FY10 revenue likely to be flat: Renaissance Jewellery

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FY10 revenue likely to be flat: Renaissance Jewellery

Sumit Shah, MD, Renaissance Jewellery commenting on its business said that the last year revenues were about Rs 750 crore and the year before that it was Rs 675. “We would be about flat or maybe 5% below in terms of revenue,” he added

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Renaissance Jewellery Q1 net profit at Rs 2.3cr ALSO READ See latest News about Renaissance Jewellery See previous management interviews See what other Experts & Brokerages are saying about Renaissance Jewellery Renaissance Jew BSE | NSE 31/05/12 Are Mutual Funds betting on Renaissance Jew?

Precious metals have been shining, gold near its all time highs; in fact it has crossed that in the Indian markets and close to that USD 1,032 per ounce level on the international markets.

Sumit Shah, MD, Renaissance Jewellery commenting on its business said that the last year revenues were about Rs 750 crore and the year before that it was Rs 675. "We would be about flat or maybe 5% below in terms of revenue," he added. However, on the profitability front, Shah said, the company expects to remain flat or slightly above its profit.

Here is a verbatim transcript of the exclusive interview with Sumit Shah on CNBC-TV18. Also watch the accompanying video.

Q: Gold would be raw material cost for you; can you give us some perspective as a company how much would you hedge, what does the increase in gold price mean eventually to your topline and does it deter demand in spite that we are going in to that oil import and festive season?

A: I think for us as a company the impact is not significant because our prices for products are locked when we receive the purchase orders. So, it doesn't have any immediate impact on our profitability. But in the long run we see a significant shift with consumers buying in international markets -- more silver and diamond product as compared to gold and diamond products because at that USD 99- USD 199 ( 99 dollars, hundred and ninety nine dollar) price points, its virtually very difficult to do gold and diamond products anymore.

As a company over the past couple of years we have seen a dramatic shift in our total revenue mix with silver and diamond becoming much important part of our sales.

Q: How is the demand for diamonds in that case?

A: The demand for diamond because of the events in the past one year has been relatively muted. I think most retailers are cautiously optimistic going into the fourth quarter. 40% of annual diamond-jewellery sales happen in the fourth quarter. It is bit early to say but the thanksgiving to Christmas season will be determinant factor to sales and how 2010 is likely to be.

Q: Overall how is business? What kind of volumes do you think you will do in the first half, in second half and how will that compare to your average of the last two years?

A: Last year our revenues were about Rs 750 crore. The year before that it was Rs 675. I would say that we would be about flat or maybe 5% below in terms of revenue. But on the profitability front because we have made a shift into various newer product categories and shifted our sales geographically -- we expect to remain flat or slightly above our profit.

Q: Do you sense China and India will be able to absorb that flat that you are facing possibly from the US markets because US, I still believe accounts for 45% of all global jewellery consumptions?

A: I think the segment that we are in, India is relatively small. I think majority of Indian jewellery sales is still plain gold jewellery, which is a sector we are not in. Overall I am not sure what the impact gold will have on the Indian consumer but I am guessing that would definitely have an impact on consumption. China definitely is a big and growing market. As a company we are focusing and working on diversifying our sales because up until a couple of years ago 90% of our revenues were from the US; we have been able to diversify that and bring that down to 75%. We do see over the next five year horizon emerging markets such as India and China to account for a greater part of our sales.

Q: Could you clarify one small point: what were the announcements in the Foreign Trade Policy. I mean what kind of an impact they will have on Renaissance Jewellery or on the industry itself? Do they make a seminal difference?

A: There were no changes in the Foreign Trade Policy that really made any difference to the jewellery sector. A lot of them related to drawbacks and things had not related to us, since we are operating in a special economic zone (SEZ) environment, there were no material changes in the Foreign Trade Policy that would affect us.