India's organised gold jewellery sector is expected to see a relatively smaller contraction in sales volumes in the current financial year, even as high
gold prices continue to weigh on consumer demand. However, retailers are likely to maintain strong revenue growth, with Crisil Ratings projecting a 21-23 per cent increase in FY27. The rating agency expects the credit health of organised jewellery retailers to remain stable, supported by healthy cash flows, disciplined inventory management and a cautious approach towards store expansion. The assessment is based on an analysis of 76 organised gold jewellery retailers, which together account for nearly 33 per cent of the industry's revenue. According to the report, jewellery sales volumes could decline by 4-6 per cent this fiscal, an improvement over the 8 per cent contraction recorded last fiscal after gold prices jumped 56 per cent. Gold Prices Continue To Weigh On Jewellery Demand Despite the anticipated moderation in volume decline, elevated gold prices are expected to support revenue growth. Gold prices are projected to average 25-27 per cent higher in FY27 compared with the previous financial year. Affordability has emerged as a key concern for buyers, particularly after the government increased the import duty on gold to 15 per cent from 6 per cent in May 2026. Higher prices have prompted consumers to reconsider their jewellery purchases and opt for more affordable alternatives. However, the pace of gold price increases has moderated, while a subsequent correction has offered some relief to buyers. This has come at a crucial time, with the festive and wedding seasons supporting demand. Early indicators from the third quarter suggest that customer footfalls and purchase conversion rates have improved across most organised jewellery retailers. The trend could help limit the overall decline in sales volumes. "Demand indicators are pointing to stabilisation rather than a broad-based recovery," said Himank Sharma, Director at Crisil Ratings. He added that consumers were increasingly shifting towards lighter-weight and lower-carat jewellery to manage affordability. Retailers' Operating Margins Likely To Face Pressure While higher gold prices are expected to boost topline growth, profitability could come under pressure during the year. Crisil Ratings expects operating margins of organised jewellery retailers to fall by 60-80 basis points from 9.3 per cent in the previous fiscal to approximately 8.5-8.7 per cent in FY27. The anticipated decline is largely linked to lower gains from inventory appreciation as gold price increases moderate. Retailers are also likely to spend more on promotional activities and customer engagement initiatives to attract buyers and sustain sales. Additionally, expensive gold could push up working capital requirements, as jewellers will need to deploy more funds to maintain their inventory levels. Store Expansion Plans Expected To Remain Measured Organised jewellery retailers are likely to adopt a more cautious approach towards expanding their physical presence over the next two financial years. According to Crisil, retailers are expected to add stores equivalent to 7-9 per cent of their existing networks over the next two fiscal years. This marks a moderation from the 12-15 per cent expansion recorded over the preceding two-year period. The measured expansion strategy is expected to help retailers manage their capital requirements while maintaining financial discipline amid uncertain demand conditions. Credit Profiles To Remain Stable Despite Industry Challenges Despite pressure on margins and higher working capital requirements, the financial position of organised gold jewellery retailers is expected to remain comfortable. Crisil Ratings attributed the sector's resilient credit outlook to healthy cash accruals and prudent inventory management practices. The total outside liabilities-to-adjusted net worth (TOL/ANW) ratio of organised retailers is projected to improve to 1.1-1.2 times in FY27, compared with 1.3 times as of March 31, 2026. Meanwhile, interest coverage is expected to remain healthy at 6.5-7 times, indicating that retailers should be able to comfortably meet their interest obligations. Going forward, the sector's performance will largely depend on movements in domestic and international gold prices, potential changes in import duties and regulatory policies, as well as shifts in consumer sentiment. While the improvement in demand indicators offers some encouragement, affordability concerns are likely to remain a key factor shaping jewellery buying decisions in the coming months, the rating agency said.
