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According to Sanjeev Bhatia, the hike in import duty on gold jewellery was an overdue move to rationalise the duty structure after the duty on raw material went up to 10 percent.
It was an overdue move to rationalise the duty structure and I am happy that it has been done now
Hailing government's decision to increase import duty on gold jewellery from 10 percent to 15 percent , Sanjeev Bhatia, President Finance, PC Jeweller says the move was expected since it was demanded by the industry after duty on raw material went up to 10 percent. “It was a logical step to enhance the duty on the finished goods as well, which has now been done and we are happy,” he says in an interview to CNBC-TV18.
The company is unlikely to get affected by the hike during the upcoming festive season as it does not import any jewllery, says Bhatia “It was an overdue move to rationalise the duty structure and I am happy that it has been done now,” he adds.
Below is the verbatim transcript of Sanjeev Bhatia's interview on CNBC-TV18
Q: What do you think of the increase in import duty on gold jewellery from 10 percent to 15 percent?
A: This move was expected and was being demanded by the industry as the duty on raw material had gone up to 10 percent. So, it was a logical step to enhance the duty on the finished goods as well, which has now been done and we are happy.
Q: While all of this will curb gold imports, this is also happening just before the festive season and wedding season. What will this mean for companies like you and the consumers?
A: As a company we do not import any jewellery because the jewellery which is being made in India is not manufactured anywhere in the world. So, we are not affected. It was an overdue move to rationalise the duty structure and I am happy that it has been done now. Being a festive season or non-festive season does not make a difference.
A: India does import some diamond jewellery and some specialised jewellery. If there is a price differential then the imported jewellery becomes more attractive and the business starts moving away from the domestic articles to outside the country.
Even though the immediate effect wouldn't have been there but in the long run it had to be done because you cannot import finished goods at a cheaper rate even when they are not exactly what is being manufactured in India because the customer would start getting attracted towards the cheaper variety available.
Q: What has been the effect of the import duty on gold going up and quite consistently in the last few months but the same not happening for jewellery. What has happened in the last few months that the industry actually asked the government for this import hike?
A: The industry has been asking for import hike to bring two things on par. Initially, the import duty on gold was hardly 1 percent which was increased in phases but duty on jewellery finished goods was not changed.
PC Jeweller stock price
On March 10, 2014, PC Jeweller closed at Rs 100.65, down Rs 3, or 2.89 percent. The 52-week high of the share was Rs 128.35 and the 52-week low was Rs 65.95.
The company's trailing 12-month (TTM) EPS was at Rs 19.83 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 5.08. The latest book value of the company is Rs 77.54 per share. At current value, the price-to-book value of the company is 1.30.
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