The Big Wedding Binge Effect | Bottomline

Nuptials in India are a big affair. Back then, parents expending much of their lifelong savings on such events was common. Today, it may not amount to as much of personal wealth for many, but it still is a sizeable slice, and its impact on business and the economy is nowhere insignificant.

Why is this year special? Weddings happen each year, but this season (November to December) and the next (January to July, but mostly January to April) are likely to see bumper spending, as the number of estimated weddings is a good 25-26% higher than last year (CAIT estimate).

The aggregate expenditure also isn’t one to scoff at. The November-December wedding season alone is estimated to see nearly 40 lakh weddings with an outlay of nearly ₹5 lakh crore. That’s 1.5-1.65% of India’s nominal GDP and about and about 2.5% of all demand and fixed deposits in the banking system (ex-of interbank deposits).

To be sure, you can expect a significant part of this spending will come from historical family savings and not from the current year earnings, hence, that’s an added economic boost. What’s more, often money locked away in gold by traditional homes comes back into circulation on such occasions.

Now that we’ve established the significance of the event, let’s delve a little deeper into its spending effects.

To appreciate the wedding effect, it is better to work up from the micro to the macro.

Let’s start with what’s intuitively a significant beneficiary sector — banquets and catering. Typically, weddings in any top 5 cities will have rates from about ₹1,500 per plate going up to ₹6,000 per plate, depending on who’s catering. Even if you use ₹2,000 per plate as a benchmark and about 250 people attending two wedding events, that works out to a tidy sum of ₹10 lakh for F&B (food and beverages) alone.

Another sector, that gets a fillip is travel. If you assume even 25% of those attending a wedding are from outstation and they take flights to get in, that’s over ₹9 lakh in just travel spend for a 250-person gathering. Similar estimations lead to a tidy total sum of major expense heads adding up to nearly ₹70 lakh for a big city wedding (see table below), which could go up to nearly ₹4 crore if the wedding events scale up to luxury levels.

To be sure, though, the majority of India will not spend so lavishly, the largest number of weddings will have lower budgets, which is why CAIT estimates the average spend at about ₹3 lakh.

From an equity investor’s perspective, though, if the listed hotel majors, airlines and travel & logistics players are on your radar, the big-city math is a better estimate to go by. Most top hotel banquets would have minimum guarantees of 200-250 persons. Given this and the big divide in spending, while the big numbers in weddings will be low budget, the bigger share of wedding spending will be accounted for by the top of the pyramid and captured by the big players.

This is already reflected in hotels being choc-a-block booked through the season and room rates soaring. Undoubtedly, hotels have been having one of their best seasons ever, and they have been quite vocal about it.

The other big spending segment is jewellery, which often accounts for a big chunk of the overall wedding budget. World Gold Council estimates that bridal jewellery accounts for 50-55% of the gold jewellery market in India. Hence, players like Titan, Kalyan Jewellers and Senco Gold should have a bumper couple of quarters.

Even ethnic apparel retailers should do well. Vedant Fashion (of Manyavar fame) is a likely beneficiary. Even brands like Raymond have launched ethnic lines to cash in on the boom. The other likely beneficiaries are liquor majors, as wedding events usually lead to a hike in liquor spending.

Besides this, there are often other related spends that are not tied to the wedding events, but an outcome of these. Given the trend of nuclear families in big cities, couples often end up setting up a house. This leads to a perk-up in demand for domestic appliances, furniture and home décor. Some families also often end up gifting cars and two-wheelers on such occasions, boosting sales.

Given that the current wedding season comes after emerging from Covid post-2021, there is likely to be some catch-up effect this year. This raises questions about growth in the next season over a high base.

So, while Q3 and Q4 could reflect some of the sales buoyancy of the wedding effect this year, extrapolating growth and valuations on this basis may not be a wise thing to do. But if you invest in beneficiary players at realistic valuations, you could be in for a joy ride when the quarterly numbers pour out.

Enjoy the ride!