The growth in demand for jewellery in India is expected to moderate this financial year, according to a report by rating agency Icra. The surge in gold prices has prompted consumers to postpone large purchases, leading to a projected value growth of 6-8% in FY25, down from 18% in the previous fiscal year.
In terms of volume growth, Icra anticipates a decline following muted growth of 2% in FY23 and 4% in FY24. The agency expects consumers to closely monitor price fluctuations and adapt to the new levels over the next few quarters.
The report highlights the increasing reliance on recycled gold to meet demand. As gold prices remain elevated, Icra predicts a 400-600 basis points increase in the share of recycled gold in the overall supply during FY2025.
Gold prices rose by 14% in FY24, boosting revenue for jewellers despite muted volume growth. This financial year, gold prices have climbed by 19% compared to the FY24 average, remaining susceptible to geopolitical tensions, inflation, and currency movements.
Sujoy Saha, vice president and sector head at Icra, noted that the revenue growth of the agency’s sample set of 15 large jewellers, representing 75% of the organized market, is likely to moderate to mid-to-high single digits in FY2025. This moderation is attributed to subdued consumer sentiment and high gold prices, despite robust store expansion plans and favorable market conditions.
Despite the muted demand, Icra expects large organized retailers to continue expanding their store networks in the near to medium term. The store count of Icra’s sample companies is projected to have increased by 21% in FY2024, following a 20% rise in FY2023, as large retailers prioritize aggressive store additions to gain market share amidst shifting customer preferences towards organized players.
Ajoy Chawla, chief executive of Titan Co.’s jewellery division, expressed a similar sentiment, anticipating subdued jewellery demand in the first half of FY25 due to fewer wedding dates and elevated gold prices. He expects a rebound in demand during the second half of the fiscal year.
Despite the challenges, Icra projects the industry’s operating margin to remain stable at 7-8% in FY25, similar to the 7% recorded in the previous financial year.
