The gold rush

TRY NOT TO BE GOBSMACKED. A 40-ft.-high, 400-ft.-long wall cladded with sparkly marble will separate the 52,000 sq. ft. mansion from the rest of Kerala’s Thrissur city. It will house a climate-controlled swimming pool, 160 tonnes of air conditioning, buggies that’ll ferry visitors from the car park to near 30 ft. of the living room, a bridge over a canal to the rear of the property, over 20 servants … you get the picture. This is the under-construction residence of Joy Alukkas, the first generation, 57-year-old owner of the eponymous chain of gold jewellery stores. He reckons his new house should be ready by October, give or take a few weeks. Adjacent, three more mansions are coming up on an acre of land each. They belong to the Kalyanaraman family that runs India’s biggest gold jewellery chain, Kalyan Jewellers, which counts Bollywood superstar Amitabh Bachchan and daughter-in-law actor Aishwarya Rai Bachchan as brand ambassadors.

While the Alukkas and Kalyanaramans are Thrissur’s wealthiest—between them they own half-a-dozen Rolls-Royces, five jets, and a helicopter, besides the mansions—they are by no means the only folks splurging. Sobha Developers, a Bangalore-based construction firm that has so far focussed on Bangalore, Pune, and Gurgaon, building apartments for the wealthy upwardly mobile, is targeting a similar clientele in Thrissur. It’s developing Sobha City, spread over 55 acres, a mixed-use property that includes land for houses (like the Alukkas and Kalyanaraman mansions), apartments, and commercial space. In phase one, nearly 550 apartments (or 95% of stock), each priced over Rs 1.2 crore, sold out. Emboldened, Sobha is planning to build another 1,000 apartments starting next year.

This January, Thrissur got its first mall; another came up in April. Two more are in the works, including one at Sobha City. There are other symbols of Thrissur’s prosperity. A senior ICICI Bank executive in Kerala says that outside of Thiruvananthapuram and Kochi, Thrissur has the most number of bank branches in the state. In the last five years, 135 new branches have come up, taking the count to 577 by 2013, or 10% of all branches in the state. This is being driven more by the local economy than remittances from the Gulf, traditionally the go-to employment hotspot for Keralites.

Till even three years ago, Thrissur, a quiet temple city, often called the cultural capital of Kerala, was famous for its annual, seven-day Thrissur Pooram festival that attracts over a million visitors in April or May. Now, it’s India’s newest boom town, and perhaps its first ‘gold-town’. And it’s beginning to exhibit all the economic markers of what happens when a small population (here, 1.56 million) suddenly gets wealthy—runaway property prices, consumer price inflation, and so on. In the last 100 years or so, India has had its fair share of boom towns: Some came up around steel (Jamshedpur and Bokaro in Jharkhand, and Durgapur in West Bengal), others around garments (Tiruppur, Tamil Nadu), even others around machine tools (Coimbatore, Tamil Nadu). But rarely has any come up around the ultimate symbol of wealth—gold.

Though official figures aren’t available, Thrissur accounts for 30% of all the jewellery made in the country. It’s a bit like what Surat (Gujarat) is to diamond polishing. Nearly all the large Kerala jewellers who have no manufacturing of their own outsource to about 3,000 small outfits which employ about 40,000 artisans located around Thrissur. Apart from Kalyan and Joyalukkas, there are half-a-dozen local chains like Manappuram Jewellers, which operate in the state. The International Gemological Institute, which evaluates and certifies precious stones, opened its first office in the south in Thrissur in 2009. The move came after it found that the volume of stones sent by merchants in Thrissur to their offices in Delhi and Mumbai was increasing rapidly. Says T.S. Anantharaman, director at the Thrissur-headquartered Catholic Syrian Bank: “As the large companies demand better processes, Thrissur is evolving to become an organised jewellery-manufacturing cluster.” Ramesh Kalyanaraman, the 36-year-old younger son of the Kalyanaramans, says that every other family in Thrissur district is associated with the gold jewellery trade.

It helps that some of India’s largest jewellery companies are headquartered there. A retired professor of economics and currently investment strategist at brokerage firm Geojit BNP Paribas, V.K. Vijayakumar, says that the trend of jewellery retail chains may well have its origins in Thrissur. In 1987, Joy Alukkas, one of four brothers, went to the Gulf after their inheritance was divided among them. Joy started a gold jewellery business in the U.A.E., catering to the Malayalis’ fetish for it there. In 2002, he returned to set up four stores across Kerala, carrying the same brand name, Joyalukkas. This was contrarian: Till then, each family ran a store or two, depending on the number of siblings who had to have a business to run.

