Jewellers to focus on recycled gold on supply constraints: ICRA

By Super

Updated: Friday, September 27, 2013, 11:18 [IST]

Jewellers to focus on recycled gold on supply constraints

MUMBAI: Supply constraints are likely to force jewellers to increasingly focus on sourcing gold through recycled route as huge gold inventory is available with the Indian public, says a report by rating agency ICRA.

"While recycled gold constituted only a small portion of requirements in the past, the same is expected to increase going forward owing to unregulated nature of the same and also on account of the high quantum of gold inventory at the hands of the Indian public," the report -- Recent regulatory overhang leaves industry in a state of flux -- said.

The imports are expected to be lower due to lesser proportion of gold jewellery exports from India, impacting supply during the second half of 2013, when demand levels surge owing to festive and marriage seasons, the report said.

The report also said that sharp drop in bullion prices has resulted in inventory losses for majority of jewellers during the last quarter of FY13, and also in the current fiscal, particularly during Q1 FY14.

While the same is expected to be compensated partly though higher making charges by jewellers and also subsequent increase in gold prices, overall operating profitability for the fiscal is expected to be lower than in FY13, it said.

However, the extent of the drop in operating margins is likely to be lower than our earlier estimates of 2 per cent owing to the pass-through of increase in prices witnessed over past few months driven by weak currency and favourable demand supply dynamics for the metal, the report said.

PTI