Despite the expected decline in volume, the sector is poised to achieve a robust revenue growth of 20-25% year-on-year, driven by higher realizations, says CRISIL report
Mumbai: The Indian organized gold jewellery retail sector, comprising jewellery, coins and bars, is expected to see sales volume decline a further 13-15% year-on-year this fiscal, after an 8% contraction last fiscal, due to high prices of gold and recent policy measures to curb imports of the metal.
Despite the expected decline in volume, the sector is poised to achieve a robust revenue growth of 20-25% year-on-year, driven by higher realizations. High prices of gold will lead to increased inventory holding costs and higher bank borrowings. However, an increase in both revenues and cash accruals will offset higher reliance on debt, resulting in stable credit profiles.
The assessment, based on an analysis of 70 organized retailers accounting for roughly a third of sectoral revenues, comes amid policy efforts to curb gold imports. India imported nearly 720 tonnes of gold in fiscal 2026, leading to an outflow of about $72 billion. To address the trade deficit and support the currency, the Government has raised Customs duty on gold, a move expected to dampen consumption and reduce import dependence. As a result, sector volumes are likely to fall to 620-640 tonnes this fiscal—marking the lowest level in a decade, excluding the pandemic-hit fiscal 2021.
Although higher realizations will result in inventory gains, retailers may pass on part of the benefit to consumers through increased discounting to stimulate demand. At the same time, higher promotional spending and a rising share of low-margin gold bars and coins will exert pressure on gross margins. Nevertheless, absolute EBITDA and overall cash accruals are expected to improve on the back of elevated price levels.
Domestic gold prices surged about 55% last fiscal, driven by global uncertainties and rupee depreciation against the US dollar, impacting affordability. This has led to a shift in consumer preference towards lightweight and lower-carat jewellery, as well as studded products. In contrast, investment demand has strengthened, with jewellery sales declining by about 25% over the past two fiscals, while demand for gold bars and coins has risen more than 50%. However, persistently high prices and the recent duty hike are expected to weigh on demand across segments.
Says Himank Sharma, Director, CRISIL Ratings, “The Central Government’s decision to more than double the Customs duty on gold to 15% from 6% will be a significant deterrent to demand for gold jewellery. While we see a notable shift towards gold bars and coins driven by investment demand, that is unlikely to fully offset the decline in overall demand. As a result, volume of the gold jewellery retail sector will decline 13-15% year-on-year to 620-640 tonne this fiscal, a level not seen in the past decade.”
At current gold prices of nearly Rs 1,60,000 per 10 grams (24 carat), realizations are estimated to be 35–40% higher year-on-year, supporting a near 20% rise in absolute EBITDA this fiscal. This will partly offset higher inventory costs, with inventory days expected to rise to 160-180 from about 150 last year, while also supporting ongoing retail expansion.
Says Gaurav Arora, Associate Director, CRISIL Ratings, “Organized retailers are expanding cautiously through franchise-led models, which is improving capital efficiency and widening their reach into Tier II and Tier III cities. While overall debt will increase by a third this fiscal to maintain higher inventory levels for new and existing stores, credit profiles will remain stable supported by improved revenues from higher realizations, and healthy cash accruals.”
The sector’s total outside liabilities-to-adjusted net worth ratio is projected to increase but remain controlled at around 1.5 times by March 2027, compared with 1.2 times a year earlier. Interest coverage is expected to moderate but stay comfortable at 5–6 times. Going ahead, volatility in gold prices, further regulatory changes, potential restrictions on gold purchases, and shifts in consumer sentiment will remain key monitorables for the sector.
Retail Jeweller India News
