Jewllery demand turns dull as gold becomes pricier: Icra

Mumbai: Growth in demand for jewellery in terms of value is likely to moderate to 6-8% this financial year from 18% in 2023-24 as consumers postpone big-ticket purchases due to the recent surge in gold prices, rating agency Icra said in a report.

In terms of jewellery volume growth, Icra expects it to decline following muted growth of 2% in FY23 and and 4% in FY24.

“Consumers are expected to remain watchful of the price movements and adjust to the new price levels over two or three quarters,” the rating agency said in a note on Tuesday. “Given the elevated gold prices, Icra expects the share of recycled gold in the overall supply to continue to increase and rise by 400-600 bps in FY2025.”

Gold prices increased by 14% in FY24, which helped boost revenue for several jewellers even as volume growth remained muted. So far this financial year, gold prices are up 19% over the FY24 average, and remain exposed to geo-political tensions, inflation, and currency movements.

Also read | When will gold prices fall?

“The revenue growth of Icra’s sample set of 15 large jewellers, which account for 75% of the organised market, is likely to moderate to mid-to-high single digits in FY2025 (compared to an estimated 16% expansion registered in FY2024), due to subdued consumer sentiments and high gold prices despite robust store expansion plans and structural tailwinds,” said Sujoy Saha, vice president and sector head, Icra.

Icra estimates the industry's operating margin to be range-bound at 7-8% in FY25, similar to 7% in the previous financial year.

Also read | Gold demand in India expected to be 700-800 tonnes in 2024: WGC India CEO Jain

Despite the muted demand, Icra expects large organized retailers to continue adding store in the near-to-medium term. 

“The store count of Icra’s sample set of companies is estimated to have increased by 21% in FY2024 after a 20% rise in FY2023 as large retailers looked at aggressive store additions in the last couple of years to gain market share with customer preferences changing towards organised players,” Saha added.

Last month, in an interview with Mint, Ajoy Chawla, chief executive of Titan Co.'s jewellery division, had said he expected jewellery demand to remain stressed in the first half of this fiscal year due to fewer wedding dates and elevated gold prices.

“The second half (of FY25) will be much better than the first half," Chawla had said.