Jewellery Sector

About Jewellery Sector

The note covers India’s jewellery market, gold demand and imports, retail organization, regional demand patterns and a set of listed jewellery businesses. It describes a sector moving towards organized players, with demand influenced by weddings, festivals and agricultural activity. In CY2023, India accounted for ~26% of global jewellery demand by volume, while the domestic market is expected to expand through FY28E.

Jewellery Sector Industry Findings

• Gold demand and sourcing: Global gold demand was estimated at 4,448 tons in CY2023, with jewellery representing 49%. More than 95% of Indian gold demand is met by imports, and domestic prices do not always fall when international prices decline because of INR depreciation and import duties.
• Organized retail gains share: Organized jewellery retail’s market share is shown increasing from 30% in FY18 to 38% in FY24E and 43% in FY28P. Customs duties on gold and silver were reduced from 15% to 6% in the Union Budget 2024.
• Regional and product preferences: In FY23, South India represented 40% of the jewellery market and West India 25%. The note describes southern consumers as preferring traditional plain-gold jewellery, while northern and western markets have greater demand for studded and lightweight jewellery.
• Demand mix and margins: Bridal wear represented 55% of jewellery demand in FY23, compared with daily wear at 35% and fashion at 10%. The note states that gross margins for plain-gold jewellery range from 10% to 14%, while diamond-studded jewellery has margins of 30% to 35%.
• Company themes: The conclusion identifies Sky Gold, Thangamayil and P N Gadgil as positioned for market-cap expansion, citing revenue growth and the sustainability or potential improvement of existing margins. Improvement in Senco Gold’s margins and Khazanchi’s ability to grow retail sales are also highlighted as monitorables.

Market Size and Organization

Company Estimates and Valuation

Sector Risks

• Gold-price and import exposure: The note links international gold prices to the dollar index and geopolitical risk. It also notes that INR depreciation and import duties can prevent declines in international gold prices from translating into lower domestic prices.
• Working capital and cash flow: The conclusion identifies optimal working-capital management and positive cash flow from operations as key monitorables. Company profiles also describe working-capital-intensive operations where varied designs must be displayed to customers.
• Business concentration: Risks identified in the company profiles include geographic concentration in Tamil Nadu for Thangamayil and Maharashtra for P N Gadgil, as well as reliance on bank debt and inventory exposure for Sky Gold.
• Margins and execution: The note flags margin improvement at Senco Gold, Khazanchi’s retail expansion and the performance of Khazanchi’s new flagship store as monitorables.

Our View

The note’s preferred growth themes are Sky Gold’s manufacturing model and the retail businesses Thangamayil and P N Gadgil, supported by revenue growth and margin sustainability. The key cross-company monitorable is whether working-capital management can support positive operating cash flow; the report assigns no ratings or target prices to the profiled companies.

Standard disclosures

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Rating rationale

Minerva Capital Research Solutions endeavors to provide objective opinions and recommendations. Ratings are assigned to stocks according to their fair value vs current market price and then categorizes them as Buy, Hold, Reduce, Sell. The performance horizon is one year unless specified and fair value is defined as analyst’s valuation for a stock.

• Buy:> 15%
• Hold: -5% to 15%
• Reduce: -15% to -5%
• Sell: <-15%