Rajesh Exports has joined the bandwagon of Indian jewellers facing a tough July-September quarter on tighter RBI regulations on the import of gold.
The company reported a second quarter net profit that slipped 11 per cent from a year ago on a significant increase in finance costs.
Net profit in the latest quarter dropped to Rs 100.4 crore from Rs 112.4 crore in the same period last year. The company has seen a 55. 61 per cent increase in finance costs to Rs 127.8 crore during the quarter, in line with other jewellers in the country borrowing large sums to comply with the RBI’s new cash for gold norm.
Operating profit grew 17.29 per cent to Rs 228.2 crore in the quarter from Rs 194.6 a year ago as a result of a 5 per cent decline in expenses.
Total expenses stood at Rs 6212.3 crore in the second quarter of fiscal ‘14 from Rs 6550.8 crore a year ago.
Net sales for the Bangalore-based company declined 4.53 per cent to Rs 6440.5 crore in the quarter-ended September 30, 2013 from Rs 6,745.4 crore a year ago. The company said it gets about 4 per cent of its revenue from its retail arm Shubh Jewellers.
The company imports a total of about 110 tonnes of gold in a year for its use.
Company has been experiencing difficulty in procuring gold since the inflow of gold into the country slowed drastically and has been using its 2.5-tonne inventory for its domestic use in Shubh Jewellers. The company derived the lion’s share of its revenue through its jewellery export business.
“The quarter was a highly challenging one, in the light of the various restrictions brought in by the government on gold and gold jewellery business to contain the Current account deficit of our country,” Managing Director Rajesh Mehta said in a statement.
The RBI and the finance ministry have embarked on several measures to rein in the freeflow of gold imports into the country, as the commodity was one of the top reasons for the widening CAD in India. Following these measures, total imports of gold into India crashed to about 3-7 tonnes a months from an average of 60 tonnes a month earlier.
The sale of jewellery has also taken a hit of about 25-30 per cent across the industry as consumers cut back on discretionary purchase.
However, the company is going ahead with its expansion plans of adding 33 more Shubh Jewellers showrooms in the state in the next two quarters. The company also plans to expand its retail presence to the other states in the South, namely Karnataka, Kerala and Andhra Pradesh. The company has plans to open 500 Shubh Jewellery showrooms by the year 2017.
Rajesh Exports has been seeing rising profitability from its retail venture in the last few quarters and while it gets about 4 per cent of total revenue from the segment, it accounts for over 10 per cent of its net profits. The company has a jewellery manufacturing facility with a capacity to process 250 tonnes of gold into jewellery. The company imports raw gold, refines at it’s own refinery and manufactures jewellery from this refined gold.
