Chennai: Even as the Chennai city police department is nurturing a doubt that GoldQuest International is operating a money chain scheme, the company is unperturbed and is expanding its operations in the country.
The company is wholly owned by the Hong Kong-headquartered GoldQuest, which in turn is part of the Quest International group (www.goldquest.com).
With the promoters of some direct marketing companies getting arrested for promoting 'pyramid' money chain schemes in the guise of selling products with 'magical' properties, GoldQuest obtained a restraint order from the court against the Chennai police. "This has provided us an impetus," says GoldQuest India country manager Pushpam Naidu.
Clarifies Joseph T Bismark, co-founder of GoldQuest and executive director, Quest International: "Ours is not a pyramid money chain scheme, where the focus is to enrol members on the payment of a fee than selling a product. But we are selling medallions and the members are paid commissions for the sales made by them."
GoldQuest's business plan runs like this. The company brings out limited edition (10000 / 20000 units) 24-carat, 1-ounce commemorative gold coins / medallions of a famous personality. Each coin is priced around Rs 45,000 (including shipping charges), which is nearly double that of the metal's intrinsic value. The company also issues gold coins weighing 10 grams, platinum coins and coins with silver engravings. Designer gold watches, also of limited edition, are also part of the product line.
Coin-buyers automatically become GoldQuest members and in turn can sell the medallions for hefty commissions. "There is no compulsion on the part of a customer to sell the company's products; he can just be content with buying a coin," assures Naidu.
Given the fact that the commission on sales is quite handsome and in an attempt to recover their investment, most of the members are naturally inclined to promote the GoldQuest concept.
Outwardly the business model sounds fine as it is modelled on a customer reward scheme for getting new customers. But there are differences, like hefty commissions paid for successful referrals and the minimum number of new customers to be roped in, to become eligible.
And the way a member is attached to his introducer as also the right or left side structure of the incentive plan resemble a pyramid, though Bismark stoutly denies this theory.
According to Naidu, the company has 12,000 customers in India and the product line is growing. GoldQuest recently came out with a gold medallion on Paramacharya Chandrasekarendra Saraswathi of Kanchi Kamakoti Peetam, Kancheepuram. Prior to this, medallions on Tamil matinee idol Shivaji Ganesan, Lord Ganesha, Goddess Lakshmi, Mahatma Gandhi, Jawarharlal Nehru and Mother Teresa were brought out.
There are some disturbing issues that need to be answered. The purity of gold is certified by the mint stamping the medallions and not by any other third-party agencies like the World Gold Council or the Bureau of Indian Standards, which offer hallmarking services in India.
But GoldQuest officials say the heritage of the German-based BH Mayer's Mint as the proof of quality. A buyer can test the gold purity only at the risk of damaging the coin that in turn would impact its numismatics value.
In these days when everything is available off the shelf, including costly imported cars, a GoldQuest customer has to wait for at least three weeks after paying the full price to get his coin.
The reason, say company officials, is because a lead-time is required to import the coin from Germany. And the waiting period could also be part of business plan - to mobilise a specified number of customers, say 11, before effecting one delivery. This not only gives sufficient cash flow to the company to pay for the gold and sales commissions but also a sizeable kitty free of cost.
In India GoldQuest must have mobilised anything upwards of Rs 25 crore, though Naidu refuses to give the exact figures or the sales mix. It will be interesting to know the real number of coins the company has so far delivered here and the free cash it is sitting on.
According to officials a mint in India would reduce the delivery delay. The company along with Mayer's Mint is planning to set up a Rs 250-crore mint near Bangalore. "We will soon come out with an announcement about the project," says Naidu.
The other pertinent issues are the coin price, which is nearly double that of the metal's intrinsic value and the chances of its appreciation. The officials say the price is based on factors like gold price, minting cost, royalty, endorsement, craftsmanship, packaging, loss of gold during production, commissions, distribution, overheads and profit margin.
But what shakes the very basis of GoldQuest's claim is the uncertainty over the coin getting the much-touted numismatic value. But the question is will the coin value appreciate in excess of the intrinsic value, assuming that the latter remains constant at the current level.
Says D Hemchandra Rao, president, Madras Coin Society: "The numismatics value is the value of history and heritage behind a coin. Further, coins that are legal tender or minted in the government mint carries more credibility with the hobbyists."
But the medallions from GoldQuest are of recent origin as the company itself is just five years old. "Limited edition is a modern-day concept to create interest." Curiously, the collector's value and the numismatists value are not one and the same as a collector need not be a numismatist.
"Basically a collector's value is an individual value and would vary from person to person. It is largely based on the urge to posses the coin. But the numismatic value is one that is generally agreed upon by serious hobbyists, who are collectors. But not all collectors are numismatists," Rao explains.
Responding to the query about the possibilities of the coin value appreciating, Wolf Dziambor, head of product training, says: "We don't guarantee appreciation. Nobody can guarantee anything in business. Can you guarantee that the stock market would rise in the future?"