Identify opportunities for a large conglomerate to enter the gold space in India

Abstract

A major step in the development of India's gold markets was the authorization in July1997 by the Reserve Bank of India for commercial banks to import gold for sale or loan to jewellers and exporters. With an estimated consumption of more than 600 tonnes, India is the largest consumer of gold in the world. The price of gold has seen a steady increase over the past few years and is presently at its all time high. The reasons for the increase in gold price could be due to the uncertainties in the financial market and due to the reduced production of gold. Given the spurt in interest in gold, the intent of the project was to understand the gold market in India and assess the opportunities for a large conglomerate to enter the space. The study indicates that there is a growing market and appetite for gold in India and retailing of Gold coins and bars could provide an opportunity. The report goes on to suggest a new way of selling the coins and bars which would make these accessible to the bottom of the pyramid in the Tier I and Ii cities. The idea is to change the way people think about buying gold. Another area which is fast emerging and is an opportunity is the Gold Loan space. The market is growing at a rapid pace and as people buy more gold the market for Gold Loans will only increase. The report suggests that barring a few Southern States, a conglomerate could expand into other states and capture the market. The Gold and Silver ETFs is another space where there is enough growth potential in the years to come. With no silver ETFs presently available in India, getting a first mover advantage will be a great positive, notwithstanding the operational difficulties in setting up a Silver ETF. The bullion trading business is a very thin margin business and there does not appear to be any economic rationality in getting into this largely B2B space. The reasoning for the above are discussed in greater detail in the report.