Joyalukkas Group, a gold and diamond retailer in India, is offering 12 free BMW cars and two kilograms (4.4 pounds) of bullion in a lucky draw as it fights a lean season in the world's second-biggest buyer of the yellow metal.
The monsoon season starting this month, usually considered a lean period for gold demand due to the lack of festivals and weddings, is threatening to deepen a sales slump caused by import curbs imposed last year. India raised duties on inbound shipments of the metal three times in 2013 to contain a record current-account deficit that pushed the nation's currency to an all-time low.
"This is the first time we have come out with a single promotion for entire India and the Gulf countries to boost demand during the rainy season," Joy Alukkas, managing director of Joyalukkas, said by phone from Kochi on June 18. "There are holidays in the Gulf countries during these months and non-resident Indians come back to their hometowns in South India. We are hoping to tap that market."
Joyalukkas's offers, valid until August 2, are likely to boost sales this monsoon season by 10% to 15%, Alukkas said. The group has 47 stores in India, 32 in the Middle East and one each in the UK, Singapore and Malaysia.
Sales of Gitanjali Gems dropped 24% to Rs 12,440 crore ($2.1 billion) in the financial year ended March 31, the first annual decline in revenue since listing on the stock exchanges in 2006.
Rajesh Exports' sales slid 24% to Rs 23,540 crore, the first annual slump since 2003, while Titan Co Ltd's jewelry revenue grew 6.5% to Rs 8,632 crore, the slowest pace since at least 2008.
While freebies may stem the decline in sales, Prime Minister Narendra Modi's efforts to revive economic growth may have a greater impact on rekindling jewelry demand, according to Abhijeet Kundu, an analyst at Antique Stock Broking Ltd.
"To see an acceleration in earnings growth, the discounts have to come down and volumes have to pick up," Mumbai-based Kundu at Antique said by phone on June 19. "There is some amount of revival in gold jewelry demand. By December, if the consumer sentiment improves further, then you could see better volume growth."
Gitanjali Gems will announce a "rain and shine" plan next month, offering discounts on ornaments and jewelry making charges, Chairman Mehul Choksi said.
"Sales are flattish at the moment because stocks are less and people are waiting for new policies to be unveiled by the new government," he said. "We expect demand to pick up because of these offers and the restrictions being eased as well."
India raised gold import taxes to 10% and required shippers to supply 20% to jewelers for export and sell 80% on the local market. The steps resulted in a drop in demand for the metal, helping China surpass the South Asian country as the world's No 1 buyer.
The industry expects the Modi administration, which took office last month, to reduce the tax in the federal budget to be presented July 10 because of improving economic conditions, according to the All India Gems & Jewellery Trade Federation.
The curbs on gold helped narrow the current-account deficit to $32.4 billion in the financial year ended March 31, from a record $87.8 billion a year earlier, the Reserve Bank of India said May 26.
A shrinking deficit aided the rupee in its recovery. It has rebounded about 13 percent since touching an all-time low of 68.845 against the dollar in August.
Billionaire T S Kalyanaraman's Kalyan Jewellers offers its regular customers a chance to dine with a celebrity and watch its brand ambassador Aishwarya Rai Bachchan on the sets of a film.
"This time we expect demand to be better as the mood is positive because of the change in government," he said.
"People assume the government will be friendly for gold."
Gitanjali's shares have gained 30% this year compared with the 20% rally in the benchmark S&P BSE Sensex. Rajesh Exports has more than doubled to a record Rs 203, while Titan has advanced 47% to Rs 337.
A weak monsoon poses a risk as almost 65% of Indian purchases are from the rural areas, according to UBS AG.
"With the kind of promotions and expectation of a change in import tax, we should see some normalcy in demand," C P Krishnan, a director at Geojit Comtrade Ltd, said.