Titan plunges 12% after govt curbs gold imports for third time in two months

Titan Industries shares slump 12.11 percent after the Reserve Bank of India banned imports of gold coins and medallions and required domestic buyers to pay cash for the yellow metal, among other measures.

Analysts said this would increase interest costs and hurt margins for players like Titan.

Several brokerages downgraded the stock after theReserve Bank of India changed gold import norms for the third time in two months, disallowing leasing of gold in India.

The central bank first banned gold lease in June 2013, then reversed the decision in July 2013 and has now again disallowed it.

The government had also raised the excise duty on refined gold bar produced from gold ore/ concentrate and gold/silver dore bars or during copper smelting from 7 percent to 9 percent.

Brokerages downgraded the jewellery & watch manufacturer as Titan could potentially have to purchase jewellery by making upfront payments given new capital control measures issued by the RBI.

Goldman Sachs downgraded the stock to neutral from buy with a price target of Rs 260. The brokerage firm assumed 30-40 bps lower jewellery EBIT margins and factored in higher funding costs for gold jewellery for FY14-16 (expected).

Meanwhile, JP Morgan downgraded the stock from overweight to neutral and cut target price from Rs 285 to Rs 265, citing increasing regulatory uncertainty, continued sluggishness in diamond jewellery / watch sales owing to weak macro; andSharp run up over past two months

The hike in import duty on gold would imply higher gold prices in the local market and would be passed on to customers, said JP Morgan.