High prices, stable demand to push gold jewellery retailers' revenue by 12-15 per cent in FY23
Mar 30, 2022
Mumbai (Maharashtra) [India], March 30 : The revenue of gold jewellery retailers is expected to rise by 12-15 per cent in the financial year beginning April 1, backed by sustained high prices of gold and steady demand, CRISIL Ratings said in a report on Wednesday.
This strong growth in revenue during the financial year 2022-23 will follow 20-22 per cent projected growth in the current fiscal, albeit on a lower base of the COVID-19 pandemic-impacted 2020-21.
Operating margins should improve 50-70 basis points (bps) year-on-year to 7.3-7.5 per cent in 2022-23, because of elevated gold prices and improved operating leverage. Consequently, operating profits will rise 12-15 per cent next fiscal, resulting in better debt metrics, CRISIL Ratings said.
"That will keep the credit outlook for organised jewellers 'stable' next fiscal, despite higher capital spending and inventory," it added.
This is as per an analysis of 82 of them rated by CRISIL Ratings, which accounts for nearly 40 per cent of the sector's revenue.
Jewellery demand is seen steady next fiscal, with volume growing 8-10 per cent to pre-pandemic levels of 600-650 tonne, owing to normalising operations, store additions, and gold prices sustaining above Rs 50,000 per 10 gram.
"Revenue growth would have been even higher next fiscal but for the Russia-Ukraine conflict, which have cranked up gold prices to Rs 55,000 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," Anuj Sethi, Senior Director, CRISIL Ratings, said in the report.
While operating profitability is expected to moderate to 6.5-7 per cent this fiscal due to limited inventory gains, and more expenditure on rentals, employees and advertisement, higher operating leverage will help restore margins to the pre-pandemic levels of 7.3-7.5 per cent next fiscal, CRISIL Ratings said.
