Aim to boost sales; margins will remain under pressure: TBZ

"We have seen an improvement in walk- ins and pent up demand is also helping," Prem Hinduja, MD, Tribhovandas Bhimji Zaveri said.

We will try to attract customer with better quality designs

Prem Hinduja

MD

TBZ

In an interview to CNBC-TV18 Prem Hinduja, MD,  Tribhovandas Bhimji Zaveri (TBZ) shared about the latest happenings in the company in the wake of ongoing festive season and the way ahead.

He said that consumer sentiment has improved and the company has seen double-digit sales growth on last two auspicious occasions of Dusshera and Dhanteras. "We have seen an improvement in walk- ins and pent up demand is also helping," he added.

TBZ aims to boost sales and is likely to focus on discounts and special offers going ahead, he said. However, margins are likely to remain under pressure on account of this.

Also Read: Will expand after consumer sentiment improves, says TBZ

Below is the verbatim transcript of Prem Hinduja's interview to CNBC-TV18's Latha Venkatesh and Reema Tendulkar

Latha: Just tell us how the sales have been this weeding season?

A: I can only tell you that there has been an improvement in the overall consumer sentiment. We started with the improvement in the economy and stable government at the centre. The walk-ins have improved. There was lot of pent up demand which had built up in the system which needs to come out and which we have witnessed over last two auspicious occasions which took place very recently. One was Dussehra and the other was Guru Pushya Nakshatra last week.

We witnessed a double digit sales growth on year-on-year basis as compared to last year. Combined with the fact that there is a lot of pent-up demand which needs to come out and which is coming out, there is also stability in the gold price. Infact we have seen a price correction in dollar terms is almost about 30 percent as compared to last year. In rupee terms it is almost about 18 percent as compared to last year. So we are quite hopeful of a good growth this quarter as compared to last quarter of last year.

Latha: But you are also giving a lot of discounts on making charges, will your margins suffer?

A: We do expect a good amount of demand coming up and we are not unduly worried about the discount which we are offering on the making charges of both gold and diamond jewellery.

Reema: In the previous quarter your gross margins on both gold as well as studded jewellery declined so on gold I believe it stands 8.4 percent and on diamonds at 32.7 percent. Do you expect the pressure on your gross margins to sustain?

A: To add a word of caution although we are seeing improved walk-ins coming in, the consumer sentiment having improved but that is happening slowly and steadily. So the margins will remain under pressure. I cannot put a finger on a certain percentage as to what it will be for FY15 but they will always remain under pressure because the endeavour of the company or for any company would be to have growth which can come through increased sales. To achieve that increased sales at some point of time one has to offer discount or promotion schemes which do put pressure on the margin so be it.

As I mentioned there is also competition all around and if everybody else is going tactical in offering discounts. We cannot remain in isolation although we are very much design focused and we are quite sure that the customer who come to us they do not come to us just because we are offering them discounts, they come to us more because of trust factor and also the variety of designs which we offer them. We are all hopeful but at the same time yes I would say that we take it with a pinch of salt that margins will not be something extraordinary, they will remain under pressure for some more time to come.

Tribhovandas stock price

On October 22, 2014, Tribhovandas Bhimji Zaveri closed at Rs 163.90, up Rs 3.45, or 2.15 percent. The 52-week high of the share was Rs 222.80 and the 52-week low was Rs 122.30.

The company's trailing 12-month (TTM) EPS was at Rs 5.22 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 31.4. The latest book value of the company is Rs 67.10 per share. At current value, the price-to-book value of the company is 2.44.

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