Demand for gold jewellery in India is estimated to grow at around 11% during the financial year 2022-23, almost 40% higher than the pre-Covid-19 levels seen in FY20, according to a research report published by ICRA.

Within the jewellery retail industry, revenues of organised retailers are likely to grow at a higher pace by around 14%, aided by their aggressive store expansion plans and a gradual shift from the unorganised segment towards the organised one, the report says.

Driven by the Akshaya Tritiya season, the jewellery retail industry is expected to witness a 45% year-on-year growth in the first quarter of FY23.

"Demand during the current Akshaya Tritya season is expected to be strong, leading to a healthy demand growth of around 45% Y-o-Y in Q1 FY2023. Growth for FY2023 is expected at 11% for the industry, despite a high base witnessed in FY2022, driven by the anticipated steady wedding and festive purchases during the current fiscal, given Indian consumer's strong cultural affinity towards gold," says Jayanta Roy, senior vice president and group head at ICRA. "Interestingly, at the forecasted level, gold jewellery demand in FY2023 would be almost 40% higher than the pre-Covid levels seen in FY2020," Roy adds.

The jewellery retail sector is estimated to have grown at a robust 26% in FY22, driven by the strong demand recovery witnessed post the adverse impact of the second wave faced in the first quarter of the fiscal.

This, according to ICRA, was despite a sharp increase in gold prices, which resulted in some postponement of purchases for weddings and other occasions towards the end of the fiscal. "Consumption in FY2022 was spurred by pent-up demand in the second quarter and healthy festive and wedding demand driving record sales in the third quarter. Further, gold jewellery demand in the fourth quarter too was better than expected, with the limited impact of the third wave on store operations," the report says.

Upon considering a sample of 14 major organised retailers, the estimated revenue growth for these organised players was robust at around 27% in FY22, post a marginal decline witnessed in FY21, the rating agency says. For FY23, revenues for ICRA's sample set are expected to grow at a steady pace of 14%, driven primarily by anticipated store expansions, it adds.

"Post the healthy levels seen in FY2020 and FY2021 on the back of inventory gains, operating profitability in FY2022 are estimated to have witnessed some moderation because of lower contribution levels and an increase in operating costs. Nevertheless, margins of organised retailers were higher than the average levels seen over the last decade, and are expected to stabilise at around 7-7.5% over the medium term," says ICRA.

"Revenue growth at around 14% for the large organised players is likely to outpace the industry growth in FY2023, backed by an expected increase in store count by more than 10% in the next 12 months and the continuing shift towards organised players witnessed in the recent past," says Kaushik Das, vice-president and co-group head, ICRA. "While the retailers’ debt levels have increased in the recent quarters to fund store expansions and associated inventory requirements, steady growth in earnings would support the coverage metrics and the capitalisation levels, which are likely to remain at comfortable levels."

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