Sales of Thrissur’s top 10 biggest jewellery companies and allied businesses (diamond polishing, jewellery manufacturing) have risen from Rs 10,000 crore to over Rs 30,000 crore in the past five years. The revenue of gold loan company Manappuram Finance, listed since 1995, shot up to Rs 2,217 crore in 2013 from Rs 160 crore in 2009, thanks to the meteoric rise in gold prices; with sales of Rs 9,400 crore in FY14, Kalyan Jewellers in now the largest gold jewellery company in India, leaving behind Bangalore-based Titan Industries. Next year, Kalyan will spend Rs 1,300 crore to expand in India and overseas, while Joyalukkas will spend Rs 500 crore, opening six jewellery stores plus a real estate push. Four-fifths of India’s domestic jewellery business, worth about Rs 2.51 lakh crore, is controlled by local players, and regional chains, mostly from Thrissur, are taking the lead in organising the business.

Manappuram Finance founder V.P. Nandakumar says while there may be no “Thrissur model” yet, “slowly a distinct style of retailing is evolving from the city”. Its characteristics: high localisation in national, and increasingly international, expansion; contract manufacturing to suit local style preferences; using celebrities; loyalty programmes to retain customers, much like banks and airlines.

C.J. George, managing director of Geojit BNP Paribas, says that Thrissur has been the hub of entrepreneurship as far as he can remember. In the 1930s, Thrissur was the hub of kuri or chit funds, which collected money from members to give to others as loans. Thrissur is the headquarters of three private sector banks—Catholic Syrian Bank, South Indian Bank, and Dhanlaxmi Bank—all of which started in the 1920s and are still operational. George, who started the earliest online brokerage service in the country, says Thrissur’s businessmen are entrepreneurial but conservative. “So far, there have been no major scandals despite [these companies] being in the finance business.”

According to an extensive migration survey done by the Kerala government in 2011, in a decade starting 1998, emigration from the state increased in all its 14 districts. However, in the four years from 2008, emigration fell in five of them. The biggest fall was in Thrissur, followed by the state capital Thiruvananthapuram.

There is nothing yet that directly links Thrissur’s falling emigration to better economic opportunities locally. But the jewellery firms are expanding and diversifying. Kalyan Jewellers employs more than 13,000 people across the country, nearly three times more than in 2008. More than 2,000 of them are in Thrissur. It has started a programme called ‘My Kalyan’, which essentially consists of small customer service centres manned by four to five people. There are over 100 such centres across Kerala that run a scheme in which customers pay installments to buy gold—much like systematic investment schemes run by mutual fund companies. Since gold ranks among the most preferred investments by most Indian households, this scheme helps customers save up before they buy their quota of gold for the year. Kalyan plans to double the number of such offices in Kerala and also spread nationwide.

Again, both Kalyan and Joyalukkas are diversifying into real estate (“Buying real estate is a matter of trust, much like buying jewellery,” says Ramesh Kalyanaraman). Joyalukkas has also started an air charter service while Kalyan’s family has started a restaurant, Kalyan Veg Platter, which is rated among the top in the city.

Sobha City’s project manager K. Unnikrishnan quit his job at ICICI Bank, Chennai, and moved back to Kerala as the opportunities were equally attractive. Akhil, son of locally renowned film director Sathyan Anthikad, who studied in the U.S. and worked in a software firm before returning to join his father, says, “I tell my friends in the U.S. to come back as all the brands, like Nike, have shops in Thrissur; they can live their lives in luxury rather than being holed up in a flat.”

Thrissur’s rise has divided local opinion. Catholic Syrian Bank’s Anantharaman says, “The national presence of Thrissur’s gold companies is bound to change the perception that Kerala is a business-unfriendly state.” Known internationally as a holiday destination, Kerala has traditionally been considered hostile to industry, largely due to troublesome labour unions and its history of being ruled by communist governments. Despite a high literacy rate, Kerala’s software exports account for less than 1% of the country’s total, though Thiruvananthapuram has had software parks since the late 1990s, when the IT boom began.

