1. Don’t see gold price fluctuations affecting sales a lot

Don’t see gold price fluctuations affecting sales a lot

According to the World Gold Council, Indian demand for the metal was 974.8 tonne last year...

By: | Published: December 12, 2014 1:04 AM

According to the World Gold Council, Indian demand for the metal was 974.8 tonne last year, second only to China’s. Kerala-based Kalyan Jewellers claims it is the country’s largest gold retailer by turnover, having clocked R8,000 crore in FY14. The company was in the news recently with leading PE player Warburg Pincus buying a minority stake with R1,200 crore. The jewellery chain is reported to be valued around R12,000 crore. TS Kalyanaraman, chairman and managing director, Kalyan Jewellers, talks to Rajesh Ravi about the company’s plans. Excerpts

With Warburg Pincus buying a stake, have you fast-tracked your expansion plans?

The investment by Warburg Pincus is indeed accelerating our growth plans, especially on the distribution side of the business. Kalyan Jewellers has already added a record 11 showrooms in the last 60 days, including launching five on the same day in Kerala, two in Bengaluru and one in Mumbai. We also expanded our presence in the UAE with three additional showrooms. Our plans of boosting our network in 2014 have been implemented. We have enhanced our position as a national brand by developing our presence in key markets across the country. Today, we have 72 showrooms in India and West Asia. We will expand our distribution network, foray into new markets like Kuwait and Qatar and tap newer markets in India.

What are your expansion plans for India?

We plan to invest nearly R800 crore to strengthen our presence in the domestic market. In the last two months, we have added eight showrooms in India. Now, we have 63 showrooms in the country. Plans are afoot to launch two stores in Jalandhar and Amritsar this month. Our plans are to consolidate our national presence and expand our network, especially in northern and western markets. We also plan to enter the eastern markets, with a foray in Bhubaneswar. Our endeavour is to increase our domestic presence by over 25% through the course of the next financial year.

Apart from West Asia, which has significant Indian population, where are you looking at?

We plan to enter Southeast Asian markets like Singapore and Malaysia next fiscal.It is reported that you are targeting a turnover of R25,000 crore in three years.

Will lower gold prices affect the plan, or do you see an upswing in demand?

India’s gold story is strong, given the tradition. We don’t expect price movements to significantly affect sales. In fact, we have seen that when prices come down, demand increases.

What is your outlook on sales of jewellery given gold prices are seen going down and other investment options, like equity, are performing better?

We are bullish on sale of gold jewellery, diamonds and studded stones. The affordable diamond segment is showing encouraging growth. Given the positive consumer sentiment in the economy, we expect demand to increase and consumption of jewellery to rise.

Have you ever thought of going public? You have a good valuation and it will help you fund your expansion plans?

Currently, we are well-capitalised. Our expansion plans are being funded through the Warburg Pincus investment and internal accruals. At present, we don’t have any plans to go public and are focused on pursuing growth.

Are you thinking of diversifying to other sectors as you have achieved significant brand recall and management expertise?

We have a real estate division that is a separate company by itself and was established four years ago. We have good expansion plans in Kalyan Developers also.

Is consolidation on the cards in the industry with smaller jewellery shops finding it difficult to survive?

The organised sector is still nascent in the country and there is enough demand for quality players to grow. As customers become more discerning, the industry will have to ensure transparency in pricing and quality.

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