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Informist, Wednesday, Apr. 23, 2025

MUMBAI – The sales volume of gold jewellery retailers in the organised sector is likely to fall 9-11% in 2025-26 (Apr-Mar) due to rise in retail gold prices to an all-time high, but their revenue will grow by 13-15% as prices and realisations are seen significantly higher from last year, CRISIL Ratings said in a release Wednesday.

Since 2020-21 (Apr-Mar), the organised gold jewellery sector has seen a revenue growth of over 20% for four successive years, leading the industry to grow 2.5 times, it said. However, sales volume has remained subdued with consumers purchasing smaller quantities amid budget constraints due to higher prices, it said.

As demand weakens, retailers are pushing sales through promotions and discounts amid increasing penetration in tier two and three cities. This has resulted in increased costs, but this cost will be more than covered by jewellery getting sold at prices higher than the purchase and making charges. This will improve operating profitability by 30-40 basis points on-year, driven by inventory gains, the rating agency said.

The higher gold prices will push up working capital borrowings for purchasing inventory for existing and planned stores. However, the jewellers' leverage will remain under control and debt protection metrics healthy, supporting credit profiles, it said. The rating agency analysed 60 gold jewellery retailers, which account for a third of the revenue of the organised jewellery sector.

"The recent jump in (gold) prices came just before the start of the festive and marriage seasons in the first half of April 2025, limiting the impact on demand thus far. However, as ticket sizes for buyers are likely to remain constant, caratage and grammage may reduce, as seen in the last four fiscals, impacting volumes," Himank Sharma, director at CRISIL Ratings, said. The demand, though lower, remains supported by duty cuts on gold imports announced last year, Sharma said.

The implementation of goods and services tax and the Bureau of Indian Standards hallmark continues to drive customers towards organised retailers, supporting revenue growth, the report said. Higher realisations will make another year of double-digit revenue growth for organised retailers, resulting in revenues of INR 4.5 trillion-INR 5.0 trillion for the industry, it said.

"Despite the increasing debt, the capital structure of gold jewellery retailers will remain comfortable. Improved revenues and operating profitability will absorb the impact on debt protection metrics as well with median interest coverage seen healthy, over 6 times in fiscal 2026," Gaurav Arora, associate director OF CRISIL Ratings, said.

Any sharp volatility in gold prices, changes in government regulations and import duties on gold, and consumer sentiment will need to be watched, the rating agency said.  End

Reported by Sandeep Sinha

Edited by Ashish Shirke

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