Demand for gold is expected to remain subdued due to various factors impacting the market, including price volatility, fewer auspicious wedding dates, and the backdrop of elections in India, the world’s largest democracy.
Despite these challenges, Titan Company Ltd, which owns the popular jewellery brand Tanishq, remains optimistic about the latter half of the year.
Ajoy Chawla, the chief executive of the jewellery division at Titan Company, expressed confidence in the second half of the year, stating, “The way this year will play out is that the second half will be much better than the first half.”
Chawla highlighted the impact of the absence of wedding dates, elections, and elevated gold prices on the market in the first quarter, leading to some stress. However, he sees a potential improvement in the second half.
Gold prices saw a significant surge in the last quarter, with prices breaching the ₹70,000 per 10gm mark for the first time in April.
Titan reported a 19% revenue growth in its jewellery business last week, despite a decline in the Ebit margin to 12.1%.
Analysts at BNP Paribas expect the margin pressure to persist in the first half of the fiscal year, but Titan has maintained its FY25 jewellery margin guidance at 12-13%.
The company noted higher growth in plain gold jewellery and coins compared to studded pieces in the March quarter.
Strategy and Outlook
Chawla emphasized Titan’s commitment to aggressive top-line growth despite the current headwinds in the market.
The company is focusing on promoting everyday and lightweight gold jewellery in response to the rally in gold prices.
In addition to Tanishq, Titan’s jewellery division includes brands like Mia, Zoya, and Caratlane, operating over 760 stores. Tanishq alone has 423 stores.
According to a report from Reuters, India’s gold demand may drop to a four-year low due to recent price increases.
CareEdge reported a 14% surge in average gold prices in FY24, leading to price volatility in the market.
Chawla mentioned that a good monsoon could boost rural demand, with improvements expected from June onward. He also highlighted the impact of elections on gold demand and the challenges posed by high gold prices.
Furthermore, Chawla pointed out that the absence of good wedding dates in May and June in key markets like Bihar, Uttar Pradesh, Rajasthan, and Gujarat could lead to deferred demand post-elections.
### Additional Insight
– It is interesting to note how Titan Company is adapting its strategy to capitalize on the trends in the gold market, focusing on lightweight and everyday jewellery to cater to changing consumer preferences.
– The anticipation of a decline in gold demand in India due to price increases highlights the sensitivity of the market to external factors.
– The impact of elections on gold demand showcases the interconnectedness of politics and economic behavior in the country.
– The emphasis on rural demand and the potential for deferred demand post-elections provide valuable insights into the dynamics of the Indian gold market.
