Jewellers back in biz, industry keen to recoup losses

All jewellers on Wednesday called off their strike. About 60 percent of jewellers had already called off the strike after the government's assurance that the Ashok Lahiri Committee will consider all their demands.
The jewellers had gone on a strike since March 2 after Finance Minister Arun Jaitley in his Budget announced a 1% percent excise tax on non-silver jewellery.

Sanjeev Agarwal, CEO, Gitanjali Export Corporation, says although the industry is not happy that the duty has not been rolled back, he is relieved that jewellers are back in business.The company will make an attempt to recoup at least a part of its losses, says Agarwal.

However, Bhaskar Bhat, Managing Director of Titan Company thinks it would be an uphill task to recover sales losses for Titan as they were steep. The company sees an impact of 7-8 percent on sales run rate in the fourth quarter, says Bhaskar. 

However, Bhaskar believes that the fundamental demand for jewellery is still intact.Below is the verbatim transcript of Sanjeev Agarwal and Bhaskar Bhat’s interview with Reema Tendulkar, Saurabhi Upadhyay and Manisha Gupta on CNBC-TV18. Manisha: What is your sense, many Maharashtra shops had already opened shutters and so was the case with many other states but Gujarat and some other states have called off the strike today. What is your sense on how the industry stands now? Agarwal: You have put things into perspective but let me also say that there was one other element where the reason why the trade was vehemently opposing excise and the reason was that if GST was getting introduced and the government is confident of it getting introduced within a year this time then there was no need to get one more regulator in such a large sector which primarily runs on a MSME basis where there are karigars and micro units all over the country. Domestic jewellery manufacturing, 90 percent of that is in the MSME and micro sector, hence, the concern and not issue with regards to either additional tax collection or any other issue with regards to regulation per se. However, having said that, on March 19 there was a extensive meeting by a number of trade bodies which was represented by the government by Piyush Gupta and subsequently Amit Shah also came into the meeting and it was agreed that a high level committee with Ashok Lahiri would chair and go through the concerns of the sector and it will consist of seven members of which three will be from the trade. Also, temporarily, it was agreed that certain draconian laws in the excise will not be levied on the gems and jewellery sector such as excise officers coming into the premises of the jeweller or the manufacturer and as the perception about these excises officers is, they tend to pickup random samples for themselves. Manisha: Whatever has been done until now, is the industry happy, we have seen all of those jewellery stocks run up cheering the move really? Agarwal: The industry is not really happy about the fact that the excise has not been rolled back. There definitely is a lot of concern still on that account. However, taking into consideration the karigar’s and the fact that they are moving out and they are even committing suicides, the intention is that let us get back to business what we know best and get out of politics of the excise levy and prevail on the government to be more logical towards the levy and the operational process of the levy.  Surabhi: You had put out a fourth quarter warning suggesting that there could be a bit of an impact on the numbers because of the jewellery strike, the jeweller strike and also because of the changes in the overall threshold, bringing it down from Rs 5,00,000 to Rs 2,00,000. I just want to get your sense. Now that the strike is over, how are you looking at the outlook in the numbers for your company? Bhat: The loss of sale on account of the strike was pretty steep for us. Although, we did not believe in the strike, we joined in the strike wherever it was necessary. So, the month of March was quite a big impact and then in April, up till now. The pan card impact of course, has been taken on since January. It s a good thing the strike has been called off, but the lesson from this strike is that we have to listen to the jewellers. The small jeweller who have not been accustomed to recording their production for the sake of excise duty, they need to be educated, they need to be told how this can be done and the friendliness of the authorities on the ground is what needs to be enhanced. The jewellers fundamentally saying that inspector Raj will come back because they have been used to this kind of treatment and that sensitivity government needs to have. While one did not support the strike. I understand the pain of the small jeweller, because they are used to this kind of work. Manisha: As you pointed out, not too many friendly things for the industry. The import duties are at record highs. You have the excise duty coming in and the pan card as well. And we all understand much of the jewellery business happens in cash. And apart from that of course, there are these fears about the Fed interest, rate hikes as well which have been impacting the industry and prices. So going ahead, as my colleague also was asking, what is your sense on where the industry really is headed in sense of demand, prices, jewellery exports, etc. Bhat: Fundamental demand for jewellery in India is still intact. It is a very large market. All this that is happening is in the interest of the country becoming more transparent and paying taxes and so on. Therefore, I would expect that there would be an interim period during which there is a lull in demand because of all this. But let us say customs duty has been around for a long time and people have got used to prices. Similarly, Rs 5,00,000 plus pan card has been around for a long time. Now, it has come down to Rs 2,00,000. Therefore, I do not see a compression in demand. There is only going to be a restructuring of demand. A large number of people, younger people certainly are welcoming all this transparency and trust that is being introduced in the industry. I should imagine that it will move more towards the adornment than investments which is where Titan’s strength lies. Reema: When you say that the loss on account of the jewellery strike was quite steep. Is it possible to at least give us a sense of how much that loss could be? For instance, your quarterly revenue run-rate was roughly about Rs 3,500 crore. What percentage of that has been hit on account of the strike per se, which could be recouped in the coming quarters? Bhat: Recouped is very difficult because weddings that have happened up to now have happened and the people have not bought, that is lost sale. Recouping is not possible. It is just that it could be of the order of magnitude of 7-8 percent. Surabhi: If you could tell us by when do you hope to get back to the normal quarterly run-rate? Would operations completely normalise in Q1 including the pan issue of the new threshold being Rs 2,00,000? Can we expect most of that impact to start normalising or will it take longer than Q1-Q2 perhaps for the revenue numbers to come back to where they were? Bhat: You must understand that they entire benefit of golden harvest scheme will be available during this quarter. The pan card is almost four months old now and the jewellery strike has been called off. So, we should see a good quarter.