Diamond jewellery sales dip on renewed gold rush

Bangalore, July 1 (IANS) Renewed interest in buying gold on its declining price would hit diamond jewellery sales, as witnessed in the first quarter (April-June) of fiscal 2013-14, an executive of a leading jewellery retail chain said Monday.

"We have seen growth in our diamond jewellery sales decline to 18 percent in first quarter (Q1) of this fiscal sequentially from 26 percent in same quarter last fiscal (2012-13) and will remain sluggish, as demand for gold ornaments picks up on declining price," retail major Tanishq's marketing executive Sandeep Kulhalli told reporters here.

As a division of leading watch maker Titan Industry Ltd of the Tata group, Tanshiq promotes branded jewellery and ornaments using diamonds to meet the growing aspirations of people, especially women in the middle age group and upwardly mobile.

Though 40 percent of the gold is sold in the bullion market in the form of coins, biscuits and investments, 60 percent is used for making jewellery products as ornaments, gifts and personal collection.

Of the $37-billion gold business across the country, $5 billion is generated by diamond jewellery.

"The gold and diamond jewellery business is at a tipping point, as the government's intervention to reduce gold imports to lower its growing current account deficit, declining price of the yellow metal and shift in buying patterns will regulate the industry's business and growth plans," Kulhalli observed.

In last fiscal, the company's jewellery business grew 15 percent year-on-year (YoY) to Rs.8,108 crore, with 30 percent of its sales coming from diamonds sold in gold casings in various designs, shapes and colours.

Diamond jewellery segment, however, grew 27 percent YoY last fiscal.

"We are seeing a clear shift in buying patters as evident during first quarter when customers rushed to buy more gold jewellery, coins and biscuits than diamonds and other precious stones. Hence, diamond sales will be lower in our overall jewellery business," Kulhalli said.

The two-decade-old division, however, hopes to grow at 23 percent during this fiscal to achieve a sales target of Rs.10,000 crore.

"We hope growth rate in diamond jewellery will be better in third quarter than in first quarter as festivals and wedding season set in and revival in consumer buy on a good monsoon," Kulhalli said.

Compulsory disclosure of PAN (permanent account number) for personal tax to buy high value jewellery items also impacted sale of diamonds in first quarter.

"The government has made it mandatory for buyers to disclose their PAN card details for all transactions on gold and diamond jewellery ornaments valued Rs.5 lakh and above. As 15-20 percent of our diamonds sales are in the high value transaction segment, we have seen the growth rate decreasing to 25 percent last fiscal from a high of 40 percent in 2010-11," Kulhalli recalled.

To make up for the decline in diamond jewellery sales, the company is bracing to expand its retail network with 30 new stores this fiscal and offer new collections of designer jewellery with more sparkling diamonds.