The revenue of gold jewellery retailers is likely to increase by 12-15 per cent in 2022-23 on steady demand and sustained high prices of gold, rating agency CRISIL said on Wednesday.
During 2021-22, revenue of gold jewellery retailers is expected to rise 20-22 per cent albeit on a lower base of the pandemic-impacted last fiscal year, it said in a statement.
According to CRISIL, operating margins should improve 50-70 basis points (bps) year-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 year, resulting in better debt metrics.
"That will keep the credit outlook for organised jewellers stable’ next fiscal year, despite higher capital spending and inventory,” it said.
This is as per an analysis of 82 of them rated by CRISIL Ratings, which accounts for 40 per cent of the sector’s revenue.
CRISIL said jewellery demand is seen steady next fiscal year, 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.
CRISIL Ratings Senior Director Anuj Sethi said, "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 gram.”
While prices have corrected a touch, continuing volatility will constrain volume growth in the first quarter of next fiscal year, ahead of the wedding and festive seasons, due to partial deferral of purchases, he said.
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 year.
With demand stabilising, CRISIL said business expansion will gather pace next fiscal year to the pre-pandemic levels of Rs 200-250 crore per annum.
Any fresh waves of the pandemic, and change in consumer spending on jewellery and import duty because of higher imports widening India’s current account deficit will bear watching, it added.