Gold Jewellery Industry Eyes Strong Growth in FY2025

The gold jewellery market is poised for significant growth in FY2025, with a projected 14-18% increase in consumption value. Despite a temporary margin dip due to recent customs duty cuts, the sector is buoyed by rising gold prices, festive demand, and expansion into new markets.

The domestic gold jewellery industry is poised to continue its upward trajectory in FY2025, with ICRA projecting a 14-18% increase in consumption value. This forecast follows a strong 18% growth in FY2024, fueled by rising gold prices despite lower volume growth.

The July 2024 reduction in import duty on gold saw a temporary decrease in gold prices, prompting early purchases in the typically weak Q2 FY2025. Continued growth is expected in H2 FY2025, driven by consumer confidence, festive and wedding season demands, more auspicious days, and favorable rural output due to good monsoons.

Revenue growth will benefit from sustained gold price inflation, with prices rising an average of 25% compared to FY2024. The ongoing increase, spurred by international economic and geopolitical instability and rising investment demand, remains a significant industry driver.

Organised jewellers plan to expand retail networks by 16-18% in FY2025. Many are adopting a franchise model for cost-efficiency and market penetration, especially in Tier II and Tier III cities. According to Sujoy Saha of ICRA, a sample of 15 large retailers, making up about 75% of the organised market, show a projected growth of 18-20% YoY in FY2025.

Despite an expected 50-70 basis points contraction in operating margins due to the customs duty cut, margins are forecasted to normalize by FY2026. The sector's debt protection metrics remain strong, with improved interest coverage expected at 6.2-6.4 times in FY2025, buoyed by increased operating profits and the capital-efficient franchise expansion model.

(With inputs from agencies.)