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Jewellery consumption growth revised to 10-12% YoY in FY2024: ICRA

In a recent update on the Indian jewelry retail industry, ICRA, a leading credit rating agency, has raised its projections for the year-on-year (YoY) growth of domestic jewelry consumption in value terms for the fiscal year 2024. The revised forecast now stands at 10-12%, up from the earlier estimate of 8-10%, with the surge attributed primarily to the increase in gold prices, the company announced in a release on Friday.

During the first half of FY2024, jewelry consumption witnessed a robust YoY growth of over 15%, driven by stable demand during Akshaya Tritiya and the escalating gold prices. However, ICRA anticipates a moderation in the growth rate to 6-8% in the second half of the fiscal year due to sustained tepid rural demand amid persistent inflation.

Gold prices, which experienced volatility from December 2022 to April 2023, remained relatively stable in H1 FY2024, up approximately 14% compared to the average prices in H1 FY2023. The elevated price levels supported revenue expansion for most jewelry retailers, despite subdued volume growth. The recent geopolitical tensions in the Middle East and the evolving global macroeconomic environment are expected to keep gold prices elevated in the near term, with the spike since early October 2023 and persistent inflation remaining key risks to demand.

Sujoy Saha, Vice President and Sector Head at ICRA noted, “ICRA’s sample set of 14 large jewellers, which account for ~70% of the organised market, is projected to record a healthy revenue expansion of 15-18% YoY in FY2024 on the back of their planned retail expansions and a gradual shift in consumer preferences towards branded jewellers. The organised jewellery retailers are expected to outperform the industry over the medium term supported by tailwinds from the accelerated formalisation of the industry.”

ICRA also anticipates a moderation in the operating margins of organized players in FY2024 due to front-loaded operating costs for planned store additions and increased advertising expenditure amid rising competition. Despite the projected increase in debt levels to fund inventory for new stores, the debt protection metrics for ICRA’s sample set players are estimated to remain comfortable, with interest coverage forecasted to remain healthy at more than 5.0 times over the medium term.

“The organised jewellers had recommenced their retail expansion in FY2023, after a brief hiatus in FY2021 and FY2022, with the store count of ICRA’s sample set estimated to have risen by more than 20% during the year. The momentum is likely to continue over the near to medium term with an estimated increase in store count by 18-20% YoY in FY2024, supporting their revenue growth,” Saha added. 

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks, and financial services companies as an independent and professional investment Information and Credit Rating Agency. Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The International Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.

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