MMTC announces plans to launch jewellery brand
Shukti Sarma 25 April 2011

MMTC’s plan to launch its own jewellery brand comes at a time when Indian jewellers are waking up to the potential of branded jewellery, but will the dream bear fruit?

The government undertaking Minerals and Metals Trading Corporation of India Ltd (MMTC), which is the biggest bullion trader in India, has announced its plans to launch its own jewellery brand. MMTC already has a silverware retail arm called Sanchi, and plans to have 30 more outlets across India for its new brand. While sentiments are buoyant, it remains to be seen whether the scheme becomes a success.

The announcement comes at a time when the market is booming, and sector commentators feel that with increasing disposable income of the middle class, there is an immense scope for branded jewellery. "Gold and jewellery are traditionally considered to be sound investments. The World Gold Council is optimistic about the future. Platinum and diamond are also catching up. Even during the recession, the domestic demand did not wane. With the number of earning youths going up, branded jewellery will definitely do well," an analyst told Moneylife.

However, lifestyle brands, which have been launched by PSUs, have not fared well in India. Be it Hindustan Machine Tools (HMT), whose watches were a rage once, or the khadi products, which have failed to stir up excitement in the youth. The reason for that may be lack of publicity, shoddy products and the 'not hip' tag that remains associated with indigenous brands, sold by indifferent salespeople.

A few weeks earlier, Dubai-based Damas dropped its India retail project due to the organisation's internal problems. Gitanjali Gems, which had entered into a joint venture for the jewellery retail business with the brand two years earlier, has also been hesitant in launching a new chain, which it has been talking about since long.

The other players, therefore, are rushing in to fill in the vacuum. Many of them are strengthening their retail network. With its pan-India network and assured presence, analysts say that MMTC already has an edge over the lesser brands. Currently, MMTC is India's largest trading firm, and the largest importer of gold.

However, it is the smaller or region specific brands like Chandrani Pearls and Joyallukas that have fared well, because they can manage their costs better. Tanishq may be the only exception in this space. The retail sector is facing a severe problem with staffing and cost management, and most of the projects have not been executed well. Moreover, in the apparel-accessory-lifestyle segment, many brands have failed. Barring a few successful ones, many are barely surviving or have quit.

However, the market outlook is positive. According to the Gems and Jewellery Export Promotion Council, the sector witnessed an impressive growth of 46.89% in FY 2010-11 in exports, and the sector is expected to see a growth of 13% from 2011-2013. The diamond industry in India is predicted to remain stable during 2010-11 due to improved prices and steady demand, as per CRISIL.

Thus, jewellers are finally looking towards organising the fragmented sector to make the most of the opportunity. Joyallukas, the Kochi-based jewellery giant, which has been talking about an IPO (initial public offering) for long, is finally coming to the market following SEBI's nod. The IPO will come at May end. The money raised, says the company, will be used to expand its retail presence (especially in north India), with the opening of 14 stores. Other notable players, like Tribhuvandas Bhimji Zaveri, are also strengthening their presence.

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