Explained: Your gold buying drill has just changed for good & how!

MUMBAI: From June, sellers of gold jewellery are mandated to have a hallmark of the Bureau of Indian Standards in the ornaments made by them to certify purity of the gold. This norm was brought about in January 2020, but the Covid pandemic delayed its implementation.

According to brokerage ICICI Securities, out of the 4 lakh jewelers in India, only 40,000 are certified by the Bureau of Indian Standards. Additionally, only 40 per cent of the gold jewellery sold in the country is hallmarked for purity.

Why the new gold hallmarking norm?
Mandatory hallmarking of gold jewellery is expected to internationalise Indian gold market and improve customer satisfaction, as per the government’s statements.

Unorganised players often sell jewellery that is either adulterated or is under-carated, which helps them lower the price of the product and gain a leg-up against organised players, which sell hallmarked products.

What will be the market impact of gold hallmarking?
The new norm is likely to further force the unorganised jewelers in India to cede ground to their organised rivals. Hallmarking of jewellery will increase their costs manifold and bring the prices of their product at par with organised retailers.

For many unorganised players, it will make the business unviable all together given the effects of previous policy measures like demonetization, goods and services tax and last year’s Covid-19 pandemic.

Will the big to get bigger due to gold hallmarking?
Analysts believe the mandatory hallmarking could become another catalyst of growth for organized players such as Titan Company, Kalyan Jewellers, Thangamayil Jewellery. ICICI Securities said these organised players could grow upwards of 12 per cent in the next five years as against the overall industry growth of 7 per cent.

The outperformance in growth will help organized jewelers in the country to further occupy market share that belonged to your neighborhood jewellery store.

Some estimates suggest the loss of market share for unorganised players could be as much as 800 basis points in the next five years. Currently, the unorganised players control over two-thirds of the market.

“Large organised players like Titan Industries, Kalyan Jewellers and Thangamayil Jewellery are expected to be the key beneficiaries given better balance sheet strength and extensive retail presence,” ICICI Securities said.