As Motilal begins coverage, Senco Gold and Kalyan Jewellers share the sparkle; evolving tendencies favor organized players

Motilal Oswal observes changes in consumer behavior, with organized businesses replacing local players.

There are a variety of business structures in the jewelry sector, notwithstanding customer preference for organized jewelry.

In the last five years, the jewelry industry has become more formalized, favoring organized players over small, independently owned businesses.

According to local stockbroker Motilal Oswal, the organised market now makes up 36–38 percent of the whole jewelry business, up from 22 percent in FY19.

The brokerage expressed optimism over the jewelry market, predicting further swift changes in consumer buying patterns as they move from unorganized/local to organized channels.

"Factors such as increasing ticket prices, enhanced shopping experiences, and greater product variety are fueling this trend," it said.

Consequently, the brokerage reaffirmed its buy recommendation on Titan and began covering Senco Gold and Kalyan Jewellers with a buy call.

Early trading on June 19 saw a 5.4 percent increase in Kalyan Jewellers shares to Rs 447 each, while Senco Gold recorded an intraday high of Rs 1,055, up 2.5 percent. Titan's stock was down over three percent and was stuck in the negative.

There are a variety of business structures in the jewelry sector, notwithstanding customer preference for organized jewelry. "Jewellery is a highly localized market, and demand patterns vary significantly among regions," said Motilal Oswal. Because of this, even if the metal is the same, the operational profit margin differs."

Titan is a prominent participant in the organized jewelry industry, with over 45% of the market share and operating over 900 shops featuring various brands. The remaining market is dominated by other retailers like Kalyan and Senco, bringing the total number of outlets in India to 2,000.

Motilal said, "Many jewellery companies progressively changed their presence to become pan-India players after enjoying success at the regional level." Thus, the franchisee model is another important factor propelling the companies' development.

"The franchise model allows for quicker reach while yet being asset-light. The brokerage said that "small jewelers are driving jewelry store penetration, which is at its peak and presents significant growth opportunities for organized players."

What's causing the optimism?

Because of Titan's great competitiveness in such a fragmented sector and its exceptional execution track record, Motilal Oswal said it has been optimistic on the company for more than ten years.

Titan has consistently outperformed other branded players because to its stronger competitive stance in terms of sourcing, studded ratio, youth-centric emphasis, and reinvestment approach.

Because of its franchisees, Kalyan Jewellers has an asset-light approach that the brokerage said would be perfect for creating cash flow to pay down its Rs 600 crore debt over the next two years.

The jewelry with studded stones, as opposed to plain gold, had the largest percentage (28%) and demonstrated Kalyan Jewellers' awareness of changing customer trends, including non-traditional and youth-led tastes.

Senco Gold stands out as a very potential participant in the organized retail jewelry industry. The firm is well-established across India, with a robust network in the east (store/revenue mix of 75–80%), according to the brokerage on Senco.

By concentrating on lightweight jewelry and catching the consumer trend of stud jewelry, the firm is growing its network in other countries and extending its presence in eastern markets.