Credit profile of organised jewellery retailers likely to improve on demand: Icra
After weak jewellery demand last year, gold purchases ahead of goods and services tax (GST) roll out and favourable demand outlook for 2017 are likely to boost credit profile of organised retailers.
According to Icra, improved organised trade with rapid formalisation of the sector and better financing environment with enhanced access to gold metal loans are also likely to aid credit profile of organised retailers.
The rating agency said that jewellery demand has rebounded sharply in the last two quarters while easing liquidity pressures, fading impact of demonetisation, extended wedding season, better farm output and rising income levels have supported growth.
Titan, which earns majority of its revenue through sale of jewellery, saw an encouraging start to FY18 with strong growth in the division. In a statement to the exchanges, it said that the company’s jewellery sales during Akshay Tritiya increased 50% over same period last year while gold exchange programme also boosted exceptional ‘growth for the division. The company, which also manufacturers watch and accessories, does not expect any disruption for jewellery sale and gold exchange.
“Further, demand is unlikely to be impacted by GST rate which at 3% is only marginally higher than the earlier rates. The net tax outgo post GST is in fact seen declining by 1.0% for a retailer which will trigger the retailers to source from tax compliant suppliers and goldsmiths enabling them to claim input tax credit on jewellery and other services availed,” said Subrata Ray, Senior Group vice-president, Icra.
However, he also added that there could be temporary impact on demand due to transition towards streamlining of supply chain.
Over the medium to long term, Icra expects the industry to record a 6-8% growth with demand being supported by cultural underpinnings, evolving lifestyle, growing disposable income and favourable demographic profile. Demand for gold jewellery demand is expected to grow by 6% in terms of volumes and 9% in values in 2017.