The domestic gold jewellery industry is projected to grow by 14-18% year-on-year (YoY) in FY25, according to a report by Icra. This growth is expected despite a likely contraction in volume. Rural India, which accounts for 60% of the overall gold jewellery demand, is expected to be a key contributor, driven by higher rural incomes following a favorable monsoon and increased crop sowing.
The growth follows an 18% surge in FY24, fueled by a sharp reduction in customs duty in July 2024, which spurred increased demand. In the second quarter of FY25, bar and coin demand reached the highest levels in over a decade, resulting in a 43% YoY volume increase in H1 FY25.
The report notes that the average gold price in FY25 has risen by approximately 25% compared to FY24, despite some price corrections in July and November 2024 following the customs duty reduction.
Icra’s sample set of 15 large jewellery retailers, representing about 75% of the organised market, is projected to exceed FY24’s 17% revenue growth, with expected growth between 18-20% in FY25. Key growth drivers include buoyant gold prices, a shift towards organised trade, increasing preference for branded jewellery, and store expansions in tier 2 and 3 cities.
However, the operating profit margin (OPM) for this group is expected to moderate by 60 basis points to 6.5-6.7% in FY25, mainly due to one-time losses from retailers adopting formal gold purchase hedging strategies.
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