India's biggest jewellery retailer Titan Co hopes to start exports in the next fiscal year to perk up sales that have been dampened by the country's strict curbs on gold imports, a senior company official said on Wednesday.
Struggling with a ballooning trade deficit, India last year imposed a record high duty of 10 percent on overseas purchases of gold, the second-biggest expense in its import bill, and introduced a rule tying import quantities to export levels.
Titan, which has a direct gold import licence but no export business, has been caught on the wrong side of the so-called 80/20 rule that means a fifth of all imports must be exported.
"The 80/20 rule has triggered this change of strategy," C K Venkataraman, chief executive of Titan's jewellery division, told Reuters, referring to the firm's export plans.
"If there are more restrictions, or for example if the government makes it 70/30, if we are exporting it will be easy. It's a pre-emptive step," said Venkataraman, who does not expect the government to remove gold import curbs anytime soon.
Finance Minister P Chidambaram has indicated that curbs can be revisited only after the final current account deficit numbers, which are expected to be published in early June.
Titan is in discussions with potential partners in Singapore and Dubai, and hopes to begin exports in the year starting April, Venkataraman said, but declined to give more details.
The company currently gets more than 75 percent of its revenue from the jewellery segment that caters solely to the domestic market valued at USD 30 billion.
Sluggish domestic market
Venkataraman expects diamond jewellery sales in the quarter ending March to grow by 15 to 20 percent from a year ago in the domestic market, but said the growth in gold jewellery sales will be sluggish.
"The fundamental factors like inflation affecting discretionary spending are not changing. For inflation to ease it will take a long time, so I expect overall industry demand to be sluggish," Venkataraman said.
For gold, prices have been an issue as the company has been paying a hefty premium due to scarce stocks, he said, which has led to higher retail prices and lower demand.
But the company should be able to minimise price risks as it has received permission from the Reserve Bank of India to hedge gold on overseas exchanges like COMEX and expects to start the process "soon", Venkataraman said.
"It makes it far simpler to hedge overseas and we are totally protected in terms of price risk, so that headache is gone," he said.
Titan Company stock price
On March 12, 2014, Titan Company closed at Rs 252.05, up Rs 2.95, or 1.18 percent. The 52-week high of the share was Rs 302.00 and the 52-week low was Rs 200.00.
The company's trailing 12-month (TTM) EPS was at Rs 8.11 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 31.08. The latest book value of the company is Rs 22.13 per share. At current value, the price-to-book value of the company is 11.39.
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