Gold jewellery retailers’ revenue seen rising 12-15% next fiscal: Crisil

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Sustained high prices of gold, as well as steady demand, is expected to raise gold jewellery retailers’ revenue by 12-15 per cent next fiscal, said ratings agency Crisil.

It also said that the segment’s revenue is expected to grow by 20-22 per cent this fiscal, albeit on a lower base of the Covid-19 pandemic-impacted last fiscal.

Besides, it said that operating margins should improve 50-70 basis points (bps) on-year to 7.3-7.5 per cent in fiscal 2023, 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.

“That will keep the credit outlook for organised jewellers ‘stable’ next fiscal, despite higher capital spending and inventory,” the agency said.

“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 gm.”

According to Anuj Sethi, Senior Director, Crisil Ratings, the revenue growth would have been even higher next fiscal year but for the Russia-Ukraine conflict, which has 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,” he said.

Furthermore, the ratings agency said that 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.

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