CRISIL ratings forecasts robust growth for organised gold jewellery retailers amidst rising prices 

The analysis examined 54 gold jewellery retailers representing 32% of the organised jewellery sector revenue predicting a remarkable 17-19% year-on-year revenue growth for the fiscal year 

Mumbai: A comprehensive analysis released by CRISIL Ratings forecasts significant growth for organised gold jewellery retailers in fiscal year 2025, driven by a combination of factors including elevated gold prices and strategic marketing initiatives. 

The analysis, which examined 54 gold jewellery retailers representing 32% of the organised jewellery sector revenue, predicts a remarkable 17-19% year-on-year revenue growth for the fiscal year. This growth trajectory is attributed to higher realisations stemming from the surge in gold prices, while sales volume is expected to remain stable. 

As gold prices continue to soar, retailers are expected to intensify their marketing and promotional efforts to counterbalance the anticipated moderation in demand. Consequently, operating profitability may experience a marginal decline of 20-40 basis points year-on-year, settling between 7.7% to 7.9%. The heightened demand is also projected to result in increased working capital requirements, primarily driven by expanded inventory and new store additions. 

Aditya Jhaver, Director at CRISIL Ratings, notes, “Retailers are gearing up for intensified branding and marketing activities, coupled with higher discounts, to attract customers amidst the backdrop of escalating gold prices.” Additionally, there is a shift anticipated towards lower carat gold jewellery and increased promotion of gold exchange programmes to sustain sales volume. 

Furthermore, the analysis highlights the ongoing trend of organised retailers gaining market share at the expense of unorganised players, supported by evolving consumer preferences and expansion strategies into Tier 1 and Tier 2 cities. Despite the anticipated rise in working capital borrowings, the credit profiles of organised gold jewellery retailers are expected to remain stable, buoyed by robust revenue growth and adequate profitability. 

Himank Sharma, Director at CRISIL Ratings, underscores the resilience of organised gold jewellery retailers, stating, “Strong cash generation, driven by healthy revenue growth and profitability, is anticipated to maintain stable credit profiles despite the expected increase in working capital borrowings.” Debt metrics are forecasted to remain comfortable in fiscal 2025, with total outside liabilities to tangible net worth and interest coverage ratios projected between 1.0-1.1 times and 8.0-8.2 times, respectively.

However, the analysis cautions that sharp fluctuations in gold prices, changes in government regulations, import duties, and shifts in consumer sentiment remain key factors to monitor closely in the coming year. 

Courtesy: The Retail Jeweller News India