New Delhi [India]: The domestic gold jewellery industry is expected to sustain its strong growth trajectory in FY2025, with consumption anticipated to increase by 14-18% in value terms, according to a report by ICRA.
Key Growth Drivers
- Impressive FY2024 Performance: The industry grew by 18% in FY2024, driven by rising gold prices despite subdued volume growth.
- Favourable Demand Factors: Growth in FY2025 is attributed to improving consumer sentiment, festive and wedding demand, a higher number of auspicious days, and good monsoon-supported rural output.
- Rising Gold Prices: With an average increase of 25% in gold prices compared to FY2024, the revenue outlook remains robust.
Impact of Customs Duty Cut
The 900 basis point reduction in import duty on gold, announced in July 2024, temporarily reduced gold prices, leading to pre-buying activity in Q2 FY2025. However, this has also caused temporary margin pressures for organised jewellers using formal hedging practices.
Organised Retailers Driving Growth
Organised jewellers are projected to expand their retail networks by 16-18% in FY2025, with a focus on Tier II and Tier III cities.
- The franchise model is being increasingly adopted for its cost efficiency and local market advantages.
- Large retailers, accounting for 75% of the organised market, are expected to witness a YoY expansion of 18-20%, according to ICRA.
Sujoy Saha, Vice President and Sector Head – Corporate Ratings, ICRA, stated:
“Planned store additions, rising gold prices, and the shift towards branded jewellery will drive growth. The customs duty cut is also expected to curb unofficial imports, benefiting organised trade.”
Margin and Financial Outlook
Despite strong growth projections, operating margins are likely to contract by 50-70 basis points in FY2025, due to one-time losses from the customs duty cut. However, ICRA predicts margins will recover to normal levels in FY2026 as the impact of the duty cut diminishes.
Organised players’ financial health remains strong, with debt protection metrics improving:
- Interest Coverage: Expected to rise to 6.2-6.4x in FY2025, up from ~6x in FY2024, supported by higher operating profits and cost-efficient expansions.
Industry Outlook
The gold jewellery industry remains poised for continued growth, driven by rising gold prices, increasing consumer preference for branded jewellery, and strategic retail expansions. While margins face temporary pressure, the long-term outlook is positive, with FY2026 expected to bring recovery and sustained profitability.