How Kalyan Jewellers Sees Covid-19 Changing India’s Gold Jewellery Market

India’s second-largest jewellery chain expects formalisation of the sector to take place aggressively as more people in the world’s second largest gold-consuming nation switch to branded ornaments.“The shift from unorganised to organised is very fast now especially post-Covid,” Ramesh Kalyanaraman, executive director at Kalyan Jewellers India Ltd., told BloombergQuint in an interaction.“People don’t want to go to crowded streets, crowded malls, etc. They want standalone stores like Kalyan. This is what we saw in Q3 and in Q4, the acceleration was very high,” he said. “Going forward, with hallmarking also becoming mandatory, we think the acceleration will go further up in the coming years.”The unorganised sector still accounts for 70% of India's $64 billion jewellery market, according to a note by ICICI Securities. While formalisation picked up in the last decade, the pandemic is expected to accelerate the shift. And that's true for most sectors as large players with capital to tide over the Covid-driven disruption are expected to gain market share.Kalyan Jewellers said revenue rose 60% year-on-year in the quarter ended March, driven by new customers. “New customer growth was 50% plus' against the usual 5-6%, Kalyanaraman said.Revenue growth from the sale of gold ornaments stood at 70% compared with 35% for studded jewellery, he said.He attributed the trend to the preference for plain gold or “staple” products. “When the customer moves from the unorganised sector to organised players like Kalyan Jewellers, they come for staple products that they have seen with their neighbours or friends,” Kalyanaraman said. “They ask for similar products, and due to our hyperlocal stores, we’re able to cater to these customers.”Pandemic ImpactThe company, which started operations in Thrissur, Kerala, expects muted financial performance in the first half of the year. It entered April with the same momentum as in the fourth quarter, but two weeks later, most of its showrooms were shut because of lockdowns to contain the second Covid-19 surge.“Things are different this year but last year what we saw in Q2 was after a slow start, walk-ins started improving,” Kalyanaraman said. “We did 92% of the revenues over last year. In Q3, it became a growth of 10-12% over the previous year and in Q4, the growth was over 60%.'The company has also been forced to operate a lower percentage of its stores in India. “This year 75% of the showrooms were running in April. The month of May is of course is almost a total washout; in June, we expect a few showrooms might open in India,” he said. “But in the Middle East, all stores are open which was totally closed in the last financial year. Q1 will be better than the last Q1. Q2 we should see a normal growth from the stores that are open.”Kalyan Jewellers has shut seven stores in tourist locations and other locations, taking a hit of Rs 90 crore, he said, with the pandemic leading to reverse migration of workers from the key market of the Middle East to India. “We don’t see any visibility in the next two years because of the pandemic situation,” Kalyanaraman said, adding consolidation in the market has improved its margins to 16-17% from 12-13% previously.As a result, he refrained from giving a road map for FY22. “Hard for us to give a road map compared to last year,” he said, adding a clearer picture would be available around June when all stores would reopen.The company, which operates a total of 107 stores, couldn’t expand at the same rate in the last fiscal as it did in the last five years. This year it plans to open 21 stores. It had to push five of its 14 planned store openings in April because of the lockdowns in Maharashtra and Delhi.Kalyan Jewellers is looking at increasingly opening stores in non-southern markets where it earns higher margin where it sees a larger proportion of studded jewellery sales. It plans to bring revenue from this region to half from the current 35% in the next five years..Watch the full interaction here

How Kalyan Jewellers Sees Covid-19 Changing India’s Gold Jewellery Market

India’s second-largest jewellery chain expects preference for branded ornaments to drive the change.

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