Icra Expects Jewellery Consumption Growth To Stay At 6-8% In FY25 Due To High Price

In FY2024, the sharp 18 per cent expansion as gold prices continue to rise and the consequent impact on consumer sentiments of postponing non-essential purchases, Icra expects the domestic jewellery consumption growth (in value terms) to moderate to 6-8 per cent in FY2025.

Following a muted volume growth of 2 per cent in FY2023 and 4 per cent in FY2024, Icra expects the volume to contract in FY2025. Icra expects the share of recycled gold in the overall supply to continue to increase by 400-600 bps in FY2025 given the elevated gold prices.

Gold prices stabilised following the volatility witnessed in FY2023 and post-Akshaya Tritiya in April 2023, before witnessing an upsurge amid the wedding and festive season from November 2023 and continued to rise by 14% in FY2024. Currently, gold prices are higher by 19 per cent over the FY2024 average.

Icra’s Vice President and Sector Head Sujoy Saha said, “The revenue growth of Icra’s sample set of 15 large jewellers, which accounts for 75 per cent of the organised market, is likely to moderate to mid-to-high single digits in FY2025 (compared to an estimated 16 per cent expansion registered in FY2024), due to subdued consumer sentiments and high gold prices despite robust store expansion plans and structural tailwinds. Wedding and festive demand is likely to be relatively muted amidst a relatively lower number of auspicious days in FY2025.”

In FY2024, Icra estimated that the industry operating margin will be at around 7 per cent and at 7 to 8 per cent in FY2025. In the future, debt protection metrics are expected to improve with steady accruals from operations and through the asset-light franchise route by large retailers with an increasing trend in expansion. The total outside liabilities to tangible net worth ratio is expected to improve to 1.7 times in FY2025, against 1.9 times in FY2024 while the interest coverage is estimated to remain at over 7.0 times.

“The store count of Icra’s sample set of companies is estimated to have increased by 21 per cent in FY2024 after a 20 per cent 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. The store additions are likely to continue in the near to medium term as well, although the players will remain watchful of consumer sentiments,” Saha added.