Should Titan shareholders worry about government’s import duty hike? Let 2013 customs hike explain

Titan Company shareholders have been on edge ever since Prime Minister Narendra Modi publicly urged Indians to delay jewellery purchases for a year in an effort to help stabilise the rapidly weakening rupee. Just when investors thought the worst may already have been priced in, the Centre raised import duties on gold and silver to 15% on Wednesday, triggering fresh panic across jewellery stocks.

The reaction was swift. Shares of Titan, India’s largest jewellery retailer, plunged more than 11% in just two trading sessions on Monday and Tuesday as fears mounted over the impact of higher import duties on demand, margins and overall consumer sentiment.

The sharp hike in import duty is widely being viewed as a near-term negative for the jewellery sector. Higher duties are expected to push domestic gold prices even higher, potentially forcing consumers, especially in price-sensitive segments, to postpone purchases. However, organised players are still expected to fare better than smaller unorganised jewellers.

And in Titan’s case, history suggests the company may once again emerge stronger from the disruption. Markets are drawing parallels with the policy tightening cycle of 2013 under former Union Finance Minister P. Chidambaram, when the government introduced a series of aggressive measures to curb gold imports amid a widening current account deficit and a sharply weakening rupee.

The measures included raising gold import duty from 2% to 10%, discontinuing credit on gold imports, restricting gold coin sales and introducing the controversial 80:20 rule, under which 20% of imported gold had to be exported as jewellery before further imports could be permitted.

Despite the sharp tightening in regulations and supply conditions, Titan remained relatively better placed than much of the industry. The company managed to maintain more stable access to gold through multiple channels, including sourcing temple gold via banks, leveraging strong banking relationships and increasing the contribution of gold exchange schemes.

Yet Titan’s margins remained remarkably resilient. The company was able to pass on higher costs due to better pricing discipline across the organised jewellery industry.

Will 2026 gold import duty hike be different?

According to Nomura, the impact on Titan appears relatively manageable across categories.

The brokerage believes the coins segment, which currently contributes around 10-15% of sales compared with mid-single-digit contribution earlier before the sharp rise in gold prices, could witness the biggest moderation in demand. However, since the segment operates at low single-digit margins versus average jewellery making charges of around 20%, lower contribution from coins could actually support margins.

Daily-wear jewellery, which contributes roughly 40-50% of sales, could see some pressure because of higher price sensitivity and the discretionary nature of purchases. However, Titan’s growing focus on lightweight jewellery and lower ticket-size products may cushion the impact.

Wedding jewellery, which contributes around 15-20% of sales, is expected to see minimal impact because of its essential and culturally non-discretionary nature. Nomura believes increasing adoption of old gold exchange schemes could further support affordability despite higher ticket sizes.

The brokerage expects almost no impact on diamond jewellery, which contributes around 25-30% of sales, given lower direct dependence on gold prices and Titan’s relatively affluent customer base.

Nomura also believes Titan could strategically utilise part of the one-time inventory gains arising from higher duties to drive customer acquisition, support demand and expand market share through promotional activity.

Meanwhile, Goldman Sachs has maintained a “Buy” rating on Titan with a target price of Rs 5,400. The brokerage expects Titan to benefit from near-term inventory gains following the increase in import duty from 6% to 15%.

The Wall Street major said revenue growth is unlikely to face any material disruption despite tighter import conditions and believes Titan remains far better positioned than peers to navigate the current environment. The brokerage continues to expect consistent high-teen growth in both revenue and earnings and sees the recent correction in the stock as a buying opportunity.

According to Ponmudi R, CEO of Enrich Money, jewellery stocks could continue to remain under near-term sentiment pressure if investors begin pricing in a temporary moderation in festive and wedding-related demand.

However, he does not expect a deep structural slowdown in gold consumption.

Ponmudi said larger organised jewellers with stronger brands, efficient inventory management and higher consumer trust are likely to continue outperforming smaller unorganised players even during periods of disruption. Analysts also believe that market dislocations often accelerate market share gains for organised retail chains.

Indian gold buying, particularly during weddings and festivals, has historically remained deeply emotional and culturally entrenched. Ponmudi added that organised jewellery players may continue gaining market share as consumers increasingly gravitate toward trusted and transparent brands during uncertain periods.

While the recent import duty hike and government commentary have rattled investor sentiment, history suggests disruption may ultimately strengthen organised players like Titan Company rather than weaken them. With strong brand equity, resilient margins, rising adoption of gold exchange schemes and a relatively affluent customer base, Titan appears better positioned than smaller peers to navigate tighter import conditions and potentially emerge with even greater market share.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)