Organised jewellery players record 14% growth in market share in 5 years: Report
The Indian jewellery sector recorded a visible shift of more than 14 percent towards organised players to 36-38 percent market share in the last five years, according to a report by financial services firm Motilal Oswal.
The organised players commanded just about 22 percent of the market in FY19.
This trend of formalisation is backed by a growing inclination towards branded jewellery, use of jewellery as an investment option, and lower carat products sold by branded retailers.
“The total jewellery market reported an 8 percent revenue CAGR during FY19-24, reaching a market value of Rs 6,400 billion. The organised market clocked around 18-19 percent revenue CAGR, while Titan, Kalyan, and Senco combined recorded almost 20 percent revenue CAGR during FY19-24,” the report noted.
The top 10 players, including Titan, Kalyan and Senco, control over 30 percent of the overall jewellery demand in India, dominating 90 percent of the organised market demand.
As per Motilal Oswal estimates, the top 10 have gained almost 10 percent market share since FY19.
“The proliferation of stores and consumers' growing preference for branded jewellers, especially in the last 3-4 years, have brought about significant shifts in the market composition,” the report said.
Brand building efforts by organised players on planks of trust and transparency, karatometer and jewellery exchange schemes, introduction of the certificate of authenticity and buyback schemes, micro-segmentation of the market and launch of sub-brands, and growth of franchise model helped organised players stake their claim over a larger slice of the marklet pie.
“Tanishq and Kalyan emerge as leading players with stores across India, with focus on rural and semi-urban demand and initiation of ecommerce for jewellery retail,” the report said.
Although organised players have benefited from the change in consumer preferences, market players have different business models within the industry. “Jewellery is a highly localised market, and demand patterns vary significantly among regions. Therefore, the operating profit margin varies significantly among players despite using the same metal,” it said.
However, it noted that at an aggregate level, the jewellery industry’s average gross margin stands at 12 percent, EBITDA at 7 percent and PAT at 4 percent.
The net profit margin for the aggregate is 3-4 percent, and capital efficiencies play a significant role in sustaining a better margin profile at the player level.
In terms of consumption outlook, bridal jewellery contributes a significant 55 percent of the total jewellery demand. This is estimated to increase around 57 percent in FY28, says consulting firm Technopak. Daily wear jewellery is estimated to come down to 3 percent, while fashion jewellery to increase by 1 percent in FY28.
On the upside, Motilal Oswal estimated a revenue CAGR of 25 percent over FY24-26, aided by strong store sales growth and expansion. While on the downside, the financial services firm assumes a revenue CAGR of 14 percent over FY24-26, considering demand-side challenges that would restrict the strong growth trajectory.
The top 10 states account for 78 percent of the organised retail network, comprising over 2,000 stores. These states represent 60 percent of the total population and contribute 68 percent of the GDP. The top five states are Tamil Nadu, Maharashtra, Karnataka, West Bengal, and Uttar Pradesh, with a store mix of 15 percent, 14 percent, 10 percent, 8 percent, and 7 percent, respectively.
The top 10 states contribute 78 percent of the organised retail network, with a population/ GDP mix of 60 percent/68 percent, the report highlighted.
Source: https://www.moneycontrol.com/