Retail Jewellery May See Growth Moderation In FY23: India Ratings

Ind-Ra maintains its view that the sector demand is likely to grow 30 to 35% yoy in FY 0222 because of a low base and a strong recovery in demand, supported by the traditional factors driving jewellery purchases.

"The ongoing Russia-Ukraine war and resultant disruptions are likely to result in overall inflation, which will keep gold prices at elevated levels. Ind-Ra expects the demand for gold jewellery, which is price sensitive in the short run, is likely to be impacted for at least a quarter (4QFY22), as customers would postpone purchases. Ind-Ra expects sectoral demand to grow 8%-10% yoy in FY23 because of sustained demand from the wedding segment and cultural-cum-traditional factors," the ratings agency has said.

The industry witnessed a strong revenue growth of more than 50% in 9MFY22, driven by a lower base effect, and pent-up demand during festive and wedding seasons. The sectoral revenue growth is likely to moderate but remain strong in FY23, underpinned by economic recovery, strong wedding demand and the cultural affinity towards gold jewellery.

Gold prices will remain volatile in the short term amid the prevailing geopolitical uncertainties, and might remain high due to the impact of the Russia-Ukraine conflict. Over the long run, the gold prices are likely to moderate due to factors such as rising bond yields, subsiding impact of the pandemic, increasing vaccination rates, and economic growth expectation. Despite the elevated levels of gold prices, the gold consumer volume demand is estimated to have increased to a seven-year high of 775-800 tonnes in FY22 (as per the latest estimates). Ind-Ra believes the volume demand in FY23 is likely to grow by 5%-10% yoy, backed by overall favourable demand dynamics.