Revenue of gold jewellery retailers expected to grow 12-14% in FY22: Report

Gold jewellery retailers are expected to witness 12-14 per cent growth in revenue during 2021-22, driven by stable gold prices and recovery in discretionary spending including on wedding and festive jewellery, according to a report.

"After two consecutive years of decline, revenue of gold jewellery retailers is poised to grow 12-14 per cent year-on-year this fiscal, driven by stable gold prices and recovery in discretionary spending, including on wedding and festive jewellery," Crisil Ratings said in the report.

Recovery in revenue, along with improved accrual, continued inventory rationalisation, expectations of profitability settling at pre-pandemic levels and healthy capital structure will keep the credit outlook stable, it stated.

The report further said growth this fiscal will come on a low base as revenue had contracted three per cent and eight per cent, respectively, in financial years 2020 and 2021.

Demand had taken a knock after import duty was hiked by 250 basis points (bps) to 12.5 per cent in the Union Budget presented in July 2019; while in the fiscal 2021, the pandemic-induced lockdowns and store closures impacted revenue, it noted.

Crisil Ratings Senior Director Anuj Sethi said, "This fiscal, revenue of organised jewellers is also set to benefit from lower import duty, and introduction of mandatory hallmarking from June 16, 2021, which will make them more competitive compared with unorganised players."

He added that while the second wave did curb operations in the first quarter, lockdowns in many states were localised and less stringent, and hence store closures were lower compared to the first wave. "Besides, pent-up demand from weddings (55-60 per cent of overall jewellery sales) and festivals in later quarters will help resurrect revenue, just as they did last fiscal."

Additionally, stabilisation of gold prices is likely to support demand this fiscal as consumers tend to hold back purchases during times of price volatility.

With economic activity picking up gradually, income levels improving and an increasing number of people getting vaccinated, gold prices have softened from the peak seen in the previous fiscal. The rates have got stabilised at around Rs 48,000 per 10 grams for 24 carats over the last few months, the report added.

Total revenue of 86 Crisil-rated players stood at Rs 62,000 crore in FY21.