Indian Jewellery Sector: CAD, Currency & Gold

研报英文原文证据摘录

Indian Jewellery Sector: CAD, Currency & Gold

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from 2% to 15%; b) export-linked gold imports with procedural hassles; c) measures to disallow

gold metal loans; d) ban on gold coins.

Titan AR comments: a) FY12: PAN disclosure for >Rs500k to curb black money added

friction to demand; b) FY13: customs duty was raised to 6% as gold was publicly labelled an

‘unproductive asset’; RBI tightened leasing norms; elevated inflation & weak sentiment led to

reduced jewellery consumption; c) FY14: weak sentiment & aggressive regulatory intervention

to curb CAD continued; a sharp gold price correction in Q1 triggered a temporary spike, but

demand remained muted for the rest of FY; abolition of gold-on-lease scheme, 80:20 import

rule, and customs duty increase impacted industry supplies & increased domestic premiums.

Titan now: Taking cues from past issues, Titan has worked over the years to reduce the impact

of potential regulatory headwinds, though it is not fully secure. For example, today, the share of

gold exchange is c50%, which is much higher than in the earlier period; domestic sourcing has

also become a source, which was still not developed then. Discontinuation of gold on lease

should be only prospective, as was the case back then, and this forms c40% of Titan’s gold

requirement, in our view. Interestingly, in 4Q, Titan sold as much as cRs61bn of gold bullion,

signalling adequate gold on hand—although we are unsure if the company would have done

this if this concern had cropped up earlier.

Way forward: While it is unclear what the government's action will be following Mr Modi’s

speech, we note that customs duty, which was reduced from 15% to 6%, could be increased

again. There may be higher GST levy. We also believe that, depending on the geopolitical