Organized gold jewelry retailers are likely to report a 23-25 percent jump in revenues this fiscal as pent-up demand along with recovery in discretionary spending, and revenue from realizations inch up, according to a note by ratings firm Crisil.
However, Crisil projects growth to moderate next fiscal to 8-12 percent, given the high base effect of this fiscal and slower growth in disposable incomes.
“In this milieu, the operating margin will decline 40-70 basis points on-year because of increased marketing and store-related expenses, and stabilize at the pre-pandemic level of 6.7-7.0 percent this fiscal and the next," the ratings firm said.
Crisil Ratings assessed the financials of 76 gold jewelry retailers, which account for an estimated 33 percent of the Rs 3.5 lakh crore organized gold jewelry sector. The credit outlook for these players is seen as stable, it said.
“We expect organized jewelry retail sales volume to increase 16-18 percent on-year to 670-700 tonne this fiscal, crossing the pre-pandemic level of 600 tonnes, supported largely by wedding and festival demand, which accounts for 80-85 percent of gold jewelry sales. The realization will also support the revenue growth with an expected on-year increase of 5-7 percent," said Aditya Jhaver, Director, Crisil Ratings.
Meanwhile, store expansion of organized jewelers is also expected to gather momentum, and this is likely to help volumes grow.
“Increase in penetration of Goods and Services Tax (GST) and mandatory hallmarking will further aid volume growth and assist the organized players resulting in market share gains for them. As a result, retailers, are expected to enhance the number of stores by 10-15 percent over the next two fiscals," the firm said in its note.
To be sure, India is among the largest consumers of yellow metal. The market is hinged on demand generated from weddings and the festive season.
“Strong revenue growth and better operating leverage will help buttress the impact of higher interest outgo because of the increased debt. Total outside liabilities to tangible net worth ratio and interest coverage will improve to 1.0 times and 9.80 times, respectively, this fiscal from the pre-pandemic 1.4 times and 6.3 times, respectively. The ratios are expected to remain comfortable in fiscal 2024 as well," said Himank Sharma, Director, Crisil Ratings.
However, the firm flagged sharp volatility in gold prices, any changes in government regulations and import duties, as well as consumer sentiment that could impact the sector.