CRISIL Ratings: For gold jewellery retailers, revenue seen up 12-15% next fiscal

30 Mar 2022 , 04:02 PM

Revenue of gold jewellery retailers is expected to rise 12-15% next fiscal, backed by sustained high prices of gold and steady demand. That will follow strong revenue growth of 20-22% expected this fiscal, albeit on a lower base of the Covid-19 pandemic-impacted last fiscal, CRISIL Ratings says in its latest report.

Operating margins should improve 50-70 basis points (bps) on-year to 7.3-7.5% in fiscal 2023, because of elevated gold prices and improved operating leverage. Consequently, operating profits will rise 12-15% next fiscal, resulting in better debt metrics. That will keep the credit outlook for organised jewellers ‘stable’ next fiscal, despite higher capital spending and inventory.

This is as per an analysis of 82 of them rated by CRISIL Ratings, which accounts for ~40% of the sector’s revenue.

Jewellery demand is seen steady next fiscal, with volume growing 8-10% to pre-pandemic levels of 600-650 tonne, owing to normalising operations, store additions, and gold prices sustaining above Rs50,000 per 10 gm.

Says Anuj Sethi, Senior Director, CRISIL Ratings, “Revenue growth would have been even higher next fiscal but for the Russia-Ukraine conflict, which have cranked up gold prices to ~Rs55,000 per 10 gm. While prices have corrected a touch, continuing volatility will constrain volume growth in the first quarter of next fiscal, ahead of the wedding and festive seasons, due to partial deferral of purchases.”