Mehul Choksi’s Gitanjali hit by gold curbs, distributor defaults and liquidity crunch

The 91.9 per cent slide in the stock price of Gitanjali Gems since April has depleted the value of promoter Mehul Choksi’s holding in the company by at least Rs 17 crore a day on an average.

His 59.44 per cent stake in the firm, valued at nearly Rs 3,300 crore in April, is now worth only a little over Rs 260 crore — a plunge of over 90 per cent in a little over two quarters. During this period, the Gitanjali Gems shares have skidded from Rs 649.5 to Rs 52.5 on Friday. As on June 30, he held 55 per cent in the company.

For Choksi, there might be a sense of déjà vu. During the stock market slump between mid-January 2008 and early March 2009, Gitanjali’s shares had crashed from over Rs 400 to less than Rs 40 but recovered in line with the broad market rally in the late 2009.

But this time, hopes of an immediate share price recovery appear dim, as the group faces troubles on multiple fronts.

Unaudited results show, the net profit of Gitanjali, which owns brands like Gili, Asmi, Nakshatra, D’damas and Sangini, in the June quarter fell to Rs 148.97 crore from Rs 35.12 crore in the same quarter last year — a 76.42 per cent slide.

The recent measures take by the government and the Reserve Bank of India to lower gold imports has hit the firm’s jewellery business.

Besides, Gitanjali, which is present in the country’s 300 cities and towns, has also faced defaults from distributors.

“…Many of our customers — small players that were selling as distributors — were not able to pay in time. These factors — established fixed cost and non-payment by some customers — led to bad debt. So, it’s a combination of all these that has contributed to poor quarterly profit numbers,” said Choksi.

For more visit: Business Standard

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