Sarah Joseph, writer and retired lecturer from Thrissur Government College, says the sudden inflow of wealth from the growth of jewellery companies cannot be considered development. Despite high literacy and per capita income, Thrissur district had a good agriculture base, which is vanishing fast, she adds. Joseph, who is contesting the Lok Sabha elections on a ticket from the Aam Aadmi Party, says that drinking water is now a big problem in Thrissur. The reason: Several of Thrissur’s natural wells have dried up due to excessive use. She adds that the new developments are eating into wetlands, which have, for generations, been very productive agriculturally. “It is another world out there,” she says. “The land mafia is pushing up real estate prices and disturbing a well-settled society with its big money.”

THRISSUR IS AN ANCIENT city. Its city centre (today known as Swaraj Round or just Round) was built around the famous, 1,300-year-old Vadakkunnathan temple, dedicated to Shiva. The 17th-century ruler Sakthan Thampuran made Thrissur the capital of the kingdom of Cochin. He is famous for having introduced the Thrissur Pooram festival and starting the chit fund business. In his time, Thrissur’s population consisted of traders, businessmen, and courtiers who had large houses in the street around the temple, a few of which still remain.

Thrissur’s rise is changing its skyline. Anthikad says the first apartments showed up barely a decade ago, and they were few and far between. Vijo Varghese, who runs city photography shop Colour House, adds: “The highest point to take pictures till recently was the central tower in the Dolours Basilica, and the landscape appeared flat as only trees were visible.” Today, there are over a dozen buildings that are 60 m-plus, while the tallest stands at 98 m in Sobha City with a helipad on the terrace.

Thrissur’s GDP is the third highest among Kerala’s districts, after port district Ernakulum and state capital Thiruvananthapuram. A McKinsey study on cities in 2012 estimated that Thrissur’s GDP would increase to $29 billion (Rs 1.7 lakh crore) by 2025, from $4 billion in 2010 and will be among the top 36 cities in India. Indeed, Thrissur’s projected GDP figures are estimated to be among the highest among the newer crop of cities such as Nagpur in Maharashtra ($22 billion,) Visakhapatnam in Andhra Pradesh ($24 billion), Vadodara in Gujarat ($20 billion), and Coimbatore ($27 billion). Some of the places that will be ahead of Thrissur: Nashik in Maharashtra, at $37 billion, and Surat at $84 billion. The McKinsey report doesn’t exactly explain what will power Thrissur’s growth, but the current indications are that it will continue to be driven by jewellery and real estate, which in some senses will be an offshoot of jewellery.

That exposes Thrissur. In the last decade, gold prices rose 10-fold, the steepest rise in modern history. The global turmoil, rapid increase in oil prices, and unstable economies drove up demand for gold as a stable asset. That effect seems to be waning, as gold prices continue to remain weak after falling 20% in the last 18 months.

There is a possibility that the jewellery companies can shrink if demand for gold stays flat and the price of the yellow metal falls in any given year. As gold companies borrow heavily for their working capital requirement (buying gold), they could be saddled with a high interest burden. Last year, the market went into a tizzy after the government increased duty on import of gold and mandated that 30% of the imported gold would have to re-exported in some form. Can these new, fast-growing jewellery firms go bust under the weight of their own expansion? “Not likely,” says C.J. George. His logic: Jewellery companies are expanding into areas previously dominated by local, unorganised players, so they have loads of headroom to grow.

He also points to Thrissur’s larger entrepreneurial history (its banks) to argue that any change in the outlook of gold will not necessarily immediately impact Thrissur’s rise. For his part, Ramesh Kalyanaraman argues that demand for gold increased even when prices shot up.

For the moment, nobody seems to care about the movement of gold prices. In 1988, Anthikad directed Ponmuttayidunna Tharavu (The Ducks that Lay Golden Eggs), considered one of the best Malayalam romantic comedies of all time. In the movie, a goldsmith is smitten by a local girl, who wants a 10 sovereign gold chain if she is to marry him. After much effort, the goldsmith gifts the chain but she eventually marries her boyfriend. In the movie’s climax, set a decade later, the girl finds that the chain is actually not made of gold. Anthikad, who is famous for his social parodies, says back then there was this unsure air about goldsmiths. “The movie was a big hit.”

A 2010 film directed by Ranjith Balakrishnan, Pranchiyettan & the Saint, stars Mammootty in the lead as Pranchiyettan, an uneducated descendant of rice traders. His business empire expands beyond his small rice shop to jewellery, real estate, finance, and shopping complexes, much like Thrissur’s jewellery tycoons. While the film then explores Pranchiyettan’s unhappiness, Anthikad says that Mammootty’s (singsong) Malayalam is typical of the dialect spoken in Thrissur district and the movie depicts the new businessmen rather well.