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Festive sparkle dims for jewellers

Dilip Kumar Jha/Mumbai 05 Oct 12 | 12:33 AM

Jewellery retailers and exporters are hoping for a much-needed cheer from the coming festival season but with apprehension, due to indications of less demand in markets here and abroad.

While import orders from the US market have declined around 20 per cent for the coming season, including Christmas, New Year and Mother’s Day, pressure on rural incomes at home is restricting jewellers’ efforts to make up for less orders abroad from local markets. Rising gold prices and fluctuations in the exchange rate have added to the woes.

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In volume terms, export of cut and polished diamonds dived 46 per cent to 13.44 million carats in April–August as compared to 24.8 mn carats in the same period last year. In rupee terms, these fell 28.7 per cent to Rs 34,450 crore from Rs 48,294 crore and in dollar terms by 41.5 per cent to $6,307 mn from $10,783 mn in the corresponding period, showed data compiled by the Gems & Jewellery Export Promotion Council (GJEPC).

The US market alone accounts for about 40 per cent of global jewellery sales, of which India contributes close to 40 per cent. The festive season mentioned contributes nearly 40 per cent of India’s annual jewellery export. Hence, the decline disturbs jewellers’ growth plans.

“US traders are apprehensive about the country’s economy, as the real indicators of a revival in economic growth remain absent, resulting in conservative trade buying. But the retail sector has recorded a marginal increase of seven to nine per cent in the past month, indicating a slightly better festive season this year," said Mehul Choksi, chairman of the Gitanjali Group, which operates around 135 retail showrooms in the US, generating 13 per cent of their annual turnover.

Jewellers had intensified the import of rough diamonds ahead of the festive demand orders, in anticipation of an upsurge in sales. GJEPC data showed rough diamond imports fell a marginal 3.2 per cent to 54.1 mn carats in April–August as compared to 55.8 mn carats during the same period last year.

Rajiv Jain, chairman of GJEPC, said US importers were also being cautious on festive orders due to the high cost of raw material and volatility in global currencies. “More than the increase in raw materials, high fluctuations in currency affects jewellers badly. Hence, overseas importers have become a bit cautious this time," he added.

TRADE BALANCE
Exports ($ million)
Items Apr–Aug ‘11 Apr–Aug ‘12 Change (%)
Coloured gemstones 125.28 117.15 -6.49
Gold 927.36 798.32 -13.91
Rough diamond 704.26 588.27 -16.47
Cut and polished diamond 10782.60 6306.94 -41.51
Total 18163.05 16136.84 -11.16
Imports ($ million)
Gold 4085.29 4744.02 16.12
Rough diamond 7094.55 5649.28 -20.37
Cut and polished diamond 7870.29 1481.78 -81.17
Total 19663.58 15381.96 -21.77
Source: GJEPC, Gold imports in bar and exports in jewellery form

Home front
The widening deficit between import of roughs and export of polished diamonds means more attention to the domestic market, with the festive season beginning with Dussehra and going up to the New Year. Jewellers have worked out discounts and other types of offers to lure customers.

Gitanjali Gems has come out with a gold coin free offer. A customer buying diamond jewellery worth over Rs 20,000 would be given a gramme of gold coin free. The coin’s size goes up with the purchase. Tanishq is set to introduce offers next week and these would ramp up sales, said Sandeep Kulhalli, vice-president (retail & marketing). He, however, confirmed their annual growth rate of 40-45 per cent for the past five years would certainly go down to just double-digits this year.

Kolkata-based Shree Ganesh Jewellery House has decided not to take making charges on gold coins. For gold jewellery, the company is waiving off 20 per cent on these charges, said Umesh Parekh, managing director.

In the first half of the current financial year, jewellery companies recorded a 15-20 per cent decline in sales in value terms and 30-40 per cent in volumes. They want to recover at least a part of this through promotional offers, said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation.

“The reform measures taken by the government have changed the overall investment sentiment, which is visible in the capital markets. We hope for a boost to jewellery sales this season," he said.

Meanwhile, anticipating a slump in demand, De Beers (the world’s premier diamond marketing group) has projected full year rough diamond output at 28-30 mn carats as compared to 31.3 mn last year. In the first six months of 2012, their production totalled 13.4 mn carats, compared with 15.5 mn carats in the first half of 2011.

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