This Deepawali, while India’s stock markets cheered record turnovers in listed gold jewellery companies, the reality on the ground could not have been starker. Across jewellery markets from Chandni Chowk in Delhi to T. Nagar in Chennai, karigars and small jewelers the lifeblood of India’s jewellery craft report the worst business in a decade. “No work, no money,” laments a veteran craftsman. “Customers are holding back. Gold is too expensive.”
Yet, corporate balance sheets paint an opposite picture. Turnovers have reportedly soared, thanks to a sharp spike in gold prices. Investors, seeing these inflated numbers, celebrate growth. But analysts and insiders warn: this is growth on paper, not in reality.
The divergence between listed companies’ reported growth and actual business performance is driven by a simple economic mechanism: gold price inflation.
- Gold prices have surged, making existing inventory look more valuable.
- Turnover figures on balance sheets shoot up, creating the illusion of rapid expansion.
- Investors mistake this price effect for genuine volume growth, driving valuations higher.
In reality, consumer demand is shrinking. “Footfall in shops is down 30–40 per cent compared to last year,” says a jeweller in Jaipur. “People are buying less, especially for big-ticket items.” Sales volumes are declining, and only the revenue numbers appear inflated because every gram of gold costs more.
The situation is akin to selling fewer mangoes at Rs 500 per kilogram: the shop may show higher turnover, but it is emptier, and the business is weaker.
The crisis is compounded by declining margins. Intense competition among jewellers has forced many to cut labour charges drastically, sometimes to as low as 2–10%. Meanwhile, karigars, who craft the intricate designs that define Indian jewellery, charge between 4–8 per cent depending on complexity.
“The value addition is shrinking drastically,” explains a Mumbai-based jewellery consultant. “The glitter you see in financial statements comes from gold price inflation, not business efficiency or craftsmanship.”
High gold prices have not translated into higher profitability for the craftsmen or local jewellers. Instead, margin pressures have intensified, threatening the very ecosystem that sustains the industry. Publicly listed jewellery companies are reporting record revenues, but these numbers conceal a fragile reality. Inventory gains have pushed up balance sheets, while operational margins remain under pressure.
Inventory in stock shows paper profits, but these are unrealised unless the metal is sold.
Reported revenues grow, yet actual volumes of jewellery sold have declined.
Core margins are under siege, highlighting that price swings rather than business strength drive financials.
Investors who rely solely on turnover risk overvaluing companies that act more as gold price proxies than jewellery businesses. A fall in gold prices could shrink balance sheets overnight, revealing the precariousness of this so-called “growth.”
The disconnect between reported financials and ground realities creates a dangerous illusion for the market:
- Turnover rises, giving the appearance of strong sales
- Inventory profits inflate, suggesting business acumen
- Actual volume growth is declining
- Margins are shrinking
For investors, the key metrics are not rising turnover but the volume of jewellery sold, labour margin trends, and operational efficiency. Gold price-driven revenue growth is inherently unsustainable. At the heart of the industry are the karigars the skilled craftsmen whose labour defines the quality and artistry of Indian jewellery.
- “We are struggling. Work is scarce. Orders are down,” says a 45-year-old goldsmith in Pune.
- “Even when we work, profit margins are tiny. High gold prices do not mean more money for us,” adds another from Hyderabad.
These voices reveal an ecosystem under stress, where listed companies’ balance sheets tell one story while the ground reality tells another.
The fundamental lesson for investors is clear: gold may shine, but jewellery business margins are shrinking. True business strength lies in craftsmanship, volume of sales, and operational efficiency not in the price of the commodity.
Strong brands with loyal customer bases may weather the storm, but those riding the wave of rising gold prices risk a harsh correction. When the price bubble bursts, balance sheets will shrink, sales will stagnate, and only the businesses with real moats skilled labour, design excellence, and customer trust will survive.
(This story is based on a thread by Prem Soni on X)
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