Jewellery stocks lose sheen on duty hike

Jewellery stocks have been on the backfoot ever since the Budget 2012-13 announced measures to discourage gold imports that have added significantly to the country's current account defici t.

Shares of jewellery firms have fallen by up to 14 per cent after the Budget was tabled in Parliament on March 16, according to information available with the stock exchanges.

Analysts said the hike in excise duty on precious metals and the ongoing agitation by jewellers since March 17 against the government move will erode bottomlines of these companies.

The stocks which felt the pressure were Gitanjali Gems (down 14.29 per cent), Shree Ganesh Jewellery (13.97 per cent), White Diamonds (13.02 per cent), Goldiam International (6.29 per cent), Su-Raj Diamonds (5.92 per cent) and Zodiac JRD-MKJ (3.36 per cent), Vaibhav Gems (2.42 per cent), Suashish Diamonds (1.41 per cent), Thangamayil (1.71 per cent). However, Shrenuj & Co is the lone gainer in the league and rose 1.54 per cent.

"Doubling of import duty and the proposal to impose excise duty on unbranded jewellery have affected the investor sentiment. Besides, these proposals agitated the jewellers, which in turn would affect the bottom line of the companies," CNI Research CMD kishor Ostwal said.

"In addition, some jewellers fears that budget proposals may lower consumption of these precious items resulting in lower profitability for jewellery companies," he added.

Bombay Bullion Association President Prithviraj Kothari said, "The doubling of customs duty will give way for illegal channel to operate and reduce gold demand significantly by 30-40 per cent."

The Budget proposed an excise duty of 1 per cent on non-branded jewellery of precious metals (other than silver) and doubled import duty on gold to 4 per cent. To prevent round-tripping, it proposed to impose basic customs duty of 2 per cent on cut and polished, coloured gem stones at par with diamonds.

These steps have triggered widespread protests by jewellers in various parts of the country and they have been on strike since March 17.

To sort out the issue, Finance Minister Pranab Mukherjee has called a meeting with jewellers' associations on Friday.

Gold and precious metal import has grown 50 per cent during the first three quarters of 2011-12 fiscal, driving up the current account deficit.