Parul
Revenue of gold jewellery retailers is expected to rise 12-15 per cent in the next financial year, backed by sustained high prices of gold and steady demand, Crisil Ratings said on Wednesday. This will follow a strong revenue growth of 20-22 per cent expected in FY22, albeit on a lower base of the pandemic-impacted previous fiscal.
“Revenue growth would have been even higher next fiscal 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,” Anuj Sethi, senior director, Crisil Ratings, said.
Operating margins should improve 50-70 basis points (bps) YoY 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’ despite higher capital spending and inventory.
Jewellery demand is seen steady next fiscal, with volume growing 8-10 per cent to pre-pandemic levels of 600-650 tonne owing to normalisation of operations, store additions and gold prices sustaining above Rs 50,000 per 10 gm.
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 said the credit outlook for gold jewellers will remain largely stable and any fresh waves of the pandemic, change in consumer spending on jewellery, and import duty ― because of higher imports widening India’s current account deficit ― will be keenly watched.
