jewelry for his wife during Diwali.
“We offer prayers and celebrate,” said Nair, 34. “It is considered by Hindus as the best time to buy gold.”
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