INDIA RATINGS: Jewellery Exporters to Outshine Domestic Retailers

New Delhi, February 20, 2013: India Ratings has a Stable Outlook for gems & jewellery (G&J) exporters and Stable to Negative Outlook for domestic G&J retailers for 2013. Exporters are likely to report better revenue growth (median) in 2013 with margins comparable to the 2012 levels. Domestic retailers are likely to report lower revenue growth (with a possible volume decline) in 2013 along with slightly lower margins than in 2012. Retailers resorting to aggressive store additions may be worst affected.

India Ratings expects G&J exporters’ revenue (in USD) to grow in the range of 4% to 9% yoy in 2013. Economic activity in major export markets such as Hong Kong, UAE and Singapore is likely to show a relative improvement over 2012, supporting growth of finished products. Export volumes to the US demand are expected to be maintained at the 2012 levels.

The credit profile of exporters may stabilise at the current low levels on account of the expected revenue growth and on-going tight cost control measures. Established exporters with muted revenue growth (5%-15%) but stable margins may exhibit better credit profiles, within this sub-sector.

India Ratings estimates lower revenue growth of 15%-25% yoy for domestic jewellery retailers’ in 2013 (2012: around 40%) and a 75bps-100bps yoy decline in operating margins. While most retailers may broadly maintain their credit profile, those undergoing aggressive store expansion will be impacted. The agency expects the portion of demand from domestic retailers catering to investment needs of customers to gradually dwindle Jewellery volumes declined 5.2% yoy during January-December 2012 after a decline of 11.4% yoy in 2011. However, investments in gold exchange traded funds increased 23.9% yoy in 2012.

While a slow and steady global recovery is likely, any economic or geopolitical event reversing the global recovery process would severely affect the already weak credit profile of most G&J exporters. Considering mixed signals from the US consumers’ discretionary purchasing behavior, a change in the Outlook of G&J exporters to Positive in unlikely.

The Outlook on domestic jewellery retailers could be revised to Negative if gold prices increase further, which could impact demand for both cosmetic and investment purposes. A Stable Outlook may result from a favourable policy environment and stability in gold prices and the consequent improvement in sales.

India Ratings-rated jewellery companies include: Chandukaka Saraf and Sons ('IND BBB'/ Stable); BC Sen & Company Limited (‘IND BBB’/Stable); Arena Lifestyle Pvt Ltd (‘IND BB’/Stable); Tribhovandas Bhimji Zaveri (Delhi) Pvt Ltd (‘IND BB+’/Stable); Karan Kothari (‘IND BB+’/Stable); Mani Exports (‘IND BB-’/Stable); Om Anand Exports (‘IND A4’); MK (‘IND A4’); Jodhani Exports (‘IND A4’) and MM Group Entities (‘IND BB-’/Stable).
(Source: Corporate Communications and Investors Relations, India Ratings & Research - A Fitch Group Company.)