New Delhi, Dec 17 The domestic gold jewellery consumption (in value terms) is expected to continue its momentum in the current financial year with an estimated growth of 14-18 per cent year-on-year, according to an ICRA report released on Tuesday.
This follows the sharp growth of 18 per cent in 2023-24, which was primarily driven by realisations even as volume growth was subdued.
A sharp 900 basis points (bps) cut in import duty in the Union Budget in July 2024 and consequent correction in gold prices for a brief period led to some pre-buying of jewellery as well as bars and coins during Q2 FY2025, which is generally a seasonally weak quarter, the report said.
"While gold prices were volatile, improving consumer sentiments and festive-led demand aided consumption growth in recent months. This, coupled with a higher number of auspicious and wedding days, and favourable monsoons aiding better rural output, is likely to help jewellery demand growth in H2 FY2025," the report opined.
Revenue growth for organised jewellery in FY2024 had been supported by realisations with gold prices rising by 14 per cent year-on-year. The same trend is expected to continue this fiscal as well. So far in the current fiscal, the average gold price has risen by a sharp 25 per cent vis-à-vis FY2024 average price, despite occasional corrections – first, after the cut in customs duty in late July 2024 and then in November 2024, following the US elections and currency movements. The continuing uptick in the gold prices for the last seven quarters has been stimulated by the evolving global economic and geopolitical scenario, and rising investment demand for gold, the report observed.
On the supply side, organised jewellers are expected to add 16-18% to their existing retail network in FY2025. Most large jewellers are opting for the franchise model to expand into new markets given the twin benefits of low capital expenditure and knowledge of the local market with the franchisee-partner, it added.
ICRA vice president Sujoy Saha said, "ICRA's sample set of 15 large retailers, which accounts for about 75 per cent of the organised market, is projected to record a healthy Y-o-Y expansion of 18-20 per cent in FY2025. Planned store additions with a 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."
ICRA estimates the industry operating margin in FY2025 to contract by 50-70 bps from 7.2-7.4 per cent levels of FY2023 and FY2024. Nevertheless, ICRA expects the debt protection metrics of its sample set to remain comfortable, with interest cover projected to improve to 6.2-6.4 times in FY2025 from ~6 times in FY2024, he added.
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