With its rich cultural heritage and affinity for jewellery, India stands as the world's largest consumer of gold, accounting for a staggering 20% of global consumption. Simultaneously, the country processes 90% of the world's diamonds by volume and 55% by value. In the jewellery market of India, gold takes centre stage, commanding an impressive 80-85% share, followed by studded jewellery (including diamonds) with about 15-20% share.
Investments and Developments in the Indian Jewellery Industry
The jewellery industry in India has attracted over $350 mn in private funding, with the largest to the following players:
In terms of public funding, traditional players like Senco, Vaibhav Jewellers, Motisons Jewellers, and RBZ have recently listed on the stock exchanges. The space has also witnessed a number of acquisitions, such as Caratlane’s acquisition by Titan, Candere’s by Kalyan, Pipa Bella’s by Nykaa Fashion and Voylla’s by GOAT Brand Labs.
Evolving Industry Landscape - Jewellery
National-level chains like Tanishq concentrate more on fast-moving jewellery, while regional chains strive to establish a competitive advantage by tailoring their offerings to the preferences of local consumers. A lot of regional players such as Joyalukkas (currently present mainly in the South), Senco (in the East), PC Jewellers (in the North/North East) are expanding to become national chains, following the footsteps of Malabar and Kalyan, which have been expanding their presence beyond the South.
To address diverse target segments, companies often create multiple brands. For instance, Titan has Zoya (luxury), Tanishq (premium) and Caratlane and Mia (mid-market), leading the market with the highest no. of stores of ~400 compared to the next player with ~150 stores and market share of 7% and 28% in overall jewellery and studded jewellery space, respectively. Similarly, Orra manages a portfolio of brands ranging from premium to modern lightweight jewellery, including Crown Star, Orra, Astra, Desired and Divaa.
Established international brands, ranging from luxury brands like Cartier, and bridge to luxury brand Swarovski, to fashion jewellery brand Accessorize, have also expanded their footprints in India.
Investor Outlook and Financial Metrics in the Jewellery Industry - India
Gold dominates the jewellery market, commanding a market share of 85%. However, its margins are relatively lower, ranging from 10-14%, owing to its commodity nature and greater price transparency compared to diamond-studded jewellery, which enjoys higher margins of up to 30-35%. The competition in gold rates has intensified, leading to a reduction in historical premiums charged by category leaders as key players shift towards one-nation, one-gold price.
The working capital dynamics for a jewellery company vary based on the product mix, as diamond studded jewellery has slower inventory turnover due to its discretionary nature and higher ticket value than gold jewellery, which has an additional investment perception value attached to it. Heavy jewellery players, predominantly offline, enjoy better (minimal) receivable days, as they primarily operate on cash sales, compared to companies in the e-commerce space, such as Giva, Melorra, selling via marketplaces.
Rise of Lab-Grown Diamonds
Lab-grown diamonds (LGDs) are transforming the industry, with the global LGD market expected to reach $55.6 billion by 2031. The share of lab-grown diamond sales worldwide has surged from a modest 7-8% during 2020 to 22% during 2023, with a noteworthy 15% contribution from India. This contribution is likely to increase further, given the recent increase in government support in the form of the elimination of customs duty on LGD seeds and grants for advanced R&D.
Jewellery companies in India have been experimenting with LGDs given growing consumer demand driven by ethical, sustainable and financial appeal, coupled with higher gross margins and the fear of gradual depletion of natural diamond reserves. For instance, Titan has acquired a stake in a USA-based lab-grown diamond maker, Great Heights, and Orra has created a sub-brand, ‘Diva’, that retails lab-grown diamonds.
Adoption of LGDs can pose some threat to jewellery players, especially light jewellery players such as Giva and Melorra, as they both cater to a customer segment that is focussed on affordability and is seeking light daily wear jewellery rather than investment-oriented customers. For heavy jewellery players like Tanishq and Orra, the impact will primarily depend on the younger generation's perception and acceptance. Evaluating the potential financial and demand impact of LGDs will be a key assessment metric for investors exploring this sector.
Growth Prospects: Shaping Jewellery Landscape for Investors
While the global market export has reduced from $20,515 mn (Apr-Sep 2022) to $15,231 mn (Apr-Sep 2023) due to various microeconomic issues, including rising inflation and high interest rates in the US, domestic demand in India is anticipated to increase substantially, and jewellery sector will garner investors’ interest, providing a positive boost to the retail companies focussing on the Indian market as witness the following :
• Changing demographics: The recent Dhanteras witnessed a 137% increase in jewellery sales. Indian jewellery retail sector is expected to grow at a CAGR of 15% from $70 bn in FY23 to $124 bn in FY27 on account of growing disposable income and urbanisation.
• Gradual shift from unorganised to the organised segment: From a mere 6% share of the organised segment in the total market in 2007 to nearly 37% in 2023, it’s expected to reach 42% in FY27. The shift is driven by consumers becoming more brand and service-conscious, displaying greater sophistication in their jewellery preferences. Additionally, policy pushes such as mandatory hallmarking and GST introduction contribute to this evolving landscape.
• E-commerce growth complementing brick-and-mortar jewellery retailing: Consumer shopping preferences are gradually shifting to online platforms, especially among millennials and Gen Z, with only ~25% showing a preference for offline shopping, as against ~44% in the case of the older generation. The distinction between offline and online purchases is gradually fading, as online jewellery plays a crucial role in influencing offline sales. Embracing online channels is poised to boost sales as it expands reach and adds to the customer’s convenience, providing a seamless experience across channels.
However, the adoption of online channels for heavy jewellery is not expected to rise substantially as it demands strong trust perception, touch and feel, assisted selling and after-sales needs, which offline stores can only offer. Many online first players are now focussing on the expansion of offline stores and the introduction of more premium categories in order to increase the AOV.
• Emerging new categories: The jewellery market has largely been skewed towards fine jewellery, contributing to ~90% of the overall sector, with wedding wear constituting 60% and daily wear 30%. Fashion jewellery contributes to the balance 10% share. With the rising women workforce, there is a noticeable surge in interest in light jewellery. Furthermore, the frequency of purchases in the light jewellery segment is higher than that of heavy jewellery, which is typically event-centric. These factors act as a catalyst for growth in the jewellery industry. As a result, existing jewellery players are targeting the young and urban population by introducing a new line of products. For example, Tanishq launched Mia and acquired Caratlane, and new players like Giva and Melorra have entered the market, taking advantage of the growing light jewellery space.
• Use of technology in production: Jewellery designers in India have been increasingly adopting innovative technologies and techniques, such as 3D printing, laser cutting and CAD/CAM, in the design and production process. These technological advancements facilitate customisation offerings and the creation of intricate and precise designs, contributing to an increase in demand.
• Evolving customer engagement strategies: Features like AR try-ons, live streaming from stores, and storytelling content not only enhance customer experience but also simplify the exploration efforts, leading to a rise in demand.
Apart from the above growth factors, there is an array of potential exit opportunities for the investors, as evidenced by past acquisitions in the space and IPOs like Kalyan and Senco providing exits to their investors, positioning this sector as an exciting bet for them.
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