The domestic gold jewellery industry is projected to grow by 14-18% year-on-year in FY25, according to an ICRA report, despite expected volume contraction
The domestic gold jewellery sector is expected to witness significant growth in FY25, with projections of a 14-18% year-on-year (YoY) increase in revenue, as per a recent report by ICRA. This growth is anticipated despite a likely reduction in volume, primarily due to shifting market dynamics. Rural India, which accounts for a substantial 60% of the total demand for gold jewellery, is expected to be a key driver of this growth. This surge in demand is attributed to improved rural incomes, bolstered by favorable monsoons and a boost in crop sowing.
This projected growth follows a robust 18% increase in FY24, which was driven by a substantial reduction in customs duties in July 2024. This move significantly boosted demand across the sector. In addition, the first half of FY25 saw bar and coin demand hit its highest level in more than a decade, with a remarkable 43% YoY increase in volume.
Despite some price fluctuations in July and November 2024 following the customs duty reduction, the average price of gold in FY25 has surged by approximately 25% compared to the previous year, adding another layer of value to the market.
According to ICRA’s survey of 15 major jewellery retailers, representing about 75% of the organised market, the industry is expected to surpass FY24's 17% revenue growth, with an anticipated growth range of 18-20% in FY25. Several factors are contributing to this optimism, including the buoyancy in gold prices, a shift towards organised retail, growing consumer preference for branded jewellery, and an expansion of stores in tier 2 and 3 cities.
However, the report also notes a slight dip in operating profit margins (OPM) for this group, with a projected moderation of 60 basis points, bringing it to 6.5-6.7% in FY25. This decline is primarily attributed to one-time losses as retailers implement formal gold purchase hedging strategies to mitigate market fluctuations.
Despite these challenges, the overall outlook for the domestic gold jewellery sector remains positive, fueled by strong value growth and a strategic shift toward organised retail and branded jewellery.
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