Gold prices rise by approximately 14 per cent in FY2024 YoY and are higher by about 18 per cent YTD over FY2024 average
Srikumar Krishnamurthy, Senior Vice President and Co-Head – Corporate Ratings, Icra notes that gold prices rose by approximately 14 per cent in FY2024 YoY and are higher by about 18 per cent YTD over FY2024 average.
He adds, “The prices shall remain exposed to factors like global macro-economic environment, geo-political tensions, inflation, currency movements and more. Given the elevated price levels and relatively lesser number of auspicious days (YoY), we expect the domestic jewellery consumption growth (in value terms) to moderate in FY2025. The revenue growth of ICRA’s sample set of 15 large jewellers, which accounts for around 75 per cent of the organised market, is likely to moderate to mid-to-high single digit in FY2025 vis-à-vis an estimated 16 per cent growth registered in FY2024.”
India’s jewellery retail sector has grown from 50 billion USD in 2018 to 80 billion USD (Rs 6,66,480 crore) in 2024, according to a report by Motilal Oswal Financial Services (MOFSL). The growth is driven by rising disposable incomes, a broader mix of regular wear beyond weddings and investments, enhanced product offerings, trust-building through hallmarking and a better buying experience at organised retail outlets.
“The gold market experienced notable fluctuations in imports from FY18 to FY20, reaching 980 tonnes in FY19 before declining to 720 tonnes in FY20. This volatility was led by various factors, including declines in global gold prices, buoyant economic conditions leading to heightened disposable incomes and substantial demand for gold due to traditional celebrations and weddings. However, in FY20, a significant drop occurred due to escalating import duties and the initial stages of an economic slowdown,” a press statement by MOFSL said in Mumbai.
According to Icra, jewellery being a non-essential purchase, consumer sentiments are likely to remain subdued thus impacting the volumes in the current fiscal year. Consumers are expected to remain watchful of the price movements and adjust to the new price levels over two or three quarters. Organised retailers are likely to fare relatively better riding on the store expansion plans and structural tailwinds.
Within the Indian jewellery landscape, organised retail makes up 36-38 per cent of the market and is gaining traction over the unorganised sector, which is dominated by over 5,00,000 local goldsmiths and jewellers. The top 10 states, including Tamil Nadu, Maharashtra, and Karnataka, contribute 78 per cent of the organised retail network, comprising over 2,000 stores.
The total gold consumption in India was attributed to 66 per cent for jewellery and the remaining 34 per cent for bars and coins.
Krishnamurthy underscores, “Large retailers continue to pursue store additions to gain market share as customer preferences changed towards organised players. Given the higher gold prices, we also expect the share of the exchange of old gold in the overall supply to increase as well. The industry operating margin is estimated at around 7 per cent in FY2024 and is expected to remain range-bound within 7-8 per cent in FY2025 amidst rising competition. Debt protection metrics are likely to improve, going forward, supported by steady accruals from operations and with an increasing trend in expansion through the asset-light franchise route by large retailers.”
Joita Sen, Director, Senco Gold & Diamonds highlights that the market is in the midst of a transformative phase and the integration of technology with traditional craftsmanship is creating new avenues for growth.
“The aspiring middle and upper-middle class who want a better quality of products and experience along with the changing trends of designs and occasions to wear jewellery are going to be drivers for growth. Consumers today are more informed and discerning, seeking pieces that offer both aesthetic and have value and investment potential,” says Sen.
Integrating digital technologies such as virtual try-ons and AI-driven recommendations for authenticity verification is becoming increasingly integral to the jewellery shopping experience. According to Sen, this technological shift is expected to attract a younger, tech-savvy demographic. Moreover, with a growing awareness of sustainability, there is a rising demand for ethically sourced jewellery. Brands that authentically align with these values are likely to see significant growth.
The long-term industry outlook remains favourable supported by factors like cultural underpinnings, an evolving lifestyle, growing disposable income, favourable demographic dividend, rising preference towards gold as an asset class, expected improvement in rural output amidst normal monsoon guidance, expectations regarding further rise in gold prices and more.
