New Delhi [India], December 17 : The domestic gold jewellery industry is set to maintain its growth momentum in FY2025, with consumption projected to grow by 14-18 per cent in value terms, according to a report by ICRA.
However, margins are expected to see temporary moderation due to the one-time impact of the customs duty cut announced in the Union Budget 2024.
The robust growth forecast follows an impressive 18 per cent expansion in FY2024, which was primarily driven by rising gold prices despite subdued volume growth. The sharp 900 basis points reduction in import duty on gold, implemented in July 2024, temporarily lowered gold prices, spurring pre-buying in Q2 FY2025a typically weaker quarter.
ICRA anticipates continued growth in H2 FY2025, supported by improving consumer sentiment, festive and wedding season demand, a higher number of auspicious days, and favourable rural output bolstered by good monsoons.
Revenue growth in FY2025 is expected to benefit from sustained gold price increases, which have risen by an average of 25 per cent in the current fiscal compared to FY2024 levels.
The ongoing price surge, driven by global economic and geopolitical uncertainties and heightened investment demand, has provided a strong tailwind for the industry.
On the supply side, organised jewellers are projected to expand their retail networks by 16-18 per cent in FY2025. Most large players are adopting the franchise model to penetrate new markets, particularly in Tier II and Tier III cities, due to its cost-efficiency and local market insights.
Sujoy Saha, Vice President and Sector Head - Corporate Ratings, ICRA, said, "ICRA's sample set of 15 large retailers, which accounts for ~75 per cent of the organised market, is projected to record a healthy YoY expansion of 18-20 per cent in FY2025."
He added, "Planned store additions with focus on Tier II & III cities, rising gold prices, shift in preferences towards branded jewellery and some likely pre-buying in Q4 FY2025 on account of higher number of auspicious days in Q1 FY2026 shall drive growth. The customs duty cut is also expected to disincentive unofficial imports, thus supporting the growth in organised trade."
Despite strong growth, industry operating margins are expected to contract by 50-70 basis points in FY2025, down from 7.2-7.4 per cent in the previous two fiscal years.
The contraction is attributed to one-time losses incurred by large retailers that use formal hedging practices for gold purchases, following the customs duty cut in Q2 and Q3 FY2025.
However, ICRA expects operating margins to recover to normal levels in FY2026 as the impact of the duty cut subsides. The debt protection metrics of organised players are projected to remain robust, with interest coverage improving to 6.2-6.4 times in FY2025 from ~6 times in FY2024, aided by a rise in operating profits and the capital-efficient franchise model for store expansions.
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