India's Rajesh Exports cuts FY14 sales, net profit growth forecast

MUMBAI, June 26 Wed Jun 26, 2013 4:51am EDT

MUMBAI, June 26 (Reuters) - Indian jewellery maker Rajesh Exports expects sales and earnings to grow at 10 percent in the current financial year to March, sharply slower than expected earlier, because of government measures to curtain gold imports, its chairman said.

The company had earlier projected sales and profit to expand by a quarter in 2013/14, but an increase in import duty to 8 percent in May and a ban on consignment imports by banks to jewellers on easy terms have dented supplies for jewellers, Rajesh Mehta told Reuters in an interview on Wednesday.

The measures were undertaken by the government to rein in a widening current account deficit that piled pressure on the rupee, which has since hit a series of record lows.

Gold purchases by India, the world's biggest importer of the yellow metal, slowed to $36 million a day in the second half of May from $135 million on average in the first half, Finance Minister P. Chidambaram said earlier this month.

"In the current scenario we would like to be with the government and be a little cautious," said Mehta, whose company imported 110 tonnes of gold in 2012/13, or about 10 percent of the country's total purchases.

However, the company will not suspend sales of gold coins and bars as requested by the All India Gems and Jewellery Trade Federation, he said.

"We don't feel stopping these sales would solve the problem... if genuine people stop the sale then all other spurious people will come into the market," Mehta said.

Sales of coins and bars contribute about 10-12 percent of the company's total turnover.

Shares of Rajesh Exports have fallen 14 percent since January, when the government initially raised gold import duty to 6 percent from 4 percent. ($1 = 59.6900 Indian rupees) (Editing by Ranjit Gangadharan)