Tuesday September 1, 06:30 PM

INTERVIEW - Rajesh Exp sees no relief from festive season

By Aniruddha Basu & Nandita Bose

MUMBAI (Reuters) - Rajesh Exports Ltd, one of India's top jewellery makers, does not see the ongoing festival season pushing up sales as a poor monsoon keeps rural buyers away, a top official said on Tuesday.

"Rural sales are not good. They have not picked up that much despite the festive season. We are not seeing any major improvement or increase in sales as such," Chairman Rajesh Mehta told Reuters over the telephone.

India sees a range of festivals in the second and third quarters, from Ganesh Chaturthi in August to Diwali in October, when rural consumption is traditionally high.

Mehta said the firm, which gets 60 percent of its sales from rural markets including small towns, would offer value-for-money products and may also take a price cut to lure buyers.

The company, which does not expect growth in annual revenues and profits this fiscal year, hopes to maintain last year's numbers by focusing on lower-margin bulk businesses, he said.

"I don't see real improvement in the global situation and we are going slow on aggressive credit providing...we are still focusing on bulk businesses and low margin business where we get immediate payment or where we get payments in advance," he said.

For FY09, Rajesh Exports had reported a net profit of 873.8 million rupees on net sales of 123.4 billion rupees.

India's gem and jewellery industry has been hit hard by the financial meltdown in Europe and U.S. which has dampened consumer sentiment and hit jewellery exporters.

Mehta said the firm was increasing focus on emerging markets in Asia to partly offset losses from its traditional strongholds.

"We are currently focusing on the Middle East and Far East. The Asian markets seem to be a little better than the European and the American markets," Mehta added.

Rajesh Exports' current order book stands at 14.5 billion rupees, with most orders coming from overseas.

RETAIL CONSOLIDATION

The firm is consolidating its retail business, which contributes about 3 percent of revenues, under a single umbrella brand due to a weak response for its premium offerings.

The firm runs retail chains under the mass-level "Shubh" and premium "Laabh" brands and has plans to merge operations under the mass-level brand.

"What we found was too much of a high position brand was not doing well, customers were not too much enthused about it. So it is better to go with the mass-level brand".

Mehta also expects the retail business to break even by the end of this fiscal.

"We are more or less on the verge of breaking even because we have restrained ourselves from heavy enterprising or any heavy expenditure."

ACQUISITION PLANS ON HOLD

The company, which had earlier announced plans to buy out gold mines and refineries overseas, has put plans on hold due to high prices of gold.

"Looking at the international scenario as of now, we have put our plans on hold because the gold prices are too high and we would not be able to get a good deal on any mine as such," he said.

"So we are looking at the market settling down a little bit," Mehta said, adding the firm was scouting for mines in Australia and South Africa.

Shares of Rajesh Exports ended down 0.61 percent at 48.9 rupees in a weak Mumbai market.

(For more news on Reuters Money click http://in.reuters.com/money)