Lower sales and then a major interest outgo – all pointed to a loss and that is what Thangamayil ended Q1FY15 with. It posted a net loss of Rs.4 crore though this is much lower than the huge Rs.20 crore loss of Q4FY14. Obviously, the various stringent measures taken by the Govt to curb gold buying left a telling effect on the likes of Thangamayil. Net revenue dropped 13% at Rs.371 crore. Its interest outgo at Rs.6.5 crore, though lower than Rs.9 crore in previous Q1 and Q4, did it in. Its debt currently stands at Rs.213 crore. The tax write back of Rs.2 crore helped bring down the loss only to that extent.

The good news is that there is some light at the end of this tunnel for gold companies. Since May, the RBI has slowly eased some of the tough restrictions. It first allowed select trading houses, in addition to already permitted banks, to procure the precious metal to boost exports. Last week, RBI relaxed the Rs one lakh ceiling on loans against gold jewellery. Now borrowers can now pledge their gold and get a higher value of loans, provided that the loan-to-value (LTV) ratio does not exceed 75% of the cost of the gold. These loans have to be only for non-agriculture purposes.This benefits companies like Muthoot but not Thangamayil. It had expected the earlier directive of allowing trading houses to get gold for exports to boost its earnings. This was to increase the supply of gold in the market, which in turn would reduce gold prices and drop premium levels. This in turn means that margins for retail jewelers like Thangamayil, should have improved due to lower gold procurement prices and fall in interest cost on borrowed funds. A 2-4% improvement in bottom line for retailer was expected with this move. Hopefully, it managed to cut its losses in current Q1 and we could see a turnaround in Q2 or better in H2 as that is the main ‘season’ for gold.