Icra expects industry growth to moderate to 8-10 per cent YoY (in value terms) in FY24 with volume growth likely to remain constrained by expected volatility in gold prices amidst global macro-economic uncertainties and evolving domestic inflation.
Nonetheless, the strong cultural affinity of Indians to gold is likely to support festive and wedding demand for gold jewellery, it added.
“Most jewellery retailers are estimated to have recorded revenue growth in excess of 15 per cent YoY on Akshaya Tritiya 2023. The aggressive retail expansion by most players during FY23 along with a steep increase in gold prices (10-12 per cent) are likely to have aided revenue growth while volume growth remained muted in the light of the high base, evolving domestic inflation and volatility in gold prices,” Icra Vice President and Co-Group Head Kaushik Das said.
In terms of profitability, operating margin is likely to remain comfortable and stabilise at around 7.5-8 per cent over the next two years.
With the debt protection metrics and liquidity position of players in the sample set expected to remain comfortable, supported by higher earnings on the back of improved scale of operations, the industry outlook is stable, Icra added.
While Icra projects the operating margins of organised players to witness some moderation in FY24 owing to higher operating costs for new stores and increasing competition, the benefits of economies of scale and likelihood of inventory gains for some jewellers in FY24 are likely to support the operating margins in the range of 7.5-8 per cent over the coming years.
Despite the projected increase in debt levels to fund the inventory for new stores, the debt protection metrics for the larger players are estimated to remain comfortable, as reflected by the estimated interest coverage of more than 5 times and total outside liabilities to tangible net worth ratio of less than 1.5 times over the next 12-18 months, against 5.6 times and 1.4 times, respectively, estimated in FY23, the report said.
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