Organised jewellers to grow at 10-11% through fiscal 2022

Aggressive promotional schemes and opening of new stores will help domestic organised jewellery retailers maintain the growth of 10-11 per cent over the next three fiscals as against 11.9 per cent growth between FY16-FY19, rating agency Crisil said. In the three fiscals through 2022, revenue growth will continue to be supported by longer-duration promotional schemes and fresh store additions, although these will be at a slower pace of around 17 per cent, it said.

It noted that increase in gold prices, a near- doubling of the promotional schemes period from 70-80 days to 150-170 days and store additions of around 33 per cent had aided the revenue growth between fiscals 2016 and 2019. It expects the operating profitability of the organised jewellers to remain stable at around 5 per cent, despite the aggressive promotional schemes and new store openings.

"Favourable product mix towards high-margin categories diamond and diamond-studded jewellery has supported operating profitability of late. Going forward, the proportion of high-margin products in sales is expected to increase by 200-300 basis points, which would lead to stable profitability," Crisil Senior Director Ratings Subodh Rai said. The agency observed that the bank credit to the gems and jewellery sector remains constrained and new store additions by organised jewellery retailers will be largely funded through internal accruals.