Domestic jewellery industry to witness 12% YoY growth in the current fiscal year: Report

The domestic jewellery industry, which recorded healthy sales during the festival period, is expected to witness 12 per cent growth during this financial year compared to the previous fiscal, according to a report.

The domestic jewellery industry is estimated to have registered a healthy growth of 60 per cent in the second quarter of FY23 as against pre-Covid levels (Q2 FY20), which exceeded Icra's expectations of an 8 per cent YoY contraction and was driven by urban demand recovery following range-bound prices.

However, on a Year-on-Year (YoY) basis, the demand recorded a contraction of 2 per cent in the quarter owing to a high base in the second quarter of FY22, which had grown by 70 per cent YoY, due to pent-up demand after the lifting of the pandemic-induced restrictions last year, the Icra report said.

Going forward, it said while some contraction is expected in the current quarter, the industry growth in FY23 is likely to be 12 per cent YoY, driven by robust growth in the first quarter of FY23 and steady wedding and festive demand.

"While the jewellery sector has recorded healthy sales in the Dussehra and Diwali season, factors like high domestic inflation, cautious consumer sentiments towards discretionary spending, and weak rural economic recovery due to erratic monsoons are likely to continue to constrain demand growth in the near term. Nevertheless, the demand outlook for the sector in the medium to long term remains favourable," Icra Vice President and Co-Group Head Kaushik Das said.

Icra expects the industry's contraction to moderate to 10 per cent YoY in the third quarter of FY23, against the earlier expectations of a 15 per cent YoY contraction, on the back of steady demand witnessed in the festive season and the favourable indications for the upcoming wedding season.

While the YoY contraction is on account of the high base last year, demand in the third quarter of FY23 is likely to be 20 per cent higher than the five-year third-quarter average demand before the pandemic (FY16-FY20).

The industry growth is likely to remain flat in the fourth quarter of FY23 owing to inflationary concerns, wedding purchases in the third quarter, and seasonal variation in demand.

Icra expects the organised jewellery retailers to outperform the industry in terms of revenue growth, driven by continued store expansions and tailwinds from market share gains, supported by a favourable regulatory environment.

The estimated revenue growth for these organised players is expected to be healthy at 20 per cent YoY in FY23, it added.

"With the healthy jewellery demand witnessed in the recent past, organised players had re-initiated their expansion plans in FY22, which is expected to gain momentum in the coming quarters. The total store count is likely to increase by more than 10 per cent in the next 12-18 months. Consequently, growth of the organised retailers is expected to outperform the industry," Icra Assistant Vice

President and Sector Head Vipin Jindal said.