Organised jewellers to outperform the industry

As per a recent note on the Indian jewellery retail industry, ICRA has revised upwards its forecast of the YoY domestic jewellery consumption growth (in value terms) for FY2024 to 10-12% from 8-10% estimated1 earlier, primarily driven by the rise in gold prices.

Jewellery consumption is estimated to have risen by more than 15% YoY in H1 FY2024, aided by stable demand during Akshaya Tritiya and higher gold prices. However, ICRA projects the growth rate to moderate to 6-8% in H2 FY2024 due to sustained tepid rural demand amid persistent inflation.

After remaining volatile between December 2022 and April 2023, gold prices were relatively stable in H1 FY2024, although up ~14% compared with the average prices in H1 FY2023. The elevated price levels supported revenue expansion of most jewellery retailers in the face of muted volume growth.

The recent tensions in the Middle East and the evolving global macro-economic environment could keep gold prices elevated in the near term. The spike in gold prices since early October 2023 and persistent inflationary headwinds remain key risks to demand.

ICRA projects some moderation in FY2024 in the operating margins of organised players owing to the front-loaded operating costs for planned store additions and increased advertising expenditure in the face of rising competition.

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