Government-owned MMTC is gradually shifting focus from trading in minerals to related businesses, including metal manufacturing. Sanjiv Batra, chairman and managing director since 2006, shares his future plan with Dilip Kumar Jha. Excerpts:
MMTC tested many markets from iron ore to pulses and finally landed into the gold and jewellery-making business. Why so many diversifications?
We have been doing a lot of trading on the government’s behalf and MMTC is a nominated agency for gold imports. We have been supplying gold to a number of local customers for 23 years. Therefore, jewellery-making is a logical extension of our business, which is currently fetching good results. We are also importing pulses for selling in local markets.
You have tied up with a Swiss company to set up a gold refinery near Delhi. The existing refineries across the country are operating at hardly 30-40 per cent of installed capacity, due to the long cycle of scrap gold recovery. How are you planning to feed the proposed refinery?
Gold refining is a capital-intensive business and private players may not be able to deploy adequate investment in it. But, for us, capital investment is not a constraint. Therefore, entering the gold refining business will be supportive to our existing ones.
The proposed refinery will entail an investment of Rs 147 crore, in which MMTC has 26 per cent equity, while the profit sharing will be 2:1 between MMTC and a Swiss company. The refinery is likely to come on stream by April 2010.
Are you also scouting for gold mine acquisitions overseas and in India?
We have formed a strategic tie-up with National Minerals Development Corporation (NMDC) to explore potential for gold mine acquisitions abroad. But, we are not planning any gold mine buy in India as there is no high recoverable gold reserve in India.
What percentage of MMTC’s total business is gold trading and gold jewellery sales?
MMTC has been the pioneer in imports of diamonds, precious stones and bullion. It is India’s largest import of gold, handling over 145 tonnes, which is distributed for supplies to bullion dealers and small and medium jewellery manufacturers. This is distributed through 20 outlets. We are also a major player in import of silver, handling nearly 1,250 tonnes. Bullion trading currently consists of about 60 per cent of our Rs 37,000-crore annual turnover.
Are you planning to introduce any brand in gold jewellery?
We have tied up with the Gitanjali group to introduce gold and silver jewellery under the ‘Shuddhi’ brand for catering to high-end consumers. Purity is a passion at Shuddhi Jewels, a chain of stores that combines the strengths of two of the biggest companies in the jewellery segment, to offer customers the benefits of both a traditional jeweller and all the conveniences of a modern retail format. We already own a brand, ‘Sanchi’ in silver jewellery and silverwares. But, branded jewellery will target premium-class customers.
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You are also participating in rough diamond auctions abroad on behalf of local customers. But, of late, customers have started abstaining from hiring an agency, including MMTC, for rough procurement. Where do you stand today ?
We successfully procured rough diamonds worth $3.7 million (Rs 17.4 crore) in October, followed by $5 million (Rs 23.5 crore) in November. That shows customers’ great confidence in us.
MMTC’s profitability is very low. Do you have any plan to boost it?
Profitability always remains low for a trading company like MMTC, which also imports commodities on Government’s behalf. But we have already entered into manufacturing activity with the formation of Nilachal Ispat in Orissa and are diversifying into trading on exchanges by acquiring a 26 per cent stake in Indian Commodity Exchange. We have also formed a currency futures trading platform – United Stock Exchange – which is likely to go live soon. We have applied for final approval from the Securities and Exchange Board of India, which we are expecting by next week. All these activities will boost our profitability in the years to come.
