Page 12 - Bullion World Volume 02 Issue 12 December 2022

Bullion World | Volume 2 | Issue 12 | December 2022

five-year average Q3 demand before FY2023 is estimated to witness
the pandemic (FY2016-FY2020). some moderation. Nevertheless,
Industry growth is likely to remain margins of organised retailers are
flat in Q4 FY2023 (up ~3% YoY) likely to remain higher than the
owing to inflationary concerns, front average levels of 6.5% seen over
loading of wedding purchases in Q3 the last decade and are expected to
and seasonal variation in demand. stabilise at around 7-7.5% over the
This follows a ~20% YoY contraction medium term. Despite the expected
in Q4 FY2022 due to omicron and increase in debt levels to fuel store
a ~85% YoY growth in Q4 FY2021 expansions, the debt protection
on the back of pent-up demand metrics for the larger players are
post lifting of the pandemic-induced expected to remain comfortable,
restrictions. as reflected by estimated interest
coverage of ~5.0 times expected
ICRA expects the organised in FY2023 (against an estimated
Mr Raunak Modi jewellery retailers to outperform the ~6.0 times in FY2022). Similarly,

industry in terms of revenue growth, total outside liabilities to tangible
While the jewellery sector has driven by continued store expansions net worth is expected to be at a
recorded healthy sales in the and tailwinds from market share comfortable 1.6 times in FY2023,
Dussehra and Diwali season, gains, supported by a favourable against ~1.4 times in FY2022.
factors like high domestic inflation, regulatory environment. Upon
cautious consumer sentiments considering a sample of 14 major
towards discretionary spending organised retailers, the estimated
and weak rural economic recovery revenue growth for these organised
due to erratic monsoons are players is expected to be healthy at
likely to continue to constrain ~20% YoY in FY2023.
demand growth in the near term.
Nevertheless, the demand outlook With the healthy jewellery
for the sector in the medium to long demand witnessed in the recent
term remains favourable. past, organised players had re-
initiated their expansion plans in
ICRA expects the industry’s FY2022, which is expected to gain
contraction to moderate to ~10% momentum in the coming quarters.
YoY in Q3 FY2023, against the The total store count for ICRA’s
earlier expectations of ~15% sample set of 14 major organised
YoY contraction in the quarter, retailers is likely to increase by
on the back of steady demand more than 10% in the next 12-18
witnessed in the festive season and months. Consequently, growth of the
the favourable indications for the organised retailers is expected to
upcoming wedding season. While outperform the industry.
the YoY contraction is on account
of the high base last year (demand Post the healthy levels of operating
had grown by ~13% YoY in Q3 profitability seen in FY2021 and
FY2022), demand in Q3 FY2023 FY2022 on the back of inventory
is likely to be ~20% higher than the gains on gold, profitability in

12