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The organised jewellery retailers are expected to witness 23-25 per cent revenue growth this financial year on pent-up demand and recovery in discretionary spending, according to a report.
The revenue of organised gold jewellery retailers -- which had jumped 36 per cent in the last fiscal on a low base of the pandemic-marred FY21 -- will grow 23-25 per cent this fiscal as volume grows on pent-up demand and recovery in discretionary spending, Crisil Ratings said in a report on Thursday.
However, the report said that in 2023-24, growth will moderate to 8-12 per cent, given the higher base of this fiscal and slower growth in disposable incomes will weigh on discretionary spending.
In this scenario, the operating margin is likely to decline 40-70 basis points year-on-year because of increased marketing and store-related expenses, and stabilise at the pre-pandemic level of 6.7-7 per cent this fiscal and in FY24.
Crisil Ratings has given the credit outlook for organised players as stable.
For the record, the organised sector accounts for almost a third of the market, with the highly fragmented unorganised sector bringing up the rest, said the report.
"We expect organised jewellery retail sales volume to increase 16-18 per cent year-on-year to 670-700 tonne this fiscal, crossing the pre-pandemic level of 600 tonne, supported largely by wedding and festival demand, which accounts for 80-85 per cent of gold jewellery sales. The realisation will also support the revenue growth with an expected year-on-year increase of 5-7 per cent," Crisil Ratings Director Aditya Jhaver said.
With volumes rising, store expansion, which had moderated between fiscal 2021 and part of FY22, is also expected to gather pace, as per the report.
Increased penetration of Goods and Services Tax (GST) and mandatory hallmarking will further aid volume growth and assist the organised players resulting in market share gains for them, it added.
As a result, retailers are expected to enhance the number of stores by 10-15 per cent over the next two fiscals, it noted.
New store addition will necessitate increased inventory, and hence additional working capital debt.
Increased availability of bank funding to established gold jewellery retailers is visible from improving gross bank credit to the sector, which is expected to continue over the medium term.
"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," Crisil Ratings Director Himank Sharma said.
However, sharp volatility in gold prices, changes in government regulations and import duties, as well as consumer sentiment, needs to be watched, the report added.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
