Gold Rush Seen Lifting Profit at Biggest Jewelry Maker
A surge in demand for gold ornaments and coins after the biggest slump in prices in three decades is poised to boost profit at Rajesh Exports Ltd. (RJEX), India’s largest manufacturer and exporter of jewelry.
Net income in the three months ending June may advance 20 percent after rising 3.3 percent in the same period a year earlier, Rajesh Mehta, chairman of the Bangalore-based company said in a phone interview yesterday. Sales at the 75 retail outlets owned by the company probably surged as much as 40 percent yesterday during Akshaya Tritiya, the biggest gold-buying occasion, from a year ago, he said.
The festival considered to be an auspicious day to buy the precious metal led to shoppers crowding jewelry stores to buy ornaments lifting sales at retailers such as Rajesh, Titan Industries Ltd. (TTAN) and Gitanjali Gems Ltd. (GITG), while a company roped in cricketer Sachin Tendulkar to promote its coins. Gold plummeted 14 percent in two sessions through April 15 in the worst slide since 1983, boosting demand from India to Australia.
“Gold is God’s currency for people so the faith is much more,” Prithviraj Kothari, managing director of Riddisiddhi Bullions Ltd. said yesterday. “Indians have blind faith in gold. From birth to death people need gold.”
Imports by India, the world’s biggest bullion consumer, may soar 47 percent this quarter to 225 metric tons from a year earlier as the drop in prices and festivals spurs demand, Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation, said yesterday. Sales during Akshaya Tritiya are estimated to be 20 percent more than a year earlier, he said.
During Akshaya, a Sanskrit word meaning “that which never diminishes,” Indians begin new ventures or buy valuables with the belief it will bring luck and prosperity. Based on the lunar calendar, the date changes every year.
Gold sales may jump 50 percent to 30 tons during this year’s festival, said Kothari, who chose the day to open his first retail outlet to sell diamond-studded jewelry in Mumbai’s Zaveri Bazaar. The festival is considered by the country’s more than 900 million Hindus as the traditional day to buy precious metals. Bullion is also bought during religious festivals and marriages as part of the bridal trousseau or gifted in the form of jewelry by relatives.
Gitanjali, India’s biggest gold and diamond jewelry retailer by revenue, forecasts sales will increase 30 percent to 35 percent this quarter from a year earlier, Managing Director Mehul Choksi said yesterday. Deliveries during Akshaya Tritiya may have increased 50 percent to 60 percent, he said.
“I buy gold for every Akshaya Tritiya,” said 45-year-old housewife Heena Makwana, as she and her sari-clad mother caressed a gold bar they purchased at Vimalsons Jewellers in Zaveri Bazaar. “Usually I buy 5 grams-10 grams, but this year I have bought 100 grams because of the low rate.”
Rajesh Exports fell 3.3 percent to 121.55 rupees at 3:30 p.m. close in Mumbai trading, while Titan lost 1.1 percent to 282.30 rupees and Gitanjali retreated 2.4 percent to 586.25 rupees. Rajesh Exports reported a profit of 982.6 million rupees in the three months ended June 30 last year.
“Gold demand is going to increase for two reasons -- India is the largest consumer of gold, and the price of gold is at a very lucrative level,” said Navneet Goenka, managing director and vice chairman of Goenka Diamond and Jewels Ltd. “They think gold looks like a very secure commodity right now.”
Gold entered a bear market in London in April as investors sold the metal in favor of riskier assets on speculation that the global economy was recovering. The precious metal is off to its worst start to the year since 1982, losing 15 percent.
Bullion for immediate delivery fell 0.1 percent to $1,428.76 an ounce. While gold has rebounded from a two-year low of $1,321.95 on April 16, it is 26 percent below the record $1,921.15 reached in 2011. Futures tumbled to as low as 25,270 rupees per 10 grams on the Multi Commodity Exchange of India Ltd. (MCX) on April 16, the cheapest since September 2011. The June-delivery contract fell 0.5 percent to 26,733 rupees today.
Jewelers in India announced a slew of offers from discounts on ornament-making charges to gift vouchers to lure buyers on Akshaya Tritiya. Valuemart Gold & Jewels Ltd. roped in Tendulkar to promote coins embossed with the image and signature of the cricketing icon. The company is selling gold coins weighing 10 grams each priced at 34,000 rupees, Valuemart said on its website.The World Gold Council and India Post are offering a 7 percent discount on coins, while Bullion India is promising free home-delivery for online purchases.
“There are more people buying gold jewelry this year rather than coins as prices have slumped,” Yashovardhan Zaveri, managing director of Tribhovandas Bhimji Zaveri Delhi Pvt., said from his jewelry store in New Delhi. “Normally, coins are preferred on auspicious days.”
Banks in India are charging a premium of $10 an ounce compared with $2 before prices slumped, he said. Premiums may ease to $4 by mid-June when demand typically eases because of the monsoon, he said.
“There’s a perennial demand for gold in India and any dip in the price is seen as a buying opportunity,” said Jagannadham Thunuguntla, chief strategist at SMC Global Securities Ltd. (GLBS) in New Delhi. “Jewelers have been growing in the past five to six years with the phenomenal, unprecedented gold rally, and they are continuing to be the beneficiaries.”
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