Organised Market Push Driving Jewellery Industry Growth, Says Motilal Oswal

The rapid formalisation of the Indian jewellery market has helped the sector grow at stronger pace, pushing its market value to Rs 6.4 lakh crore by fiscal 2024.

The jewellery sector's revenue grew at an average of 8% from fiscal 2019 through fiscal 2024 due to rapid organisation of the sector. Organised market constituted 36-38% of the total jewellery market by fiscal 2024, up from 22% in fiscal 2019.

The organised segment demonstrated an impressive 18–19% revenue CAGR, while leading brands Titan, Kalyan, and Senco collectively achieved a 20% revenue CAGR during the same period.

Rising consumer preferences for higher ticket prices, enhanced shopping experiences, and a broader product variety fuel this trend towards the organised sector. These factors are accelerating the shift from unorganised local markets to organised channels.

Moreover, the franchise model is emerging as a key growth driver for leading players. Success in new markets has encouraged top brands to explore further geographical expansion. The asset-light nature of the franchise model allows for quicker reach and higher store penetration, presenting substantial growth opportunities for organised players.

Motilal Oswal has Initiates coverage on:

• Kalyan Jewellers India Ltd. with 'buy' rating and a target price of Rs 525 apiece, implying an upside of 23%.

• Senco Gold Ltd. with 'buy' rating and a target price of Rs 1,300 apiece, implying an upside of 27%.

• While reiterating 'buy' on Titan Co. with a target price of Rs 4,150 apiece, implying an upside of 16%.

Key risks highlighted by Motilal Oswal include:

• Gold price volatility

• Failure in store unit economics, especially in new markets

• Capital inefficiency in rapid store expansion

• Pricing pressure (with respect to making charges) due to competition.

The top 10 organised jewellery firms in India now collectively control over 30% of the total jewellery market share, according to Motilal Oswal.

This marks a significant increase from fiscal 2019, when these players held less than 20% of the market share. The organised jewellery market, which constitutes 36-38% of the overall jewellery market, has seen substantial growth in recent years due to the expansion of stores and a rising consumer preference for branded retailers.

The top 10 states account for 78% of the organised retail network, which encompasses over 2,000 stores, according to Motilal Oswal. These states—Tamil Nadu, Maharashtra, Karnataka, West Bengal, and Uttar Pradesh—represent 60% of the population and contribute 68% of the country's GDP. The store-to-GDP ratio for these states stands at 1.1 times, significantly higher than the 0.7 times ratio observed in other states.

Tamil Nadu leads with the highest ratio of 1.7 times, followed by West Bengal at 1.4 times.

This data underscores the concentrated nature of the organised jewellery market in India, highlighting both the regional distribution of stores and their economic impact.

Despite the fact that jewelry has emerged as a nationwide trend among several players, the market remains fundamentally hyper-local. Effective customer acquisition, upgrades, and frequent visits necessitate strict local oversight and competitiveness. Retailers are adopting diverse expansion strategies tailored to the preferences of specific cities or neighbouring towns. Some bridge the gap by attracting consumers from smaller towns to nearby cities where they have stores. Successful execution will rely heavily on efficient inventory and SKU management, as well as enhancing customer experiences.

Unlike other retail sectors, such as the quick-service restaurant category, where competition includes product substitutions, the jewellery market faces limited substitution risk.

In the QSR category, consumers have numerous options, leading to significant substitution risks. However, in the jewellery sector, customers tend to stick to their preferred choices, thereby minimising the risk of substitution.