PC Jeweller is in focus as Crisil upgrades their long-term rating. In an interview to CNBC-TV18, Sanjeev Bhatia, CFO of the company spoke about the rating and latest happenings in his company.
He also shared his views on the rule that's announced that gold above 22 carat cannot be exported.
He said PC Jeweller never exported jewellery above 22 carat.
He further added that exports are about 32 percent of company's total revenue.
On business front, he is confident of maintaining the growth rate for FY18.
He sees a gradual shift occurring from unorganised to organised players.
Saw pre-goods and services tax (GST) buying during the last 10 days of Q1, he added.
Below is the verbatim transcript of the interview.
Latha: I just wanted to clarify about this rule that got announced yesterday that gold above 22 carat cannot be exported. Is there any such gold jewellery above 22 carat that is exported by you at all?
A: No not at all. The company exports only hand-made 22 carat gold jewellery. So, as a company we have never ever exported any jewellery above 22 carat. I am frankly not even very sure if there is any jewellery above that; it may be some other medallions, coins, or some other items like that. So as a company we are not affected by this ruling at all.
Latha: So it is only more than 22 carat, so 23-24 carat jewellery if at all could be affected, not 222 carat?
A: Yes, correct. Not 22 carat. 22 carat is one of the standard jewellery carats all over the world.
Anuj: Are you saying that there is zero impact on your company?
A: Yes, there is zero impact on our company. We export only 22 carat hand-made plain gold jewellery.
Latha: How much are exports and how much are domestic sales for you?
A: Our exports though on quarter-to-quarter (QoQ) they can vary, but at a steady state, they are about 30-32 percent of our total revenue. I am sure that they would be continued to maintain at that level only.
Latha: This rule that over 22 carat jewellery and gold cannot be exported, what will be the impact on the industry, what is the goal for this policy?
A: I really don’t know; to be frank I am not aware of what will be the overall impact on industry. However, I can only speak for my company as such, which I have already very emphatically said that since we do not export anything above 22 carat, so, we remain unaffected. I am not very much aware as to which industry player is exporting what component.
Latha: Let me come to your own business then. You reported very strong numbers, 27 percent growth in revenues, is this a run rate that you can maintain for the full year?
A: We are pretty confident because the way the things are changing, we have been talking for many years now and I am sure I would have always said that there is a gradual shift happening all along from unorganised towards organised jewellery players. With the advent of new regulatory norms being imposed by the government, we started from excise and then Pan and now finally GST. So this shift has become only stronger and we are very confident that this shift would continue to help all the organised players in this sector. Since we are now expanding very rapidly in tier II, tier III, and smaller locations also, we will be able to get the benefit of this shift in a much stronger way now.
Anuj: We did see the benefit of GST shift maybe already in your last quarter’s numbers. Can we extrapolate that into full year?
A: Yes, I think so. We are pretty confident that we should be able to maintain this growth momentum. There is no 100 percent accurate prediction, but this growth momentum should be maintained. It can vary from a few basis points here and there.
Latha: How much of this could have been pre-GST buying?
A: The pre-GST buying which we saw was basically in the last week only. It was not a major factor for us. However the growth momentum is continued to maintain in this quarter as well. So, the pre-GST rush was there for last 7-10 days when everyone – it was just a frenzy all around, not only for jewellery but for all around. However, we have seen this momentum to be maintained in this quarter also. So, we are pretty confident that is why I can very confidently say that this momentum should be maintained throughout the year.
Latha: I am asking you because if you look at gold imports, February, March, April, May, we did see about nearly USD 4 billion of gold getting imported. However June and July have shown around USD 2 billion. So, there seems to be that either a pre-GST or some other impact. There is a distinct slowing in imports that is not reflected in your sales at all?
A: If I talk about my company as such then because we also sell a very huge amount of diamond jewellery so the sales are both for gold as well as diamond jewellery and regarding slowdown in gold import, I can only say now as the festive season comes upon us and the jewellers again start again restocking, the imports would go up again. So it is a matter of flow.
Latha: For the full year can we work with a revenue growth of 25 percent and a margin of about 11 percent?
A: I think that seems to be pretty much achievable. However, though I would not like to – since we don’t predict any guidance, but these are figures which I also feel pretty confident that these are very much in an achievable range.
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