Titan eyes exports amid gold curbs, poor Indian demand

Titan Co, India's biggest jewellery retailer, hopes to start exports in the financial year beginning April to help sales that have been dampened by the country's strict curbs on gold imports, according to a Reuters report.

Struggling with a ballooning trade deficit, India last year imposed a record high duty of 10 per cent on overseas purchases of gold - the second-biggest expense in its import bill after oil - and introduced a rule tying import quantities to export levels.

Titan, which has a direct gold import licence but no export business, has been caught on the wrong side of the so-called 80/20 rule that means a fifth of all imports must be exported.

"The 80/20 rule has triggered this change of strategy," C K Venkataraman, chief executive of Titan's jewellery division, told the news agency, referring to the firm's export plans.

"If there are more restrictions, or for example if the government makes it 70/30, if we are exporting it will be easy. It's a pre-emptive step," said Venkataraman, who does not expect the government to remove gold import curbs anytime soon.

Finance minister P Chidambaram has indicated that curbs can be revisited only after the final current account deficit numbers are in. These are expected to be published in early June.

Titan is in discussions with potential partners in Singapore and Dubai, and hopes to begin exports in the year starting April, Venkataraman said, but declined to give more details.

The company currently gets more than 75 per cent of its revenue from the jewellery segment, but it currently caters solely to the domestic market, valued at $30 billion.

Venkataraman expects diamond jewellery sales in the quarter ending March to grow by 15 to 20 per cent from a year ago in the domestic market, but said the growth in gold jewellery sales will be sluggish.

"The fundamental factors like inflation affecting discretionary spending are not changing. It will take a long time for inflation to ease, so I expect overall industry demand to be sluggish," Venkataraman said.

For gold jewellery, prices have been an issue as the company has been paying a hefty premium due to scarce stocks, which has led to higher retail prices and lower demand. But the company should be able to minimise price risks as it has received permission from the Reserve Bank of India to hedge gold on overseas exchanges like COMEX and expects to start the process "soon", he said.

"It makes it far simpler to hedge overseas and we are totally protected in terms of price risk, so that headache is gone," said Venkataraman.