Jewellery industry likely to shine in FY22

As the pandemic wreaked havoc on all industries that was linked to consumption and retail consumers, one industry managed to recover at a quicker pace compared to other industries.

The jewellery sector continued to show robust recovery after the impact of the second wave in the first quarter of fiscal year 2022, as the industry witnessed better than pre-Covid consumption levels in the second quarter of the fiscal, according to a report by ICRA.

Strong pent-up demand led to higher footfalls across key markets and healthy offtake towards marriages were key drivers for the consumption growth in recent months. Moreover, as the festive season begins in India, jewellery shops are expected to have more sales in the next three to four months.

Organised players in the sector are well-positioned to benefit from the improved demand, helped by renewed store expansion being undertaken across markets, coupled with consumer preference shifting towards purchasing hallmarked products, noted the report.

ICRA expects revenue in the industry to grow by more than 10% in fiscal 2022. It also expects revenue of 12 major gold jewellery retailers to grow by over 15% in fiscal year 2022, after the marginal decline witnessed in last financial year.

Meanwhile, increased demand from overseas markets also indicated the sector was rebounding as gems and jewellery exports increased 19.71% to $3235.24 million in September 2021, from $2702.57 million in the year-ago period, according to data from Ministry of Commerce & Industry.

In addition, the spot gold prices in the international markets have fallen by almost 17% since August 2020, thereby having a positive effect on domestic prices also. Gold prices have declined because the appeal for the yellow metal as a hedging tool has waned due to global economic recovery from the coronavirus crisis.

Although, sales of leading retailers are likely to register healthy growth, margins are expected to moderate on the back of lower contribution levels and increase in operating expenses. However, debt protection metrics are likely to remain comfortable, according to the ICRA report.

Stock to Watch

Companies which are having market cap of more than Rs 1000 crore in this industry are as follows: Titan, Kalyan Jewellers, PC Jeweller, Rajesh Exports, Vaibhav Global, Goldiam International, Thanngamayil, Renaissance, Asian Star.