In the 22nd meeting of GST Council which was held on 6th October 2017, the council decided to withdraw Gems & Jewellery industry from the scope of prevention of Money Laundering Act (PMLA). The act concluded that the jewellery needs to be verified by buyers and clients via a KYC process for supplies of more than Rs. 50,000. This will surely impact the Gems & Jewellery sector in a positive manner as the festival season is about to come.
after the conclusion of the 22nd meeting of GST council regarding easing the norms for gems and jewellery sector, some of the sectors will show affirmative side. The following list correctly shows the impact on sectors and stocks that will gain after the withdrawal of PMLA:
Artificial Yarn:
Artificial or man-made yarn got the GST rate tweaks and now applicable GST is 12% from previous 18%. The decision lowered the price of man-made yarn by 6% effectively. Previously, it became harder for companies to sustain the international rate fumes and they are forced to buy the source yarn from China and Indonesia at much cheaper rates. Due to high market price, higher cost of fabrication and high competition with respect to an international standard, the Indian Synthetic sector is suffering a lot and the side effect is stagnation in a growth factor.
Considering all the pros and cons, GST council agreed to rate cut down and it is a blissful moment for the sectors involved in Man-made yarn processing and supplying as they are prepared now to compete globally. Some of the stocks which have shown positive impacts are Filatex, SRF, Century Enka and JBF.
The agrochemical experts globally remarked the changes as positive and the impacts will be seen by end of 2017. The management is expecting the demand rise in chemical sectors by the last quarter of the financial year 2018. Mehul Thanawala, director at JM Financials said, “We expect the substantial capex made in the chemicals segment to start contributing to revenues from FY19 onwards, hence maintain a ‘buy’ rating with a target price of Rs 1,670.”
Rate Cut Down In Pumps’ Parts:
After the GST council meeting held on 6th October, the GST rates on Pumps’ parts reduced from 28% to 18% and the changes in the pumps manufacturing industry will be seen soon. The pump market is also performing well in boosting the growth as it is valued at Rs. 10,000 Crore in the financial year 2016 and is assumed to boost at 8% annually in coming years.
Despite the hurdles, the pump and its spare part sectors executed the continuous growth and productivity. Albeit, some small and medium businessmen stopped the contribution in a production of the pump and its parts in lieu of incapability to meet the guidelines under new indirect tax regime and the rate cut down will be favouring to comply with GST rates.
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The key beneficiaries in this sector will be Shakti Pumps, Kirloskar Brothers, and KSB Pumps.
The currency trading stock at a PE of 39 times is cheapest than its following 12-month profits among the competitors. The management teams also expressed that the demand to exchange inefficient pumps sets with the efficient and quality sets is originated from the EESL & MNRE in the first place.
From the total 30 million pumps, 80% pumps are of agriculture use and 50-60% are diesel pumps in the current scenario.
Gems & Jewellery Sector:
The government’s move to cast out the Prevention Of Money Laundering Act got the appreciation by experts as it will benefit the Gems and Jewellery sector. Deepak Jasani, research head at HDFC Securities accoladed the inapplicability of PMLA and said it would be profitable to all the Gems & Jewellery industry such as companies who have a regional presence or higher presence in tier-2 and tier-3 cities, the buyer feel awkward in sharing their identity proof with the sellers.
The key beneficiaries in this sector will be PC Jewellers, Titian Company, and Tribhovandas Bhimji Zaveri.
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The stock for Gems & Jewellery has doubled after the ending fumes of demonetization impacts. Abhishek Ranganathan, Ambit capital said, “Titan’s focus and execution on the wedding segment mirror adornment where it has established itself as the leader and With large opportunity and unique asset-light model, Titan’s punchy multiple of 43 times FY19 estimated earnings is not expensive”.
