Monthly instalment schemes floated by jewellers are keeping the gold demand alive for the retailers, with the amount received by them from consumers continuing to grow in corpus when overall gold demand remains weak.
Market leader Tata-owned Tanishq has disclosed that monthly deposit at its stores has gone up by 10% year-on-year (yoy) in FY24 to touch Rs 4286 crore, despite the higher base of previous year. For Reliance Retail, it is up by 24% yoy at Rs 349 crore at its Reliance Jewels outlets and Senco Gold by 12% yoy at Rs 216 crore, as per annual reports of these retailers.
PNG Jewellers managing director Saurabh Gadgil said the deposit for them is up by 23% yoy to Rs 400 crore in FY24 and it expects to cross the Rs 525 crore mark this fiscal. In contrast, the World Gold Council (WGC) has estimated that gold demand in calendar 2023 had declined by over 3% in absolute volume or quantity in India due to high prices.
Kavita Chacko, research head – India of WGC, said that market reports indicate that overall buying momentum remains healthy now, with an uptick compared to the period before the import duty reduction. Import duty on gold was brought down to 6% from 15% in July in the Budget, which prompted customers to place orders for heavy jewellery for weddings later this year and for the upcoming Dhanteras.
Chacko said the monthly gold purchase scheme leads to buying of heavy jewellery pieces. Reports from different retailers show that these schemes constitute 10 -15% of their sales, she said.
“Those who invest in these schemes to buy jewellery are agnostic to price rise and they will continue to invest. Therefore, we expect that the monthly gold purchase schemes will drive demand for gold in the upcoming festive season and the year,” said Chacko.
On Tuesday, gold prices touched life time high with the 24-karat yellow metal hovering around Rs 76,911 per 10 gm. Last year, around this time prices were around Rs 60,000-61,000 per 10 gm. The jeweller EMI scheme starts from Rs 1,000 per month. The amount received from customers under the jewellery purchase schemes of the jewellers are construed as deposits under the Companies Act, 2013.
Analysts said these schemes have become critical to boost demand.
“Advance purchase schemes run by top jewelry players act as a catalyst who are price conscious given volatility in gold prices,” said Shirish Pardeshi, research head at Centrum Broking.
“From the retailer perspective since they offer attractive schemes such as fixing gold rate to various discounts including 35-40% off on making charges, it helps to attract footfall. In the jewellry segment if they are able to build one satisfied customer, it leads to repetitive purchases,” he said.
Suvankar Sen, managing director of Senco Gold Ltd, said that in FY24 the company had to discontinue the schemes for four months as it had reached 25% of the company’s net worth.
“According to the Companies Act, one cannot take deposits in this situation. Then we had to take board and shareholder approvals, and apply to the Registrar of Companies to obtain necessary permission to restart deposits. Nearly 8-10% of our sales now comes through these schemes,” he said.
WGC has recently revised the gold consumption for calendar 2024 to 850 tonnes from 750 tonnes estimated earlier. In the first half of this year, gold demand was to the tune of 288.7 tonnes as compared to 284.4 tonnes of last year.
