The organised jewellery sector currently accounts for just over a third of the total market, while the remaining portion is controlled by the highly fragmented unorganised sector.
Organised gold jewellery retailers are set to witness a 22-25 per cent increase in revenues this fiscal according to a CRISIL report. The forecast is 500-600 basis points higher than the earlier estimate of 17-19 per cent. This surge follows the significant reduction in import duties of around 900 basis points announced in the Union Budget. The expected growth will primarily be driven by higher sales volumes as retail gold prices decline from their previous lifetime highs.
The CRISIL report says, “Although the sudden drop in gold prices may result in inventory losses on existing stock, these losses are expected to be offset by improved demand.” It adds, “Retailers will be able to reduce spending on marketing and promotional campaigns due to the stronger demand.”The report, however warns, despite the growth in revenues, operating profitability is projected to decline slightly by 40-60 basis points to 7.1-7.2 per cent.
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