 "Jewellery stocks: Limited impact of excise duty levy")
The imposition of one per cent excise duty on jewellery articles (other than plain silver jewellery) announced in the Budget is a near-term negative for organised players such as Titan, Tribhovandas Bhimji Zaveri (TBZ), PC Jeweller. "The levy can be passed on to consumers and is more likely to increase the compliance of unorganised jewellers, giving them lesser leeway to split jewellery bills above Rs 2 lakh as the levy establishes a trail," says Abhishek Ranganathan of Ambit Capital.
If implemented properly, these moves will aid in creating a level-playing field for organised and unorganised players. This would be a positive for most listed jewellery companies. Any delay in implementation will hurt organised and listed players. Icra believes the impact on jewellery demand due to higher taxes is likely to be minimal, as gold prices are already low.
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After falling one to four per cent on Monday, these stocks inched up 0.7 to 6.5 per cent on Tuesday. Part of the reason for the fall could be confusion on Budget provisions such as tax collected at source (TCS). Going by the Budget, TCS is applicable to purchases of gold above Rs 2 lakh; in case of jewellery, for purchases above Rs 5 lakh; these two points came out in a clarification on Tuesday; this could be a reason for the uptick in jewellery stocks on Tuesday. There will be some increase in input costs for jewellery makers on higher duties for doré imports and manufacturing of gold bars, which would be passed on, say analysts. Doré is an alloy of gold.
Overall, analysts remain positive on jewellery stocks. Return of gold-harvesting scheme is likely to aid jewellery revenues of Titan Company. Continued growth in domestic and export markets and inexpensive valuations are why analysts remain positive on PC Jeweller.
