Organised jewellers are expected to expand their retail network by 16-18% in FY2025.
New Delhi: ICRA expects the domestic gold jewellery industry to maintain its growth momentum in FY2025, with consumption in value terms projected to grow by 14-18% year-on-year, the credit rating agency said in a release on Tuesday.
This follows a ~18% growth recorded in FY2024, primarily driven by rising gold prices even as volume growth remained subdued.
The sharp 900-basis point cut in import duty announced in the Union Budget of July 2024 led to a temporary correction in gold prices, prompting the pre-buying of jewellery, bars, and coins in the second quarter (Q2) FY2025.
This period, typically a seasonally weak quarter, witnessed an upswing in demand. ICRA notes that improving consumer sentiment, festive demand, and increased weddings and auspicious days will further bolster jewellery consumption in H2 FY2025.
“ICRA’s sample set of 15 large retailers, accounting for ~75% of the organised market, is projected to record a healthy 18-20% year-on-year growth in FY2025,” said Sujoy Saha, Vice President and Sector Head – Corporate Ratings, ICRA. “Planned store expansions into Tier II and III cities, rising gold prices, increased preference for branded jewellery, and pre-buying ahead of Q1 FY2026 auspicious days are expected to drive this growth. The customs duty cut will also disincentivise unofficial imports, supporting organised trade.”
Organised jewellers are expected to expand their retail network by 16-18% in FY2025, with many opting for the franchise model for low capital investment and local market expertise. Gold prices have sharply risen, averaging ~25% higher in FY2025 compared to FY2024, driven by global economic and geopolitical uncertainties and increasing investment demand.
However, the customs duty cut is anticipated to have a one-time impact on the operating margins of organised retailers that employ formal hedging practices. ICRA estimates industry operating margins to contract by 50-70 bps from the 7.2-7.4% levels recorded in FY2023 and FY2024. The operating margins are expected to normalise in FY2026 as the one-time losses wane.
ICRA also projects the debt protection metrics of its sample set to remain strong, with interest cover improving to 6.2-6.4 times in FY2025, up from ~6 times in FY2024. This improvement will be driven by higher operating profits and capital-efficient expansion strategies adopted through franchising.
“The operating margin of ICRA’s sample set of companies is expected to moderate to 6.5-6.7% in FY2025 due to the one-time impact of customs duty cuts in Q2 and Q3. However, we anticipate a recovery in FY2026 as the industry adapts,” Saha added.
