If the financial performance of listed jewellers in 2009-10 – when India last experienced deficient rainfall – is any precedent, a weak monsoon has little impact on the prospects of these companies.
That year, Titan’s sales grew 22 per cent and its profit rose 53 per cent; TBZ’s sales and profit rose 32 per cent and 62 per cent respectively. Other players such as Gitanjali Gems, PC Jeweller, Thangamayil Jewellery and Tara Jewels also saw robust financial growth. Three factors helped. One, in the wake of the global financial crisis, gold prices had shot up sharply – this helped jewellers more than make up in value what they lost due to weak volumes in the first half of the year. Next, volume growth made a comeback in the second half of 2009-10 with stimulus measures propping up economic growth in the country and customers reconciling to higher gold prices and resuming purchases.
Finally, with listed jewellers catering to the urban markets, they would have been spared from the impact of lower discretionary spending by the rural consumer, who is the most impacted by poor rains.
Will the script be similar in 2014-15?
Since the listed players still remain focussed on the big cities and towns, they are unlikely to be impacted by declining rural purchasing power, if the economic growth picks up with the aid of non-farm sectors.
But there could be two dampeners. One, unlike 2009-10, gold price currently is weaker than the year before, with global appetite for the yellow metal waning. This will keep realisations low. Also, the government’s supply curbs on gold may put a spanner in the works.