Gold Import Duty Jumps to 15%: Jewellery Stocks Bleed, But These Companies May Surprise You

Gold Import Duty Jumps to 15%: Jewellery Stocks Bleed, But These Companies May Surprise You

India just pulled one of the sharpest policy reversals the gems and jewellery sector has seen. Less than two years after slashing gold import duty to 6% in the July 2024 Budget — a move that Sky Gold and Diamonds called a boost to "cost efficiency and international competitiveness" in their FY25 annual report — the government has hiked tariffs on gold and silver to 15%. The stated goal: curb imports and protect a rupee battered by the West Asia oil crisis.

Jewellery stocks reacted swiftly. Kalyan Jewellers dropped 9% in a single session on the back of PM Modi's austerity appeal and the duty news. But the market's reflexive sell-off across the entire sector may be missing the more nuanced picture buried in company filings.

The Obvious Losers: Higher Costs, Thinner Margins

Kalyan Jewellers (KALYANKJIL) had been riding an exceptional growth wave. Per their Q3 FY26 investor presentation, India revenue grew approximately 42% year-on-year with same-store-sales growth of 27%. The company added 21 new showrooms in Q3 FY26, with franchised (FOCO) showrooms now contributing roughly 51% of India revenue. But Kalyan relies heavily on gold metal loans — a financing mechanism where banks supply physical gold that the company must fix the price for within a set window. Their earnings transcripts repeatedly flag that "Net Debt" includes gold metal loan obligations. A 15% import duty directly inflates the cost of every gram sourced through this channel, squeezing the margin expansion that had been driven by "procurement efficiencies and operating leverage." Sky Gold and Diamonds (SKYGOLD) posted spectacular revenue growth of 103.26% year-on-year to Rs 3,548 crore in FY25, per their annual report. But operating profit margins remain thin at 6.16%. Their filings reveal Rs 20.26 crore in outstanding gold metal loans used to fund inventory. With margins already tight, a 9-percentage-point duty increase on gold inputs is painful for a company that operates as a B2B jewellery manufacturer. Motisons Jewellers (MOTISONS) had flagged "high import duties" as a structural challenge for the industry in their FY25 annual report — even when duties were at 6%. At a net profit margin of 9.34% and operating profit margin of 14.37%, the company has limited room to absorb higher input costs without passing them to consumers. Their filing explicitly cited the Budget 2024 duty reduction as a positive catalyst; the reversal undoes exactly that tailwind. Manoj Vaibhav Gems (MVGJL), which focuses on Tier 2-3 towns in Andhra Pradesh and Telangana, faces a particularly acute challenge. Per their annual report, rural India commands approximately 60% of the country's gold jewellery demand — around USD 36 billion. These price-sensitive buyers in rural markets, where "jewellery remains the preferred asset" around weddings and harvest seasons, are the most likely to defer purchases when sticker prices jump.

The Hidden Winners

Goldiam International (GOLDIAM) is the clearest beneficiary that most investors are overlooking. The company has aggressively pivoted to lab-grown diamond (LGD) jewellery, which contributed 81.8% of export sales in Q4 FY25, up from just 54% in Q4 FY24, per their earnings transcript. FY25 EBITDA margin stood strong at 22.4%, and profit after tax rose 29% to Rs 1,171 million. Lab-grown diamonds require no gold imports. As natural gold jewellery becomes more expensive at retail, Goldiam's ORIGEM domestic brand — launching across Mumbai locations — could capture consumers trading down from traditional gold pieces. Hindustan Zinc (HINDZINC) produces silver as a byproduct of its zinc mining operations. Per their investor presentation, silver production reached 714 MT generating revenue of Rs 4,388 crore, within a total revenue of Rs 34,083 crore (up 18% YoY). The company has announced plans to double its silver capacity. With import tariffs on silver also rising to 15%, domestically produced silver from Hindustan Zinc becomes more competitive versus imported metal — an accidental windfall for what is primarily a zinc miner. IIFL Finance (IIFL) runs one of India's largest gold loan portfolios. Per their annual report, consolidated loan AUM reached Rs 64,638 crore with gold loan AUM growing 28% year-on-year. Higher gold prices — driven partly by import duties making gold more expensive domestically — directly increase the collateral value backing each loan, allowing the company to lend more per gram. Portfolio yield was already at 18.9% in Q4 FY24. Rising gold prices driven by the tariff hike are a structural tailwind for gold lenders.

What Retail Investors Should Do

The knee-jerk reaction to sell all jewellery stocks is understandable but overly simplistic. Look at how each company sources gold: those reliant on gold metal loans and direct imports (Kalyan, Sky Gold, Motisons) face genuine margin pressure. But companies like Goldiam, which sidestep gold entirely through lab-grown diamonds, or Hindustan Zinc, which produces silver domestically, sit on the right side of this policy shift. Gold lenders like IIFL Finance benefit from the very price inflation that hurts jewellers. Before acting, check each company's inventory sourcing model in their latest filings — the duty hike creates clear winners and losers even within what looks like a single trade.

Data sourced from company filings on NSE via Xaro.