The report highlights that rural India accounts for a 60 per cent share of the overall domestic gold jewellery demand
The domestic gold jewellery industry is likely to witness growth in the range of 14 to 18 per cent in the current fiscal (FY25) on a year-on-year (YoY) basis in value terms, despite there being a possibility for a likely contraction in volume, according to a report by Icra. The report highlighted that rural India accounts for a 60 per cent share of the overall domestic gold jewellery demand.
Favourable monsoon and higher crop sowing this year are anticipated to boost rural incomes, potentially leading to higher purchases. The growth momentum of the domestic gold jewellery industry is likely to remain strong this fiscal, after a sizable growth of around 18 per cent in the previous financial year, driven by the surge in demand after the sharp cut in customs duty with effect from 24 July 2024.
As per the report, bar and coin demand in the second quarter of the current fiscal (Q2FY25) was the highest in more than a decade, leading to an overall rise in volume of around 43 per cent in H1FY25 on-year.
The report added that the average gold price in the country in FY25 so far is up by around 25 per cent compared to the average price in FY24, despite intermittent corrections, at first after the cut in customs duty by 9 per cent in late July 2024 and then in November 2024.
Icra’s sample set of 15 large jewellery retailers, which account for around 75 per cent of the organised market, is projected to surpass the strong revenue growth of 17 per cent seen in FY24 and register a growth in the range of 18 to 20 per cent in FY25. As far as the key growth drivers are concerned, buoyant gold prices, shift in market share towards organised trade with an increase in preferences towards branded jewellery and planned store additions with a focus on tier 2 and 3 cities are driving the revenue growth.
The operating profit margin (OPM) of Icra’s sample set is projected to moderate YoY by around 60 basis points (bps) to 6.5-6.7 per cent in FY2025, predominantly on the back of one-time losses to be booked by large retailers who adopt formal hedging for gold purchase.
