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UPDATE 1-India's Rajesh Exports see positive impact on Q2 profits as RBI eases import rules
May 22, 2014 / 11:51 AM / 3 years ago

UPDATE 1-India's Rajesh Exports see positive impact on Q2 profits as RBI eases import rules

(Adds details, quotes)

By Siddesh Mayenkar

MUMBAI, May 22 (Reuters) - Indian jewellery maker Rajesh Exports Ltd expects its net profit for the quarter ending Sept. 30 to rise 25-30 percent, helped by the easing of gold import rules, its chairman said on Thursday.

Shares of jewellery companies such as Titan Co Ltd and Rajesh Exports surged on Thursday after the Reserve Bank of India expanded the number of private agencies that can import gold.

“This will have good positive impact in terms of our profitability and revenues. We expect the impact to come from next quarter onwards,” chairman Rajesh Mehta told Reuters in an interview.

The RBI also allowed banks to give gold loans to domestic jewellery makers, a practice that was stopped last year. Without the gold loans, jewellers had been forced to take credit to fund purchases, adding to their costs.

“We will be able to save on our costs due to this new notification ... We will save on premiums, and other costs. We need not go to the bank to take gold, so naturally there will be good amount of savings,” said Mehta.

Premiums charged on London prices have been easing, and on Thursday they stood at $90 an ounce after hitting a record of $160 in December last year. International prices were at $1,296 an ounce.

Although the two steps alone are not expected to affect India’s current account deficit, they could reinforce expectations that RBI and finance ministry officials will soon move towards removing some of those curbs.

Restrictions on the import of gold were widely credited for helping the current account deficit shrink to 0.9 percent of gross domestic product in the December 2013 quarter compared with a record high 6.5 percent a year earlier, sparking a recovery in the rupee from record lows hit in August.

India’s incoming prime minister, Narendra Modi, who led the opposition Bharatiya Janata Party (BJP) to a decisive victory in a just-concluded election, has indicated his willingness to remove gold curbs.

Modi will be sworn in on Monday and the plan to ease the curbs is ready for his government to take up.

“It’s a very good move... this has ensured that the government doesn’t encourage smuggling and other parallel activities,” said Mehta.

According to the World Gold Council, about 200 tonnes of gold may have entered India through illegal “hawala” channels, which are informal international networks for remitting money.

Shares of Rajesh Exports ended up 13.2 percent on Thursday, while the main Mumbai market index rose 0.3 percent. (Editing by Ruth Pitchford)

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