Tuesday, April 07, 2015

The Indian gem and jewellery sector may be encouraged with procuring finances, if ABN AMRO Bank’s proposal to set up a wholly-owned subsidiary in India, materializes. The Bank has applied to the Reserve Bank of India for setting up its operation in India, and has received an in-principle’ approval for the same, reports say. The Bank intends to primarily serve the Indian gem and jewellery sector with this office, reports add.

If this happens some of the listed entities in this space, viz: Gitanjali Gems Ltd (Rs.43.20), P C Jewelers Ltd (Rs.330.60), Renaissance Jewelry Ltd (Rs.81.60), etc would be one of the greatest beneficiaries. 

Besides, on going marriage season and upcoming festive season is likely to boost the sales of the Jewelry companies. 

Also, there were recent media reports that, India’s organised gems and jewellery retail market has started to grow at a much faster pace in recent years; than the unorganised one, since gold trade was liberalised with the scrapping of the gold control Act in 1990.
While the overall retail gems and jewellery sector is growing 10% annually, the organised retail segment is expanding 30-40% in recent years, said Balram Garg, managing director at PC Jeweller, citing an internal study. Gold jewellery makes up for 80% of the Rs.3,00,000-crore gems and jewellery market of the country. Currently, the organised segment accounts for 22%, while the unorganised one, primarily comprising local and independent stores, makes up for 78% of the retail gems and jewellery market.
Meanwhile, Gitanjali Gems reported 17-fold jump in its net profit at Rs.39.43 crore for the quarter ended December 31, 2014 as compared to Rs.2.31 crore for the same quarter in the previous year. Total income of the company increased by 48.07% at Rs.1872.41 crore for Q3FY15 as compared Rs.1264.54 crore for the corresponding quarter previous year.

On the consolidated basis the company’s net profit rose 90.27% to Rs.96.01 crore for the Q3FY15, as compared to Rs.50.46 crore in Q3FY14. The total income increased 30.62% to Rs.3604.69 crore in the quarter under review as compared to Rs.2759.6 crore in the corresponding quarter previous year.

The promoters holding in the company stood at 35.27% while Institutions and Non-Institutions held 14.04% and 50.70% respectively

On the other hand if the food inflation starts to move up then the stocks of agri-commodities could benefit. Unseasonal rains and hailstorm have impacted "Rabi Crops" across North and Western India, raising fears of spike in food prices. 

I have already recommended the speculative counter, Genera Agri Ltd (Rs.4.50) with a target of Rs.10 and Jain Irrigation Systems Ltd (Rs.63.65) for a target of Rs.71.

Now if the food inflation starts to push up the CPI or WPI then also Jewelry stocks would gain. 
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