India Ratings and Research (Ind-Ra) noted the environment for organized jewellery retailers is encouraging while diamond exporters of cut and polished diamonds may see some tough days, reports say. According to the Ind-Ra report, although demonetization and the subsequent liquidity crunch held back consumers from purchasing gold jewellery, the Indian consumer’s inherent affinity for gold jewellery and the healthy macro-demographics give positive signs for jewellery demand. Having fallen 22 percent on y-o-y basis according to WGC, the demand is expected to stand at above a five-year average of 600MT in 2017, as per Ind-Ra.

Ind-Ra further noted that the credit metrics is likely to be stretched for the exporters of cut and polished diamonds in FY18 with EBITDA/interest coverage of 2.9x (FY17 Projected: 2.75x-3.0x), on the factors of low revenue growth and small profit margins, long working capital cycles and a high dependence on bank lines for inventory funding, reports add.

On the positive side, the report cited that an encouraging diamond jewellery demand in US and the improvement in the Chinese jewellery demand and better cut and polished diamond prices could help boost sentiments of exporters. But any measuires like a high goods and Service Tax, government norms to reduce gold imports or physical consumption, could impact organised retailers.