Organised gold jewellery retailers in India are expected to see a 22-25% surge in revenues this fiscal year, following the recent reduction in import duty, according to a report by Crisil Ratings.
This marks a significant increase from the earlier projection of 17-19%, driven largely by increased volumes as retail gold prices drop from their record highs.
The report noted that while the price drop may cause some inventory losses on existing stock, the impact will be cushioned by growing demand and reduced spending on marketing efforts.
Operating profitability is expected to dip slightly by 40-60 basis points (bps), settling at 7.1-7.2%. Himank Sharma, Director at Crisil Ratings, emphasized that the duty cuts, now at their lowest in a decade, have come at an ideal time for retailers as they begin preparing for the festive and wedding seasons.
Although retailers plan to add 12-14% more stores this fiscal year, the lower gold prices will help manage working capital needs. Credit profiles are expected to remain stable, even with profitability facing slight pressure, thanks to improved cash flows from higher revenues.
Gaurav Arora, Associate Director at Crisil Ratings, stated that financial metrics for gold jewellery retailers will be healthier than previously anticipated, maintaining stable credit standings.
