According to ICRA research, domestic gold jewellery consumption (in value terms) is predicted to maintain its pace in the current fiscal year, growing by an estimated 14–18% year over year. This comes after a notable 18% gain in FY2024, mostly attributable to realisations even if volume growth was muted. According to the research, some pre-buying of jewellery, bars, and coins occurred during Q2FY25, which is typically a seasonally poor quarter, as a result of a 900 basis point reduction in import duties in the Union Budget in July 2024 and the temporary drop in gold prices that followed.
Despite the volatility of gold prices, the recent increase in spending was supported by both festive-led demand and rising consumer moods. According to ICRA, this would likely contribute to the expansion of jewellery demand in H2 FY2025, along with an increase in the number of auspicious wedding days and favourable monsoons that improve rural output. Realisations helped organised jewellery’s revenue growth in FY2024, as gold prices increased by almost 14% yearly. According to the research, a similar pattern is also anticipated to persist this fiscal year.
Despite sporadic corrections, the average price of gold has increased by 25% so far in the current fiscal year compared to the average price of FY2024. This was the case in late July 2024, when customs duties were reduced, and again in November 2024, following the US elections and currency fluctuations. The changing global economic and geopolitical landscape and the growing demand for gold investments have contributed to the gold prices’ ongoing upward trend during the last seven quarters. Organised jewellers are anticipated to expand their retail network by 16–18% in FY2025. Given the dual advantages of minimal capital investment and local market expertise with the franchisee partner, most large jewellers are choosing the franchise model to enter new markets.
“ICRA’s sample set of 15 large retailers, which account for approximately 75% of the organised market, is projected to record a healthy YoY expansion of 18-20% in FY2025,” stated Sujoy Saha, Vice President and Sector Head – Corporate Ratings, ICRA. Growth will be fueled by planned shop openings emphasising Tier II and III cities, rising gold prices, a shift in consumer preferences toward branded jewellery, and maybe some pre-buying in Q4 FY2025 due to the larger number of auspicious days in Q1 FY2026. It is also anticipated that reducing customs duties will discourage unauthorised imports, promoting the expansion of organised commerce.
From 7.2–7.4% in FY2023 and FY2024, the industry’s operating margin is predicted to shrink by 50–70 basis points in FY2025. However, according to ICRA, the firm’s sample set’s debt protection metrics should remain comfortable. Interest cover is predicted to increase to 6.2–6.4 times in FY2025 from roughly 6 times in FY2024, driven by an increase in operating profit on an absolute basis and a correspondingly lower rise in interest costs as a result of the retailers’ adoption of a more capital-efficient franchise route for store additions. According to ICRA, most organised players have planned to increase their retail presence in the medium term. This is expected to result in increases in market share, but front-loaded expenditures may cause the margin to decline.
“The one-time losses incurred by major merchants that use formal hedging procedures for gold purchases as a result of customs duty decreases in Q2 and Q3 are the main cause of the predicted decline in the operating margin of ICRA’s sample set of enterprises YoY in FY2025 to 6.5-6.7 percent. ICRA then anticipates that their operating margin would return to normal in FY2026,” Sujoy Saha continued.
