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New Delhi: Organized gold jewellery retailers are likely to report 23-25% jump in revenues this fiscal as pent-up demand along with recovery in discretionary spending, and revenue from realizations inch up, according to a note by ratings firm Crisil.

However, Crisil projects growth to moderate next fiscal to 8-12%, given the high base effect of this fiscal and a slower growth in disposable incomes.

“In this milieu, operating margin will decline 40-70 basis points on-year because of increased marketing and store related expenses, and stabilize at the pre-pandemic level of 6.7-7.0% this fiscal and the next," the ratings firm said in a note on Thursday.

Crisil Ratings assessed financials of 76 gold jewellery retailers, which account for an estimated 33% of the 3.5 lakh crore organised gold jewellery sector. The credit outlook for these players is seen as stable, it said.

“We expect organised jewellery retail sales volume to increase 16-18% on-year to 670-700 tonne this fiscal, crossing the pre-pandemic level of 600 tonne, supported largely by wedding and festival demand, which accounts for 80-85% of gold jewellery sales. Realisation will also support the revenue growth with an expected on-year increase of 5-7%," said Aditya Jhaver, Director, Crisil Ratings.

Meanwhile, store expansion of organized jewellers is also expected to gather momentum, and this is likely to help volumes grow.

“Increase in penetration of Goods and Services Tax (GST) and mandatory hallmarking will further aid volume growth and assist the organised players resulting in market share gains for them. As a result, retailers, are expected to enhance number of stores by 10-15% over the next two fiscals," the firm said in its note.

To be sure, India is among the largest consumers of the yellow metal. The market is hinged on demand generated from weddings and the festive season.

“Strong revenue growth and better operating leverage will help buttress the impact of higher interest outgo because of the increased debt. Total outside liabilities to tangible networth ratio and interest coverage will improve to 1.0 time and 9.80 times, respectively, this fiscal from the pre-pandemic 1.4 times and 6.3 times, respectively. The ratios are expected to remain comfortable in fiscal 2024 as well," said Himank Sharma, director, Crisil Ratings.

However, the firm flagged sharp volatility in gold prices, any changes in government regulations and import duties, as well as consumer sentiment that could impact the sector.

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