ICRA forecasts that the growth in domestic jewellery consumption (in value terms) will moderate to 6-8% in FY2025 due to recent sharp increases in gold prices. This is a significant drop from the ~18% growth seen in FY2024. The rise in gold prices is expected to lead consumers to postpone non-essential purchases, impacting overall market volume, which ICRA predicts will contract after muted growth in FY2023 and FY2024.
The share of recycled gold in the market is expected to rise by 400-600 basis points in FY2025 as consumers become more price-conscious. Despite this, organised jewellery players are likely to benefit from the increasing formalisation of the industry and ongoing store expansions.
Gold prices stabilised after Akshaya Tritiya in April 2023 but surged by approximately 14% year-on-year in FY2024, driven by wedding and festive season demand. Prices are now 19% higher than the FY2024 average, influenced by factors such as the global macroeconomic environment, geopolitical tensions, inflation, and currency movements.
ICRA’s analysis of 15 large jewellers, representing 75% of the organised market, indicates that revenue growth will likely slow to mid-to-high single digits in FY2025, compared to an estimated 16% growth in FY2024. This is attributed to high gold prices and subdued consumer sentiments, despite robust store expansion plans. Wedding and festive demand are also expected to be relatively muted due to fewer auspicious days in FY2025.
The industry’s operating margin is estimated at around 7% for FY2024 and is expected to remain in the 7-8% range in FY2025 due to rising competition. Debt protection metrics are anticipated to improve, supported by steady operational accruals and expansion through the asset-light franchise model by larger retailers. The interest coverage ratio is projected to stay above 7.0 times, with the total outside liabilities to tangible net worth ratio improving to 1.7 times in FY2025 from 1.9 times in FY2024.
Store counts for ICRA’s sample set of companies increased by approximately 21% in FY2024, following a 20% rise in FY2023. This growth is driven by large retailers aiming to capture market share as consumer preferences shift towards organised players. Store expansions are expected to continue in the near to medium term, with retailers remaining cautious about consumer sentiments.
