Gold price surge to cut organised retailers’ volumes by 9-11%: Crisil Ratings
Rising gold prices are expected to reduce sales volumes for organised gold jewellery retailers by 9-11% in fiscal 2026, as high prices lead consumers to purchase smaller quantities. However, despite the volume dip, revenues are projected to grow 13-15%, driven by higher gold prices and realisations, predicts India's premium rating agency Crisil Ratings.
On Tuesday, gold prices in India hit a historic high, breaching the ₹1 lakh per 10-gram mark.
The rating agency projects the retail revenues of organised jewellery sector are set to grow for a fifth consecutive year, after a 2.5 times increase in industry size since fiscal 2021.
The sales volume has been weak due to persistent high gold prices affecting consumer budgets, Crisil said in its latest industry out look.
“The recent jump in prices came just before the start of the festive and marriage seasons in the first half of April 2025, limiting the impact on demand thus far. However, as ticket sizes for buyers are likely to remain constant, caratage and grammage may reduce, as seen in the last four fiscals, impacting volumes. The demand, though lower, remains supported by duty cuts on gold imports announced last year," says Himank Sharma, Director, Crisil Ratings.
Price and Demand Dynamics:
Gold prices have risen about 25 percent in fiscal 2025 and are already about 20 percent higher as of mid-April 2025 compared to last year.
Even with a modest 4-5 percent price rise from current levels, fiscal 2026 average prices would be up 22-24 percent year-on-year.
Retailer Strategies and Profitability:
Analysing the market realities, the rating agency said the retailers are using discounts and promotions to maintain sales momentum, particularly in Tier-2 and 3 cities.
Operating margins are expected to increase 30-40 basis points (bps) due to inventory gains, with jewellery being sold at prices higher than the acquisition cost. The operating margin is projected to move closer to the seven-year average of 7.8-8.0%, reversing a two-year declining trend.
Financial Implications:
The financial implications of the rising prices is an immediate rise in working capital borrowings. This is mainly to finance higher-cost inventories for both current and new stores.
Despite the higher debt levels, leverage and debt protection metrics are expected to remain healthy, backed by improved cash flows from higher revenues and margins.
Credit Profiles Supported:
A CRISIL analysis of 60 major organised jewellery retailers (accounting for one-third of the sector’s revenue) supports the positive financial outlook.
Median interest coverage ratio is expected to remain above 6 times in fiscal 2026.
Structural Industry Trends:
Ongoing formalisation through GST and BIS hallmarking continues to drive customers towards organised players, supporting long-term growth, say the rating agency analysts.
Estimated revenue for the organised gold jewellery industry in fiscal 2026 is Rs. 4.5–5.0 lakh crore.
Risks and Uncertainties:
Volatility in gold prices, potential regulatory changes, and shifts in consumer sentiment could impact projections. Although current demand remains stable due to last year’s import duty cuts, future policy changes could sway outcomes.