Titan anticipates stronger gold jewellery demand in H2FY25

Rising gold prices and a series of other factors are set to challenge India's gold jewellery market in the first quarter of the current fiscal year. 

Demand for the precious metal is expected to be subdued due to price volatility, fewer auspicious wedding dates, and the backdrop of elections in the world's largest democracy.

Despite these headwinds, Tata-backed Titan Company Ltd, which houses one of India's top jewellery brands, Tanishq, remains optimistic about the latter half of the year.

“The way this year will play out is that the second half will be much better than the first half," said aid Ajoy Chawla, chief executive, jewellery division, Titan Company on the sidelines of a retail event in Mumbai. 

"Quarter one is likely to be a little bit more stressed because of the absence of wedding dates and presence of elections, and add to the mix, elevated gold prices,” Chawla said.

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Gold prices surged around 8% in Q4, continuing their upward trend in April by breaching the ₹70,000 per 10gm mark for the first time.

Last week, Titan, known for its watch and jewellery segments, reported a 19% revenue growth in its jewellery business. 

However, jewellery Ebit (earnings before interest and taxes margin) fell to 12.1%, attributed to weak consumer sentiment and increased competition amid rising gold prices. 

Despite the margin pressure anticipated to continue into the first half of the current fiscal year, Titan has retained its FY25 jewellery margin guidance at 12-13%, according to analysts at BNP Paribas in a report released on 6 May. 

The retailer also noted higher year-on-year growth in plain gold jewellery and coins compared to studded pieces in the March quarter.

Strategy and outlook

Chawla emphasized that Titan will pursue aggressive top-line growth despite the short-term headwinds. 

“We have internal targets; we chase aggressive top-line growth. We are still bullish about jewellery demand for our brand and organized retail in India because the formalization winds continue to be there. We are optimistic,” he asserted.

In response to the rally in gold prices, Titan is promoting more everyday jewellery and lightweight gold pieces in the first quarter. “We have taken a bet on lightweight gold products during this season and we are ensuring adequate supply across all our stores,” Chawla noted.

Besides Tanishq, Titan's jewellery division comprises brands such as Mia, Zoya and Caratlane; it operates over 760 stores. Tanishq, the company’s flagship jewellery brand, ended the March quarter with 423 stores.

India's gold demand could drop to the lowest in four years due to the recent uptick in gold prices, Reuters reported late last month, citing a senior official at the World Gold Council (WGC). India's gold demand in the March quarter rose 8% from a year ago, it said.

Average gold prices surged 14% in FY24, leading to significant price volatility in the latter half of the last fiscal year, ratings firm CareEdge said in a report on Wednesday. 

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Domestic jewellery industry is expected to see muted volume growth in FY25 due to these price increases, evolving macroeconomic conditions, and anticipated price volatility, it added.

Chawla added that a good monsoon could bolster rural demand, with an improvement likely from June onwards. 

He noted that elections create disturbances due to movement restrictions and the model code of conduct, making people hesitant to carry gold for exchange. Additionally, high gold prices add to the challenges.

"Also, usually May and June have good wedding dates especially in markets like Bihar, Uttar Pradesh, Rajasthan, Gujarat, etc. This year those dates are missing. I'm expecting post the election there could be a deferred demand flowing into June,” he elaborated.

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