Battle between unorganised and organised in gold; 17 companies that could rule 42% of India’s gold market by 2023

The Indian Gold market, the world’s second largest consumer after China needs no introduction. We have gargantuan demand numbers. For instance, the country’s wedding demand stands at over Rs 1.6 trillion. Wedding contributes an astonishing 58% of the entire Gold sales. But even as Indians prefer to invest in the yellow metal, a battle between the organised and unorganised players is expected to get intense in a couple of years. And in this battle between the organised and unorganised, 42% market-share will be cornered by 17 companies by 2023. If the analysis from HDFC Securities is to be believed, then these players are expected to track a growth of 11% CAGR (Compounded Annual Growth Rate).

This essentially means that rural markets which have largely been the major buyers in India’s Gold consumption story, may prefer to buy from organised trade, which at the moment commands nearly 29% of the overall sales. Many players from the unorganized sector may be pushed into the organized sector. The report critically states that domestic jewellery may grow at nearly 6% in FY18-23. “Gold volume is expected to remain stable (1.5% CAGR) as unorganized jewellers increasingly get marginalized courtesy the governments push to formalize the sector,” says the report. The report has identified jewelers such as PC Jeweller, Malabar Gold, Senco Gold, Kalyan Jewellers, GRT, Thangamayil, TBZ, Joy Alukkas, as the prominent ones from organised trade.

The research, largely based on the basis of store visits, says that Titan is currently leading the market when it comes to design, but jewellers like Joyalukkas, Kalyan Jewellers and PCJ are closer to catching up. Here are some of the other interesting observations from this study: Presence of the top 17 players is lower than 4% in North and West, but these top jewellers enjoy nearly 40% market share in the Southern markets. Domestic gems & jewellery consumption is pegged at Rs 3.2 trillion, of this the domestic jewellery market itself is about at Rs 2.7 trillion (estimated to have grown at nearly 6.5% CAGR over FY11-18.) Top 6 jewelers to corner one-third the market: The top 6 jewellers in India currently account for 4-5% of the BIS-listed stores and command nearly 20% revenue market share (RMS). Given their ambitious expansion over the next 5 years, RMS-to-store ratio is expected to expand further. We expect them to account for nearly one-third of the domestic consumption (Jewellery + Investment) in India by end of FY23.

The report is largely optimistic about the Gold sector, but 2018 has been an unfortunate one. The industry observed unearthing of India’s biggest LoU (Letters of Undertaking) related scam by once-India’s biggest diamantaire. In fact three of five biggest scams related to companies dabbling in Gold have been unearthed in the current year alone. Nirav Modi and Mehul Choksi acquired fraudulent letters of undertaking from PNB for overseas credit from other Indian lenders, defrauding a bank of more than Rs 113 bn. Nathella Sampath (Rs 3.8 billion), and Kanishk Gold (Rs 8.25 billion), are the major ones to be reported in the near one year time period. Shree Ganesh Jewellery house cheating case for an amount of Rs 22 billion in 2013, and the Winsome frauds case worth Rs 65 billion in 2013 are the other cases. The research paper certainly means opportunities in the North east. Besides, it will be interesting to track the development of the unorganised sector into a organised one.

Courtesy: Sify.com/ Image: sify.com