FPIs find a gem in Niravgate-hit jewellery sector, and it's not Jhunjhunwala's Titan!

NEW DELHI: The jewellery pack has lost much of their shine on Dalal Street ever since the Nirav Modi scam broke out and financial markets started taking a grim view of the sector.

But foreign investors have kept their faith intact in one jewellery firm, New Delhi-based PC Jeweller (PCJ). This, even when the stock lost one-third of its market value during March quarter.



FPIs held 31.22 per cent stake in the jewellery maker as of March 31, which was their highest ever in the firm, shareholding data suggests. FPIs held a 30.44 per cent stake in this company at the end of December, and 25.04 per cent in the year-ago quarter.

The stock had been witnessing panic selling by investors amid speculations that its promoters might have undisclosed a business relationship with e-governance service provider Vakrangee, which is reportedly being probed by market regulator Sebi for possible stock manipulation.

PC Jeweller has clarified that none of its promoters had diluted stake in the company and none of their shares are pledged as collateral with any institution.

The Rs 13,000 crore scam involving diamond merchant Nirav Modi and Mehul Choksi-led Gitanjali Group proved to be a major headwind for India’s jewellery sector as domestic lenders have since become cautious in lending to these high cash-flow businesses.

But analysts have a different view on PC Jeweller as the company it does not have any international transactions in diamonds. It procures its diamonds from local markets on cash basis.

PC Jeweller stock hit a 52-week low of Rs 195.10 on February 2 but has since recovered 57 per cent to trade at Rs 308 on Thursday.

Shares of peer firms such as Gitanjali Gems and TBZ have plunged 92.52 per cent and 28.23 per cent, respectively, in last one quarter.

Tata Group firm Titan, which has ace investor Rakesh Jhunjhunwala and his better half Rekha Jhunjhunwala as key investors (8.45 per cent stake), is up 4 per cent in last 90 days. The company made it to the elite Nifty50 club on April 2.

For December quarter, PC Jeweller reported a 52 per cent YoY surge in net profit at Rs 163 crore. Ebitda margin improved despite an increase in advertisement spends, because of around 50 per cent growth in the high-margin diamond jewellery segment. Margins are expected to improve further as the firm has reduced focus on the low-margin export business.

"Collateral damage is a very much part of this business. From that perspective, stocks like this do not rerate for a very long time. From that perspective, what is value remains value for a long time," said Chakri Lokapriya, CIO & MD, TCG AMC.