Summary:

A CRISIL Ratings study of 58 gold jewellery stores, representing one-third of the organized sector's revenue, forecasts a 22-25% revenue increase for this fiscal year, up from the previous estimate of 17-19%. This boost follows a significant reduction in import duties announced in the Union Budget and a decrease in retail gold prices. While potential inventory losses are anticipated, lower marketing costs and rising demand are expected to offset this. Operating profitability is projected to slightly decline to 7.1-7.2%, but retailers' credit profiles should remain stable.

Since February 2024, higher gold prices have dampened demand, though retailers have benefited from increased realizations. The recent cut in the import tariff from 15% to 6% has lowered retail gold prices by ₹4,500-5,000 per 10 gm, improving affordability and potentially driving a 3-5% increase in volumes. Despite gold prices being 17% higher than the previous year, the festive and marriage seasons are expected to boost H2 sales. Profitability may dip to 7.1-7.2%, with financial metrics remaining robust but requiring close monitoring for any fluctuations.

Source: IBEF

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