Will India's gold jewellery retailers maintain credit strength amid soaring gold prices?

Kolkata: India's organised gold jewellery retailers are expected to maintain their credit strength despite elevated gold prices, with healthy cash accruals, prudent inventory management and measured expansion plans cushioning the impact of higher working capital requirements, according to a Crisil Ratings analysis.

An assessment of 76 organised retailers, accounting for around 33% of industry revenues, indicates that credit profiles will remain resilient in FY27, even as high prices continue to constrain jewellery demand.

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Gold prices remain significantly above historical levels following a 56% surge last fiscal, which led to an 8% decline in volumes. The increase in import duty to 15% from 6% in May 2026 has added to affordability pressures. However, moderation in price appreciation and the subsequent correction have offered some relief, with early third-quarter trends pointing to improving footfalls and conversion rates.

Crisil expects jewellery volumes to decline at a slower pace of 4-6% this fiscal, while revenues are projected to grow 21-23%, supported by gold prices averaging 25-27% higher than last fiscal.

Organised retailers are also expected to gain market share as consumers increasingly favour established brands offering transparency, exchange programmes and gold savings schemes. Demand for lighter-weight and lower-carat jewellery is gaining traction as buyers seek to manage higher ticket sizes.

"Demand indicators are pointing to stabilisation rather than a broad-based recovery. Consumers remain price-sensitive and are increasingly shifting towards lighter-weight and lower-carat jewellery to manage affordability," said Himank Sharma, director, Crisil Ratings. Investment demand for coins and bars is also expected to contract 4-5% this fiscal.

Profitability, however, is likely to moderate as inventory gains from last fiscal's sharp gold price rally taper off. Higher promotional and customer engagement spending will add to the pressure. Operating margins are projected to decline 60-80 basis points from 9.3% last fiscal to 8.5-8.7% in FY27.

Elevated prices will also increase inventory valuations and borrowing requirements. However, retailers are expected to keep expansion plans measured, adding stores equivalent to 7-9% of their existing network over the next two fiscals, against 12-15% in the previous two years.

"While elevated gold prices will increase inventory funding requirements, the sector's credit fundamentals remain well supported by healthy cash accruals, prudent inventory management and measured growth strategies," said Nishita Vora, team leader, Crisil Ratings.

The total outside liabilities-to-adjusted net worth ratio is expected to improve to 1.1-1.2 times in FY27 from 1.3 times in March 2026, while interest coverage is projected at a comfortable 6.5-7 times.