Gold prices fell below Rs 30,000 per 10g level on Thursday, mirorring a fall in gold prices in overseas markets. Gold has now fallen around 6 percent in the last 30 days.
"There has been a significant correction but what we are seeing is volumes will pick up and we are seeing grammage growth back into a decent number...The pattern generally has been people work on a budget and they have a certain value in mind when they come to a store and if they get more grams it makes so much more sense for them to buy gold," Subramaniam told CNBC-TV18.
Also read: See gold at $1500/oz; profit taking in commodities says UBS
After a weak first half, Titan's jewellery volumes picked up 12 percent in the third quarter, helped by festive season demand and start of the wedding season. Jewellery EBIT margin picked up 80bps to 9.8 percent in Oct-Dec, according to Bharat Chhoda and Dhvani Modi of ICICIDirect.com, the retail broking arm of ICICI Securities.
Subramaniam sees customers walking into stores on the back of the fall in gold prices and a "reasonably strong" wedding season.
He also said that the company hedges its entire gold inventory and didn't have any inventory gains or losses.
Meanwhile, studded jewellery volumes are also expected to see an uptick in the Jan-March quarter on the back of the promotional 20 percent discount on diamonds offered by Titan, the ICICI Direct analysts said in a recent report.
Titan shares were down 0.5 percent at Rs 256.40 on NSE in noon trade.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: We have seen some slip in gold prices off late; it stands at a seven month low. What impact will it have on your realisations as well as in terms of your volume performance for Q4?
A: There has been a significant correction but we think volumes will pick up. We are also seeing grammage growth back into a decent number. In our first two quarters there was a decline and in the last quarter we had a 12 percent growth and that should be more than sustained this quarter as well, going by the prices.
Generally, people work on a budget and they have a certain value in mind when they come to a store and if they get more grams it makes so much more sense for them to buy gold. So gold is just not an ornament, it is also investment and it makes lot of sense for them to do that.
Actually it is welcome if gold prices ease off a little because you find customers walking back to stores and particularly with the wedding season being reasonably strong this year, we should see more walk-ins now.
Q: Is there any immediate loss in terms of inventory that you may have purchased at more expensive levels?
A: No, because we hedge our gold entirely. We don't have any inventory gains or losses at all. We buy and sell at the same rate and that is the mechanism we follow. We use the gold on lease scheme for that very effectively. So, any reduction or drop in gold rates will not impact us at all.
Q: Is your internal research telling you that we are going to see some more fall in gold prices or this is it?
A: We don't have much of an internal research on this because our entire business model is based on just the making charges. We don't have a view on gold as yet. Of course we do read a lot of what reports come out from various bankers and so on and so forth. Frankly there have been very contradictory views.
We have got views which talk about gold rates going past USD 2000 per ounce again sometime during the year. There also have been contradictory reports saying that the bull run gold has been having for the last five-six years is about to reverse .So it is very difficult to say actually what could happen.
However, I would assume that the economy in the US is going to change now; the Quantitative Easing three (QE3) reversal, if they are not going to be spending so much more then gold should start dropping because the dollar would start strengthening and that is a more likely possibility.
Q: You have indicated that the volume growth of 12 percent that you saw in Q3, we are likely to see that in Q4 as well. Is it only because of the festive season or the lag effect of the festive season spilling on to Q4 as well? Can this double digit volume growth extend on to FY14 as well?
A: I won't be surprised if it extends because now if you were to look at today's gold rate vis-à-vis what it was last year and if you were to knock off the customs duty impact, which is significant over the last one year the customs duty has gone up significantly. Even with that it is less than 10 percent and therefore volume growth is bound to happen, the industry will grow.
A double digit volume growth is not something which I would rule out at all.
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