Titan slips more than 11% over gold curbs, downgrades

Titan Industries slipped another 10 percent in trade this morning after closing 13 pe cent lower on Tuesday amid concerns that restrictions put by RBI on gold imports will hit business prospects.

he RBI has clarified that all imports of gold for domestic consumption can be made only with 100 percent cash margin, while also setting restrictions on the import of gold on consignment basis among other measures.

[caption id=“attachment_864553” align=“alignleft” width=“380”] Following the RBI’s recent steps to curtail gold imports, Titan’s management said the company’s ‘gold on lease’ financing model now stands at risk.[/caption]

At 10:52 am, Titan Industries was down 11.25 percent at Rs 211. The stock has plunged over 20 percent in a matter of two trading sessions (intraday) after the Reserve Bank of India issued a notification on changes to the current terms governing gold imports.

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In a filing to the BSE, Titan Industries on Tuesday said that it has been clarified that all imports of gold for domestic consumption, either through banks, nominated agencies or directly can be made only with 100 percent cash margin.

Reacting to the development, most global brokerages have downgraded the stock and also slashed its target price.

“Policy changes have altered Titan’s business model, which may compel long-term investors to rethink their position,” Morgan Stanley said in a report.

The brokerage downgraded Titan to “underweight” from “equal-weight” and cut the price target to Rs 198 from Rs 245, saying the recent combined measures would hit earnings by 13-14 percent for fiscal 2015 and return on capital employed (ROCE) by more than 1,000 basis points.

The Reserve Bank had last week extended the restrictions on gold import to other agencies in addition to banks, to keep a check on burgeoning current account deficit.