India's organised gold jewellery retailers are expected to weather another year of elevated gold prices without any material deterioration in credit quality. While demand is normalising after the sharp price-led disruption of last fiscal, healthy cash accruals, disciplined inventory management and measured expansion plans should help preserve credit strength despite higher working capital requirements.

Our analysis of 76 organised gold jewellery retailers, which account for ~33% of industry revenues, indicates as much.

Gold prices remain significantly above historical levels following last fiscal's sharp 56% surge, which resulted in an 8% decline in volumes. Elevated prices, compounded by the increase in gold import duty to 15% from 6% in May 2026, continue to weigh on affordability. However, the pace of price appreciation has moderated, and the subsequent correction in prices has provided some relief as the festive and wedding season gathers momentum. Early third-quarter trends reported by a majority of organised retailers point to improving footfalls and higher conversion rates, which should support sales and moderate the volume decline.

Consequently, we expect retail jewellery volumes to contract at a slower pace of 4-6% this fiscal. Revenue growth, however, should remain robust at 21-23%, supported by gold prices averaging 25-27% higher than last fiscal. Organised retailers are also expected to continue gaining market share as consumers increasingly gravitate towards trusted brands offering greater transparency. Their exchange programmes and gold savings schemes should further support marketshare gains despite a challenging demand environment.

Says Himank Sharma, Director, Crisil Ratings, "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. As a result, jewellery volumes are expected to decline 5-6% this fiscal, while investment demand for coins and bars, which accounts for nearly 40% of overall demand, is likely to contract 4-5%."

Even as demand conditions improve from the weakness seen at the start of the fiscal, profitability is expected to normalise. Last fiscal, margins benefited from substantial inventory gains driven by the steep increase in gold prices. As price appreciation moderates, these gains are likely to taper. At the same time, retailers are expected to step up spending on promotions and customer engagement initiatives to sustain footfalls and conversions. Consequently, operating margins are projected to soften by 60-80 basis points from last fiscal's 9.3% to about 8.5-8.7% this fiscal.

Elevated gold prices will also increase balance-sheet intensity. Higher inventory values will necessitate additional working capital borrowings even as retailers continue investing in network expansion and product diversification. That said, expansion plans remain calibrated, with store additions expected at 7-9% of the existing network over the next two fiscals, compared with 12-15% over the previous two fiscals. Funding is likely to come through a balanced mix of internal accruals and debt.

Says Nishita Vora, Team Leader, Crisil Ratings, "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. As a result, credit profiles are expected to remain resilient despite higher working-capital intensity."

Indeed, capital structures are expected to strengthen despite the increase in borrowings, supported by healthy cash accruals and sustained profitability. The total outside liabilities-to-adjusted net worth ratio is projected at 1.1-1.2 times in fiscal 2027, compared with 1.3 times as of March 31, 2026. Interest coverage is also expected to remain comfortable at 6.5-7.0 times.

Going forward, the sector's performance will hinge on the trajectory of gold prices, any changes in import duties or regulations, and shifts in consumer sentiment.