He also spoke about how MMTC-PAMP is launching innovative product offerings, including digital gold and collectible gold coins in partnership with Disney and the World Wildlife Fund (WWF), and how this strategy can help you overcome the challenge of covid-19 to the industry.
How has the COVID-19 pandemic affected the demand for gold products? Have you seen any kind of recovery in the last few months?
During a six-month period, from April to September, gold volumes were practically nil. The numbers were very low compared to what we recorded in previous years. There were multiple reasons behind this. While there was the challenge of closure, with retail stores closed and people not leaving, there was also the economic slowdown and other factors to deal with.
We also had a situation where gold prices started to go up enormously. As a result, many people decided not to buy. This significantly depressed our volumes and, in general, those of the industry.
The good news is that we saw a small resurgence in demand in October. The figures have been quite reassuring in October 2020 compared to October 2019. There was double digit growth in October 2020.
Since this year Diwali is in November, we hope it will also be a good month. But again on a cumulative basis for this year. We would be way behind this financial year compared to last year.
Has your strategy changed in any way after covid-19?
Our strategy has changed. In the past, MMTC-PAMP classically supplied bullion to a few people throughout India. But now, we are trying to generate new sources of income, in a focused and strategic way. This will ensure less volatility in the overall business and help us to take firm steps in the consumer space.
Just to name a few products, the digital gold portfolio is very important to us and there is an excellent response from customers. Our team has also made many innovations in the coin minting segment.
For example, we have partnered with Disney and will be releasing coins featuring Disney characters. We have launched collectible coins in association with the World Wildlife Fund. These products will provide good gift options to different categories of customers.
We would like this portfolio of minting and digital gold business to contribute almost 25-35% of our portfolio in terms of profits.
There have been regulatory concerns about digital gold. Do you have a mechanism to protect the interests of investors?
The contract we have with digital gold investors is very simple and clear. First of all, there is an amount of physical gold that is compared to the name of the investor each time they invest in digital gold. So, suppose an investor bought digital gold for value ₹1,000 today, that amount of gold is physically moved to our vault, on behalf of the investor, on the Sohna road.
Second, these vaults come with state-of-the-art fireproof and security systems, among others. Additionally, we ensure that all assets are fully insured for full value, including the force majeure clause (read bit.ly/36mCC84 to understand the clause). Third, as a trustee, we have IDBI Bank, which is basically underwriting the MMTC-PAMP accounts as an independent auditor. Therefore, we stand up to the highest levels of governance.
Recently, it launched a gold buyback plan. How is it different from other similar schemes on the market?
With existing buyback schemes, jewelers generally buy gold that they sell and are not open to buying back gold that has been made by someone else. So the loss of value to customers that occurs is enormous. It can amount to 20% depending on the price the jeweler chooses to give. Also, jewelers sometimes insist that they will exchange metal for metal and pay no money. All of this can discourage people from selling gold even if they need it.
Under our buyback scheme, we take jewelry made by anyone. We use advanced technology to accurately measure the gold content of the item. After taking into account our cost, the customer will have a 3-4% impact on the price.
We transfer the amount payable to the customer’s bank account after the know-your-customer (KYC) documentation is completed.
Many people would be planning to buy gold this Diwali. What would you advise them?
It is very important to consider who you are buying from. You need to be careful about whether the purity of the gold is really what the jeweler or seller claims. Take into account manufacturing costs when buying jewelry.
Also, consider the liquidity aspect when buying gold. So if you want to sell your digital or physical gold tomorrow, you need to know how liquid it is.
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