MUMBAI: After the Securities and Exchange Board of India (Sebi) allowed mutual funds to launch silver ETFs, Vikas Singh, CEO of MMTC-PAMP, speaks to Neil Borate of Mint about his company’s plans to launch digital silver and expand into southern India.
MMTC-PAMP is a joint venture between MMTC, which is a public sector undertaking, and PAMP, a Swiss gold refiner.
How important is digital gold to your business?
We have the ability to refine almost 300 tonnes of gold and 600 tonnes of silver. Of this we are utilising a capacity equal to around 100 tonnes of gold a year. In this context, the contribution of digital gold is almost in the double digits to our volumes.
In digital gold, there are no transaction or making charges. We have no storage charges for up to 5 years of holding. After that it is just 0.18% of the value. IDBI Bank is our trustee for this business and we have insurance policies in place for force majeure incidents.
Let me add some more context. Our capacity for gold refining is almost 40% of India’s requirements. We are India’s only London Bullion Market Association (LBMA) accredited refinery which certifies ethical sourcing of gold, financial transparency and audit standards for refiners. We produce gold that is 99.99% pure. That’s why anything from MMTC PAMP commands a premium in the market.
You had launched coins in collaboration with Disney and WWF last year. How did that play out?
MMTC PAMP started its consumer journey last year. We were mostly catering to the big jewellers in the country earlier. Similar to digital gold, it is moving towards a double digit contribution to our volumes. Covid slowed us down last year, like the rest of India. This year, we are struggling to meet demand. Most of the demand comes from physical stores. However e-commerce players also distribute these coins and ingots (rectangular bars) for us.
Sebi recently barred brokers from distributing digital gold. How much impact will this have?
Entities who are registered as brokers with Sebi cannot offer digital gold, but for instance a subsidiary of the group can offer it. There was a bit of a shake up with some players having to move out. But overall, no impact on sentiment or participating. We are actually looking forward to a decision on which regulator will oversee digital gold as a whole. People who had already invested in digital gold through a stock broker were given the option to redeem or simply move directly to our platform and get a holding statement from us.
Sebi has also come out with rules for a national gold exchange and electronic gold receipts to trade on existing exchanges. How will this affect you?
EGRs are digital gold in a slightly different format. When you allow existing stock exchanges to trade in them, it allows the ecosystem to transact in a transparent manner. Since we are the only LBMA certified refiner we would like EGRs based on LBMA certified gold to trade on a different ticker from other types of gold. That’s what we are recommending to Sebi.
You had a gold buyback scheme launched last year. How was the response?
The success of such a scheme is linked to the company’s physical footprint. Unfortunately, our physical footprint is low. From that point of view, it has been a constraint, but the customer feedback was excellent.
Since launching our old gold buyback process last year, we have seen double digit growth every quarter when it comes to refining old gold and scrap gold. We are launching a new system of buyback where we will come to your doorstep, value it, buy it off you and collect it there and then.
When you go to sell your physical gold or ornaments, you need not only a good price but also a good method of assessing purity. Some players use traditional methods to assess, while our techniques are very modern. We are launching a new system of buyback where we will come to your doorstep, value it, buy it off you and collect it there and then.
Sebi has allowed Sebi Silver ETFs. Are you taking any steps in this direction?
We are looking at digital silver. We had planned to launch it during Diwali but it may take a month or so more. In terms of value, silver will not match up to gold. An equivalent amount of silver is about 1% of gold. Given the fact that the renewables industry is all about silver, think solar panels or electric batteries, the category is expected to go through its own share of explosion. When it will do so, I don’t know of course and we don't make any sort of forecast.
What are your expansion plans?
Southern India is possibly the region with the highest affinity to gold in the country and accounts for about 40% of the market. MMTC PAMP has historically been a north and central India kind of play. We are now going in for a very aggressive expansion in the south. From the current footprint of about 7 cities to around 200 cities. We will have 15 stores of our own and we will look at onboarding almost 1,000 BIS (Bureau of Indian Standards) registered jewellers. We have the technology to create unique products such as our coins launched in association with WWF.
What is the extra charge that customers pay for precious metals collectibles?
There is a standard making charge which is about 1% of the value and for silver it is around 8-10%.
