High gold prices to moderate jewellery consumption in FY25, says ICRA
Tue June 18 2024
The domestic jewellery consumption growth (in value terms) is expected to moderate to 6-8% in FY25 as compared with expansion of 18% in FY24, due to the sharp rise in gold prices in recent months and the consequent impact on consumer sentiments of postponing non-essential purchases, ICRA said in a study.
After a muted volume growth of 2% and 4% in FY23 and FY24 respectively, the volume will contract in FY25, it added.
“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 FY25,” it further said.
According to the rating agency, the current gold prices are higher by 19% over the FY24 average and remain exposed to a confluence of factors like global macro-economic environment, geo-political tensions, inflation and currency movements.
Sujoy Saha, Vice President and Sector Head, ICRA said, “The revenue growth of ICRA’s sample set of 15 large jewellers, which accounts for 75% of the organised market, is likely to moderate to mid-to-high single digits in FY25 (compared with an estimated 16% expansion registered in FY24), 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 FY25,” he added.
ICRA estimates the industry operating margin at about 7% in FY24 and at a range-bound of 7-8% in FY25 amidst rising competition.
Source: https://www.thehindu.com