Malabar Gold upbeat about festive season sales

Gold as an asset class has improved its significance during this pandemic period. Both as a hedge against inflation and also as a safe haven investment, this asset class has outclassed others over these years. Additionally, the demand for gold jewellery is also growing among young people. Sensing the demand uptick after the disruption caused by the pandemic, gold jewellery companies are raising their game through aggressive expansion plan.

Malabar Gold and Diamonds, has decided to invest Rs 750 crore in Telangana to set up manufacturing facilities and a refinery in order to cash in this emerging demand.

The company has chosen Telangana given State's skilled manpower, quality infrastructure and positive government support. In a conversation with Bizz Buzz, company's Chairman MP Ahammed said it is planning to boost its global retail presence with the proposed worldwide launch of 56 stores, including 40 stores across India in FY22.

The jewellery group is planning an investment of around Rs1,600 crore (this fiscal) for its expansion drive which is estimated to generate 1,750 of new jobs. The company also sees increased buying from youngsters and has focused on making jewellery in various designs suiting these young customers' modern tastes and preferences.

How is the overall demand environment in the last one year as far as demand for gold and diamond jewellery is concerned? How strong is the demand revival post the second wave?

Subdued consumer sentiments and restricted operations timings affected overall retail sales volumes in Q1 (April-June) of this fiscal. The impact on sales was particularly noticeable between the last week of April and May. However, we have seen significant improvement in sales with gradual unlocking measures over the last few months. If there is no rise in caseloads or escalation in infection rates, we are looking forward to a robust festive season. There is a significant improvement in consumer sentiment and demand with indications of revival in economic activity.

What are the key factors driving the current investment announcement of Rs 750 crore in Telangana?

Actually, the proposed investment in Telangana is part of our global expansion programme. We intend to boost our operational footprint across untapped domestic and export markets. We studied the investment potential of different states in India and found Telangana to be a viable investment destination on account of the state's skilled manpower, quality infrastructure and positive government support. Malabar Group will be setting up its first gold refinery unit in India along with its largest gold and diamond jewellery facility with an investment of Rs750 crore. This initiative will be a key opportunity for showcasing and popularizing the skills and expertise of Telangana's karigars in India and abroad. Malabar is now having 15 retails showrooms in Telangana employing 1000 persons. We have decided to expand our retail chain in the state.

What are your expansion plans in the current fiscal year in India and abroad?

The company is planning to boost its global retail presence with the proposed worldwide launch of 56 stores, including 40 stores across India in FY22. We are envisaging an investment of around Rs1,600 crore for the expansion drive which is estimated to generate 1,750 of new jobs.

In India, our expansion strategy will be centered in states like Tamil Nadu, Telangana, Andhra Pradesh, Karnataka, Maharashtra, Delhi, West Bengal, Uttar Pradesh, Odisha and Kerala. Internationally, our expansion drive will be focused on further strengthening our position in markets like Singapore, Malaysia, Oman, Qatar, Bahrain and UAE.

The government has made BIS hallmarking mandatory now. Will it support the growth prospects of organised players like Malabar Group?

Gold is considered as an auspicious metal that blends tradition with purity which is of paramount importance since the value of the yellow metal hinges solely on it. We strongly believe that our customers have the fundamental right to get pure gold when they buy ornaments from our showrooms. Without any shade of doubt, we can unequivocally say that we sell only gold ornaments of highest purity in our showrooms, a tradition we have been continuing for the past 20 years. We have been selling BIS 916 hallmarked gold ornaments much before gold hallmarking was made mandatory in the country. We are selling them not only for the benefit of the customers, but for our reputation as well. With the certified confirmation of gold purity and ensuring credible proof of the metal's quality, hallmarking will help traders win customer's confidence and build stronger relations with them. Overall, this is a right step to help the industry and position India as a leading gold production and distribution center in the world.

Has gold regained its safe-haven status during the pandemic? What kind of sales growth does Malabar Gold and Diamonds expect this fiscal year?

During the pandemic phase, gold has strengthened its safe haven status. As a result, despite the price decrease, demand for the yellow metal remains buoyant. With hallmarking becoming a mandatory trade practice, the relevance of gold as a reliable investment asset class has increased among investors. Hence, we are expecting a significant growth in the gold jewellery consumption in the coming quarters. We are estimating an uptick in consumer sentiments and sales ahead of the festive and wedding season.

What are the initiatives being taken by Malabar Group to attract youngsters for buying gold and diamond jewellery?

New-age youngsters prefer to buy jewellery that has life beyond the locker. They prefer to buy wearable jewellery which complements their personality and defines their individual style statement. Young people love contemporary jewellery with modern designs and are open to experimentation. A large number of our customers are youngsters and we specialize in making jewellery in various designs to suit their modern tastes and preferences.

Digital gold or paper gold is gaining popularity in recent time. Will you look at coming up with some offering in this space in future?

As a gold retailer presently, we are selling only physical gold.