Most jewellery stocks tumbled after Titan Industries has discontinued its popular monthly deposit schemes ‘Golden Harvest’ and ‘Swarna Nidhi’. The new Companies Act restricted the rate of return on monthly deposit schemes at 12 per cent a year. The Government restricted the fund raising ability of jewellers through these schemes.

This apart, the total amount that can be raised through this route has now been restricted to 25 per cent of the net worth of the jewellery company.

Shares of Titan Company, which owns the Tanishq brand, dropped 3 per cent to ₹322. Gitanjali Gems and Rajesh Exports were down 6 per cent each at ₹74 and ₹154. PC Jeweller dipped 4 per cent to ₹112.

Titan has said that certain rules were introduced specifically under Explanation to Rule 2 (1) (b) of the Companies (Acceptance of Deposit) Rules 2014, which appear to bring jewellery schemes under the definition of public deposits.

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Alternative schemes However, Titan stated that it is likely to come out with alternative schemes that would be in compliance with the new law, of shorter duration than 12 months.

The new Companies (Acceptance of Deposit) Rules, 2014 came into effect from April 1.

As of March 30, Titan had mopped up ₹1,300 crore through the monthly savings scheme for jewellery purchase. Closing down both the schemes, Titan said it was constrained to comply with the new law immediately, and that it has decided to stop accepting any further instalments from existing account holders.

The company has said that current account holders would have to make their purchases immediately, since the company was closing down the scheme. If a customer does not close their account before August 31, the company said it would refund the amount through cheque.

Focus on earnings Richard Liu, Research Analyst at JM Financials, said the development marked an end to the rumours floating about the gold schemes, and to a string of regulatory disruptions that jewellers have had to contend with in recent years. Post a muted FY14, investors may now choose to focus on earnings recovery instead of regulations, he said.

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