Indian Jeweler Becomes Billionaire as Gold Price Surges

T.S. Kalyanaraman is beloved by his customers and detested by his rivals for bringing transparency to jewelry sales in India, where haggling is the norm.

He opened a shop in the southern Indian state of Kerala in 1993 and taught customers how to test the purity of their gold to expose cheating craftsmen. He was also the first jeweler in town to attach price tags to his gold and gem collection, angering competitors who accused him of ruining the trade.

Two decades later, the 65-year-old has become a billionaire as a 12-year rally in gold prices fails to damp demand in India, the world’s largest consumer of the precious metal. He owns 44 stores in India and plans to open 36 more by March 2014, including five in the Middle East.

“Less profit, more turnover; that is what we believe in,” Kalyanaraman, chairman of Kalyan Jewellers, said in a phone interview from Kerala. “Be as transparent as you can in your trade. The big thing in life is trust.”

Kalyanaraman’s closely held Kalyan Jewellers is valued at about $1 billion, according to the Bloomberg Billionaires Index. The estimate is based on the average enterprise value-to-earnings before interest, tax, depreciation and amortization and price-to-earnings ratio of three publicly traded peers: Titan Industries Ltd., Gitanjali Gems Ltd. and Rajesh Exports Ltd.

Kalyan Jewellers posted revenue of 95 billion rupees ($1.8 billion) and Ebitda of 2.95 billion rupees in the year ended March 31. It has net debt of 7.6 billion rupees. He has other assets worth about 3.5 billion rupees, according to Sanjay Raghuraman, chief operating officer of Kalyan Jewellers.

Billionaire’s Brand

“I don’t calculate my net worth,” said Kalyanaraman, when asked about his status as a billionaire. “I am more keen to trade, develop my brand, but you may be right.”

He has never appeared on an international wealth ranking.

Kalyanaraman’s ancestors were Hindu priests and saints. More than a century ago, his grandfather left the priesthood to start the family business. The elder’s uncle, who was a “dewan”, or official, to the Maharaja of Kochi in pre-independent India, urged him and other Indians to become entrepreneurs so that the country could achieve self-sufficiency.

His grandfather started one of the first textile mills in Kerala in 1900 before it was taken over by the government. The family then opened a textile shop in 1906 in Thrissur, the cultural capital of Kerala, which was managed by Kalyanaraman’s father.

After-School Job

Kalyanaraman started learning the business from his father when he was 12, completing simple tasks at the shop after school. He studied commerce at Sree Kerala Varma College in his hometown before managing the family’s textile shop and subsequently starting his jewelry business with 7.5 million rupees.

He recently set up a property company, developing apartment units and villas in Thrissur. Kalyan Jewellers is spending about 30 billion rupees to expand in the world’s second-most populous nation, including opening jewelry shops in India’s financial capital of Mumbai.

As the company grows, the billionaire is using the appeal of Indian film stars to woo customers. Aishwarya Rai, a former Miss World turned leading lady, is one of the brand ambassadors.

“She is a woman icon,” Kalyanaraman said. “We wanted somebody who wears our jewelry, who endorses our product to be the most beautiful woman in the world.”

Jet Set

The billionaire is the first owner of a private jet in Kerala, known for its palm-lined beaches and plantation-covered hills. He bought the seven-seater Embraer Phenom 100 about a year ago for 300 million rupees to visit his chain of jewelry shops in the other parts of India.

“It was only done to save time because time is money; nothing connected with luxury,” he said. “Our stores are spread across very small towns where there are airports but there are no frequent flights. For just a one- or two-hour job, I would spend one-a-half days because I would go there and come back only the next day.”

Demand in India, the world’s largest consumer of gold in 2011, climbed 9 percent in the quarter ending Sept. 30 even as global use declined 11 percent, according to the World Gold Council. The jewelry market in the South Asian nation is valued at $16 billion to $18 billion, according to Firstcall India Equity Advisors Pvt., while New Delhi-based consultants AM Mindpower Solutions estimate sales of gold ornaments may reach $41.3 billion in three to four years.

Wedding Tradition

India consumes 30 percent of the global gold supply, according to the council. More than half of gold jewelry is bought for weddings, where a bride is bedecked in ornaments from head to toe. Buying gold is also considered auspicious during religious festivals.

India increased taxes on gold imports to reduce a record current-account deficit and moderate demand for the precious metal that’s rallied for 12 straight years. The duty on gold and platinum imports was raised to 6 percent immediately from 4 percent, Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi yesterday. The tariff will be reviewed if imports moderate, he said.

Southern India accounts for 45 percent of the total jewelry business in the country and is poised to be the fastest growing market, according to Firstcall. While the states of Tamil Nadu and Kerala are known for plain gold jewelry, Andhra Pradesh and Karnataka have emerged as markets for studded ornaments.

“We don’t find it tough to sell gold; people love to buy jewelry,” Kalyanaraman said. “The only way to make your wife, sister or lover happy is to give them something that they love.”

Soaring Valuation

Valuations of Indian jewelers have soared. Shares of Gitanjali Gems have surged 96 percent in the last 12 months, while Thanga Mayil Jewellery Ltd.’s stock has doubled. Tribhovandas Bhimji Zaveri Ltd., Tara Jewels Ltd. and PC Jeweller Ltd. sold shares for the first time in India last year.

“In times of economic turbulence, the Indian psyche of capital flight to safety in the golden metal and other precious stones and jewelry remains very strong,” said Munesh Khanna, a partner at Grant Thornton LLP in Mumbai. “Given the increased importance of branding, quality, product guarantee and reputation, organized players like Kalyan Jewellers with their significant footprint in the south and other markets are positioned to be clear winners in the coming years.”

Gold gained 7.1 percent last year as stimulus programs in the U.S., Europe and Japan boosted the metal’s appeal as an alternative investment.

Lord Rama

Even Kerala’s erstwhile rulers stored gold as an offering and insurance against economic stress. About 300 kilometers from Kalyan’s headquarters, a treasure trove of antique gold coins, jewels and statues worth billions of dollars were discovered at the 16th century Sree Padmanabhaswamy Hindu temple in Trivandrum, the capital of Kerala, in 2011.

Closer to home, Kalyanaraman, whose office is adorned with idols of Lord Rama, a Hindu god, spends his Sunday mornings at the temple that his grandfather built more than a century ago.

“I stand by the principle of honesty, fair play and trustworthiness,” he said. “We want to do good for the community.”

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