Organised gold jewellery retailers to achieve strong revenue growth in FY25: CRISIL

A CRISIL Rating analysis of 54 gold jewellery retailers, representing 32% of the organized jewellery sector's revenue, projects 17-19% on-year revenue growth in FY25, driven by higher realizations from elevated gold prices, while volume is expected to remain steady. Retailers will likely increase marketing and promotional campaigns to address moderated demand due to rising gold prices. Consequently, operating profitability may decrease by 20-40 basis points to 7.7-7.9%. Working capital requirements are expected to rise due to increased inventory and new store additions. Despite this, credit profiles should remain stable. Domestic gold prices increased by 15% during FY24, reaching US$ 804.71 (Rs. 67,000) per 10 gm by March 2024 and further rising to about US$ 876.78 (Rs. 73,000) in April 2024, bolstered by gold's appeal as a safe investment amidst geopolitical uncertainties.

Director at CRISIL Ratings, Mr. Aditya Jhaver, noted that retailers are likely to offer higher discounts and expand product designs to attract customers amidst higher gold prices. This shift towards lower-carat gold jewellery and promotion of gold exchange programs is expected to support volume. Organized retailers will continue gaining market share from unorganised ones, driven by changing consumer preferences and store expansions into Tier 1 and 2 cities. Store expansions have seen strong double-digit growth post-pandemic, though the pace may moderate to 10-12% in FY25. Elevated gold prices will necessitate replenishing gold inventory at higher costs, increasing working capital debt. Bank funding availability for established gold jewellery retailers has improved in recent years. Director at CRISIL Ratings, Mr. Himank Sharma, added that stronger cash generation from healthy revenue growth and adequate profitability will stabilize credit profiles despite rising working capital borrowings. Debt metrics will remain comfortable in FY25, with only slight moderation from fiscal 2024 levels. Sharp volatility in gold prices, changes in government regulations, import duties on gold, and consumer sentiment will be critical factors to monitor.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.