Mumbai, May 2 (Representative) Despite a sharp increase in gold prices, jewellery retail demand is expected to witness a healthy 45 per cent growth in the first quarter of the current fiscal, largely driven by the Akshaya Tritiya festive season, says ratings agency ICRA. According to the agency, at the forecasted level, gold jewellery demand in FY2023 would grow by 11 per cent as compared to last fiscal and almost 40 per cent higher than the pre-Covid levels seen in FY2020. Akshaya Trithiya will be celebrated on May 3 across the country. “Demand during the current Akshaya Tritiya season is expected to be strong, leading to a healthy demand growth of around 45 per cent Y-o-Y in Q1 FY2023,” Jayanta Roy, Senior Vice President and Group Head, ICRA said. He further said that the growth for FY2023 is expected at 11 per cent for the industry, despite a high base witnessed in FY2022, driven by the anticipated steady wedding and festive purchases during the current fiscal, given Indian consumer’s strong cultural affinity towards gold.
“Interestingly, at the forecasted level, gold jewellery demand in FY2023 would be almost 40 per cent higher than the pre-Covid levels seen in FY2020,” Roy added. According to the agency, the jewellery retail sector is estimated to have grown at a robust 26 per cent in FY2022, driven by the strong demand recovery witnessed post the adverse impact of the second wave faced in the first quarter of the fiscal. “This was despite a sharp increase in gold prices, which resulted in some postponement of purchases for weddings and other occasions towards the end of the fiscal. Consumption in FY2022 was spurred by a pent-up demand in the second quarter and healthy festive and wedding demand driving record sales in the third quarter. Further, gold jewellery demand in the fourth quarter too was better than expected, with the limited impact of the third wave on store operations,” it noted.
ICRA further expects that within the jewellery retail industry, revenues of organised retailers are likely to grow at a higher pace by 14 per cent, backed by their aggressive store expansion plans and a gradual shift from the unorganised segment towards the organised one. With jewellery demand witnessing a healthy growth, organised players had re-initiated their expansion plans in FY2022. “Despite the expected increase in debt levels to fuel store expansions, the debt protection metrics for the larger market players is expected to remain comfortable, as reflected by an interest coverage of 5.4 times expected in FY2023. Similarly, total outside liabilities to tangible networth is expected to be at a comfortable 1.3 times expected in FY2023,” it added.