iw3feb15

Kerala – The Golden Hub of the Country

Few companies in India have gold reserves higher than those of Singapore, Sweden or Australia. The love for gold in India is tremendous and Kerala is the golden hub of the country with renowned brands like Muthoot, Manappuram, Kalyan, Joyalukkas and Chemmannur originating from the state.

Local media reports in Kerala have indicated that the total gold reserves, not counting the gold retail outlets, of some of the Kerala-based gold loan companies — Muthoot Finance, Manappuram Finance and Muthoot Fincorp — jointly hold gold jewellery, higher than the gold reserves of Singapore, Sweden or Australia. Between them, the leading gold loan companies in the state are believed to hold 200 tonnes of gold jewellery, though the exact quantity is not publicly known.

The tradition of buying gold for festive occasions and marriages has contributed to the gold reserves present in Kerala. An industry observer says, “Gold ranks top amongst other options as it is the most liquid assets after hard cash. Hence, consumers prefer to keep a significant portion of their savings in gold.” The younger generation has taken a liking to diamond jewellery, but gold sellers are not overly worried. Retailers say that unlike in the north, south Indians prefer solid gold jewellery rather than stone-studded ornaments.

The state may still be an outlier in the manufacturing sector, but when it comes to the yellow metal — whether buying, selling or mortgaging — Kerala brands like Muthoot, Manappuram, Kalyan, Joyalukkas and Chemmannur have turned truly international besides multi-state operations within India. Kerala’s fancy for gold has been so intense that a private equity company, Warburg Pincus Llc invested $200 million (Dh735 million, Rs12 billion) in Kerala-based Kalyan Jewellers for a minority stake. Kalyan is among the leading retail jewellery brands in Kerala alongside Joyalukkas, Alappatt, Chemmanur, Bhima, Malabar Gold and Atlas, among others.

Thrissur tinted in Gold

About 70 per cent of the 1,000 kg of gold ornaments Kerala sells every day – Keralites buy the largest chunk (10-20 per cent) of the country’s gold – is crafted in Thrissur. High Road, one of Thrissur’s busiest commercial localities, bears testimony to the city’s gold craze. The rows of 500-800 sq ft shops flanking the road mostly sell gold ornaments.

In 1990, three policy changes led to plentiful; supply of legal gold in the country – the repeal of the Gold Control Act (restricting the sale and holding of gold in personal possession); the grant of permission to non-resident Indians to bring in up to 5 kg (subsequently raised to 10 kg) of gold; and the introduction of provisions in the Foreign Exchange Regulation Act, 1973. These measures opened up the industry. Many family jewellers read the signals accurately and opened shops in a business that had previously seen only goldsmiths and traders rule the roost.

Thrissur has about 700 jewellery outlets, which source products from over 3,000 manufacturing units located in suburb such as Venginissery, Chiyyaram, Koorkkanchery, Vallachira, and Perinchery. “The sector employs roughly 50,000, of whom 10,000 are from outside the State,” said PV Jose, Chief Patron of the Jewellery Manufacturers’ Association of Kerala (JMA) to Hindu Businessline.

Koduvally – Densest Jewellery Hubs

Koduvally looks like any other Kerala town but when observed closely you will find 600-metre curve with staggering 100 or more small jewellers on both sides. No doubt, the city is reckoned to be one of India’s densest jewellery hubs in the country. The number of gold merchants here is today perhaps more than even in Dubai. The business volumes are no match though,” said Kerala legislator P T A Rahim to Times of India.

Though the town has lost its sheen post the rise of big players but it still continues to be an important gold hub in India. The real retail boom began in the 1970s and was driven by the Gulf, told Surendran, who is also general secretary of the Koduvally Gold & Silver Merchants Association a platform of 85 local retailers. “Plenty of raw material and money began flowing in from the Gulf,” he said to Times of India.

Soon, the town became the fulcrum of all of Malabar’s gold trade, so much so that when the market could not make space for fresh entrants, they began spreading to other parts of Kerala. It is now said that Koduvally jewellers have a presence in almost every town of Malabar. Today, at least 250 families in and around the town are into the business. Another 2,000 families are goldsmiths. Needless to say, the town’s economy has a “spine of gold”.