Titan Industries shares dip on RBI move

Fresh move to control CAD in addition to hike in gold import duty to 10%, could hike working capital expenses

Shares of Titan Industries Ltd fell as much as 14% on Friday after the Reserve Bank of India (RBI) prohibited the imports of gold coins and medallions and said gold jewellery companies will have to make full payment to procure gold.

This fresh move to control the current account deficit (CAD) in addition to the hike in gold import duty to 10%, could hike working capital expenses and interest costs for Titan Industries and other jewellery makers who have been buying gold on a lease basis from banks until now.

“This, once again, raises the specter of increasing interest and hedging costs for jewellers. Titan’s fiscal year 2014 and fiscal year 2015 earnings per share can potentially face a 6.25% and 12% cut, respectively,” analyst Abneesh Roy of Edelweiss Securities said in a note to clients.

Shares of Titan Industries were trading down about 11% at Rs 244.10 apiece, Friday at about 13:20 hours on the BSE.