Tanishq to hedge gold buys

Tanishq, the jewelry division of Titan Industries, will begin hedging in gold next fiscal. This move primarily aims to up the efficiency in procuring the metal.

Titan Industries managing director Bhaskar Bhat said, "Next financial year we will test the waters. We may hedge less than 10 per cent of our procurement at a time, or around Rs 10 crore to start with and then decide the future."

Currently though, the company is trying to learn the art of hedging and speculating in gold. Bhat clarified that the hedging will be limited to procurement by Tanishq for its own needs. "If at all we enter it in a big way, then it may be a different division, certainly not under retail business."

With futures in gold evolving in India, this is but a natural course of action for India's largest branded jeweler. Tanishq procures about 5 tonnes of gold a year and stocks in the system at a given point of time are around Rs 150 crore.

For now, in any period Tanishq buys the exact amount of gold it manages to sell during the period. This way, loss or gain on gold price fluctuation is negligible. But to completely eliminate uncertainties created by fluctuating gold prices, the company wishes to enter the futures market. Beginning next financial year, Tanishq will evaluate sourcing combinations and right buying locations.

The company said that it will need to build a qualified team to initiate the process. At the moment, it is roping in several experts to set up a bench in house to kick off the pilot phase. Based on the success of this test, the company said, it will finalise its scale up plan.

Tanishq, which accounts for over 70 per cent of the branded jewelry business in the country, targets sales of Rs 575 crore this fiscal, 35 per cent more than the Rs 425 crore achieved last year.