A section of jewellers have been on strike almost the whole of March so far to protest against the Budget proposal to impose 1 percent excise duty on non-silver jewellery.
Subramaniam acknowledged fourth quarter performance will be impacted by the industry strike and also by the move to make PAN cards mandatory on all jewellery transactions of Rs 2 lakh and above.
While the company managed to keep its Tanishq stores open in some parts of the country, local agitations forced closure in few others, he said.
He expects growth in watches segment to be muted in FY17, while sales growth in eye wear segment looks encouraging.
Below is the verbatim transcript of S Subramaniam’s interview with Nigel D’Souza, Varinder Bansal and Surabhi Upadhyay on CNBC-TV18.
Nigel: We are just getting some takeaways and we believe that your quarter four sales have been hit by this entire PAN rule. Could you run us through some details?
A: They were two reasons one is the PAN to some extent has impacted. The second one of course the whole month of March, there has been a lot of disruption in the market in terms of keeping our stores open. You realise that there was the excise duty which has been imposed under the new tax laws. The Jewellery Federation has been on strike, some of them have withdrawn the strike but in many parts of the country still is on. We were also forced to shut down a lot of our stores over this period. So, it has been an impact of both for this last one quarter.
Surabhi: Can you give us some sense, can you quantify the sort of impact that you are expecting on our revenue for the fourth quarter because of both the PAN issue as well as the jewellers strike?
A: It is going to be difficult to quantify how much is due to what. The fact that basically growth is going to be lower than what we have anticipated at the beginning of this quarter.
Varinder: Will there be any change in guidance after what you mentioned in the analyst meet?
A: Not really. This is after considering that. What we have talked about is more about next year rather than about this quarter. So, we have talked about a 15-20 percent growth in jewellery and that remains despite this. At least as of now we believe that these things will get sorted out pretty quickly whatever be the issues and so we don’t expect any change.
Varinder: Quarter three was one quarter where they competed very well especially the jewellery segment. The income growth was around 17 percent. Is there any way you can quantify that the income growth could be less than 15 percent, between 10 to 15 percent on back of these developments?
A: I wouldn’t want to talk about that now. Before the quarter ends we normally don’t give numbers for this quarter. There will be a growth yes may be a little muted from what it was last quarter but for the half year as a whole we have done pretty well. The second half of this year in terms of overall growth and overall margins as well we expect to do quite decently.
Varinder: What about FY17?
A: FY17 we have talked about a 15-20 percent growth. That is the sort of number we are looking at for jewellery. We would be little muted on watches still, eyewear we expect to do much better because the last quarter has been very encouraging. We will grow in watches as well compared to current year but we still expect it to be muted.
One more thing about the watch business is that the new technology watches, Juxt that we launched has been doing very well. We therefore expect to start getting good traction.
Varinder: Just to mention because last time jewellery growth was 20 percent, last quarter. So, if 15 to 20 percent, it is bit less than what market is expecting that is why the stock is moving down. Will there be any impact on the EBITDA margins because they seem to stabilise last quarter at 9 percent so any impact on the margins going ahead?
A: No, margins will start strengthening the moment we reach at something like a 15-20 percent growth.
Surabhi: Your quarter three revenue was somewhere at around Rs 3,400 crore. Should we be prepared in quarter four to see an absolutely flat number comparable? Should we be prepared to see may be a de-growth or if you could give us some sense I am not asking for a specific number of course?
A: We don’t do a quarter-on-quarter (Q-o-Q) a sequential quarter growth; we don’t look at that because jewellery as you know is pretty much based on seasons and therefore seasonality. Therefore we look on year-on-year (Y-o-Y) growth. Year-on-year growth is definitely going to be there, question is, is it definitely going to be muted to compare to what we thought it would be at the beginning of the quarter.
More to follow…