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Credit rating agency ICRA in its latest report has said that the domestic jewellery consumption growth (in value terms) is likely to moderate to 6-8% in FY2025, amidst the sharp rise in gold prices in recent months and the consequent impact on consumer sentiments of postponing non-essential purchases, from the sharp around 18% expansion in FY2024. After a muted volume growth of around 2% and around 4% in FY2023 and FY2024 respectively, ICRA expects the volume to contract in FY2025. Consumers are expected to remain watchful of the price movements and adjust to the new price levels over two or three quarters. 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. 

According to the report, after the volatility witnessed in FY2023, gold prices stabilised, post Akshaya Tritiya in April 2023, before witnessing an upsurge since November 2023 amid the wedding and festive season. Gold prices rose around 14% in FY2024 on a YoY basis, which supported revenue growth for most jewellers, despite muted volume growth. The current gold prices are higher by around 19% over the FY2024 average and remain exposed to the confluence of factors like the global macroeconomic environment, geo-political tensions, inflation, currency movements etc.

ICRA estimates the industry operating margin at around 7% in FY2024 and at a range-bound of 7-8% 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. The interest coverage is estimated to remain comfortable at over 7.0 times while the total outside liabilities to tangible net worth ratio is expected to improve to around 1.7 times in FY2025, against around 1.9 times in FY2024.