High gold prices will be the key driver amid minimal volume growth and credit outlook to remain stable, according to the Crisil Sustained high gold prices will brighten up revenue of organised gold jewellery retailers by 16 to 18 per cent this fiscal, but volume growth will remain modest driven by volatile and elevated gold prices, said rating agency Crisil.
This comes after a stellar compound annual growth rate (CAGR) of 35 per cent logged during fiscal 2022 and 2023, led largely by strong volume growth, driven by pent-up demand and increased consumer spending.
It added that average realisations during fiscals 2022 and 2023 increased at a CAGR of five per cent.
The operating margin, meanwhile, is expected to moderate by up to 30 basis points to 7.8 to 8.0 per cent, led by increasing promotional and store-related expenses. Still, the margin will remain above the pre-pandemic level of 6.8 to 7.0 per cent.
"Working capital debt requirement will continue to rise as jewellers keep expanding stores, albeit at a slower pace than in the past two fiscals. The credit profile for the players will remain stable," Crisil stated.
A Crisil rating study of 46 gold jewellery retailers, comprising 25 per cent of the organised jewellery sector revenue, indicates as much. For the record, the organised sector accounts for slightly more than a third of the market, with the highly fragmented unorganised sector making up the rest.
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