JOIN USThe unprecedented crash in gold prices in April this year and subdued price levels in the next two months lured away buyers from diamonds to gold, a trend that could be a recurring theme in the coming months if gold prices continue to remain soft, according to Tanishq, the jewellery retailing brand of Titan Industries.
“The diamond business grew at about 18 per cent in the first quarter of this (fiscal) year, compared to about 25 per cent in the first quarter of the previous year (2011-12) due to the overwhelming urge among buyers for gold after the fall in prices. If gold prices remain low, the trend of low growth in diamond business could persist,” the Vice-President, Retail & Marketing at Titan, Sandeep Kulhalli told reporters here on Monday.
He hoped that in the current quarter, diamond business would grow at 20 per cent.
“Buying appetite for gold has almost bottomed out. We believe now customers will come back to diamond,” he said. The average ticket size of diamond at Tanishq is Rs 75,000, he added. The north and west account for about 65 per cent of Tanishq's jewellery sales.
Jewellery contributed Rs 8,108 crore in net sales, or about 81 per cent of Titan's overall net sales of Rs 10,009 crore in fiscal 2013. The division’s profit before interest and tax was Rs 891 crore. Diamonds account for about 30 per cent of its jewellery revenues, Kulhalli added.
He said that the growth in diamond business at Tanishq declined from about 40 per cent in 2011-12 to about 27 per cent in 2012-13.
The share of diamond sales is pegged at about 15 per cent of India's retail jewellery market that is estimated at $30 billion annually.
However, the company is undeterred and keen on going ahead with expansion plans. “We plan to open about 12 stores in this fiscal, including one in Bangalore.”
Tanishq has about 150 stores currently, including about 18 that were announced last fiscal and are slated to be completed this year.
Diamonds deliver higher returns than gold, he said and added that Tanishq is set to announce new collection of diamonds shortly.
Contrarian view
Gold eating into diamond sales is not true at Bangalore-based Abaran Jewellers, according to its CEO, Pratap Kamath. “Wedding season contributed to 25 to 30 per cent growth in diamonds y-o-y, though we see it tapering off in the coming months,” he said. Gold volume sales grew by almost 300 per cent in first quarter, he added.
The Corporate Executive Director (Marketing) at Malabar Gold and Diamonds, Amjad Hussain said that there was no perceptible switch from diamond to gold at their outlets.