Gold Sales May See 15% Growth On Customs Duty Cut, Says Senco’s Suvankar Sen
In the first quarter, high prices caused some consumer hesitation. However, the current lower prices are likely to stimulate buying activity, according to him.
There could be a 10-15% rise in gold sales as prices of the yellow metal have been falling, said Suvankar Sen, managing director and chief executive officer of Senco Gold Ltd.
The dip in prices has been triggered by a duty cut on gold and silver announced in Budget 2024. This decrease is expected to boost consumer interest, particularly with key festivals like Raksha Bandhan and Diwali approaching, as well as the wedding season in November, Sen said.
"Historically, when gold prices fall, consumer enthusiasm tends to increase. We anticipate a 10-15% rise in sales due to lower gold prices," he said. In the first quarter, high prices caused some consumer hesitation. However, the current lower prices are likely to stimulate buying activity, according to him.
Addressing concerns about inventory management. Sen mentioned that Senco Gold typically hedges its inventory through MCX and gold loans from banks, allowing for flexibility in price adjustments.
Reduction in gold prices may lead to a temporary hit to some business, due to previously paid duty. Senco's hedging strategies are designed to mitigate these impacts with no hits, the top executive said.
"The custom duty cut is expected to benefit organised players like Senco Gold, by leveling the playing field against unorganised competitors," he said. This creates a more equitable market environment and allows the company to better showcase the advantages of buying from established, trustworthy sources, he said.
Sen emphasised that consumer trust and compliance with regulations are key differentiators for organised retailers.
Regarding inventory, Sen revealed that Senco Gold maintains a hedge of approximately 90-95% through a mix of gold loans and MCX contracts. Half the inventory, which is hedged on MCX, has helped cushion the impact of recent price reductions.
Going Forward
Sen reaffirmed Senco Gold’s expansion strategy. The company plans to continue expansion primarily in northern and eastern India, aiming for an 18-20% growth in both top-line and bottom-line figures for the year. The jewellery retailer currently operates 166 stores, a mix of company-owned and franchise locations, with franchises facilitating entry into tier-2 and tier-3 cities.
On lab-grown diamonds, which have been gaining attention in the industry, Sen provided insight into their current market position. While lab grown diamonds hold a 2-3% share in the diamond jewelry market, they are not expected to replace natural diamonds anytime soon, which holds a 15-25% market share.
Lab-grown diamonds are still in the early stages of consumer acceptance in India, Sen said. "They currently represent about 2-3% of the market. While they offer an alternative, real diamonds continue to offer better long-term value and returns."
