The Shree Ganesh Jewellery House stock hit the 10 per cent downward circuit breaker on Thursday to close at Rs 33.40. On Wednesday after trading hours, the company had reported Rs 1,048-crore loss in the second quarter ending September 30. As a result of the losses, the company’s net worth fell Rs 941 crore.
Early this month, rating agency CARE suspended the ratings assigned to bank facilities/ instruments of the company with immediate effect.
The company told
In the last couple of years, the company said, it undertook sales of diamond jewellery with materials supplied by long-term creditors. However, merchandised products could not be sold (due to demand slowdown) and the company had to subsequently buyback jewellery and deliver them to its creditors. “In this process, SGJ suffered losses due to creditors demand for a discount,” a spokesperson of the company said.
Owing to changed global macroeconomic conditions, the spokesperson explained, gold prices have fallen 27 per cent since October last year. The diamond jewellery trade also suffered. “Debtors are saddled with huge slow-moving inventory,” Shree Ganesh said.
“To fund the loss resulting from gold purchase contract, Shree Ganesh requested debtors for goods on credit. SGJ offered to sell the products through a mix of cash payment and credit terms for a longer period,” the company further added.
It said that (debt payment) defaults is now a sector-wide phenomenon and it further dampened market sentiments creating a vicious cycle delaying the recovery process.
Arun Kejriwal, founder of advisory firm Kejriwal Research, wondered how the company could provide for losses, booked in a different quarter (third quarter) in the accounts of Q2. “There is more to it than what meets the eye,” he said.