The government recently slashed the base import prices for precious metals—gold dropped 7.6% to $1,526 per 10 gm, and silver fell 13.9% to $2,427 per kg . This isn't just a headline tweak. Since customs duty (currently 6% for gold) is calculated on this base price, the reduction directly lowers what jewellers pay to bring the yellow metal into the country. The timing is particularly interesting, coming amid geopolitical turbulence in West Asia that has been disrupting traditional supply routes.
Let's talk about what this means for the money side of things. For Senco Gold, which held inventory worth ₹4,602 crore in the first nine months of FY26, this translates to roughly a 0.46% reduction in procurement costs InvestorPresentations. That might sound small, but in the jewellery business where margins are tight, every basis point counts. The bigger story is working capital. Lower import prices mean companies need less cash tied up in inventory. Senco could see working capital relief of about ₹350-400 crore annually, while Kalyan Jewellers, with its much larger inventory base of ₹11,329 crore, could save roughly ₹850-900 crore InvestorPresentations.
This matters because both companies rely heavily on Gold Metal Loans (GML) at around 3.1% interest annually InvestorPresentations. When you need less working capital, you lean less on these loans. Senco could save ₹10-12 crore in interest costs annually, and Kalyan could save ₹25-30 crore. That's money that flows straight to the bottom line.
Now, here's where the two companies diverge in how they benefit. Senco Gold employs a multi-layered hedging strategy, covering 50-90% of its gold inventory InvestorPresentations. This means the unhedged portions benefit immediately from lower prices. Kalyan, on the other hand, is fully hedged against gold price fluctuations Transcripts. Management has explicitly stated that gold price movements don't directly benefit margins because of this comprehensive hedging. For Kalyan, the benefits accrue gradually as hedge contracts reset.
The margin impact reflects this difference. Senco Gold, with its EBITDA margin at 13.2% in Q3 FY26, could see expansion of 70-90 basis points over the next 2-3 quarters. Kalyan, starting from a lower base of 6.8%, might see 35-55 basis points of expansion. The net profit margin tells a similar story—Senco could add 50-65 basis points, while Kalyan might add 25-35 basis points.
But there's a strategic choice here. Do these companies pass the cost savings to consumers or keep them as margin improvements? The competitive landscape suggests different approaches. Senco, with its premium design-led positioning and policy of no discounting on gold or making charges Transcripts +1, is likely to retain 70-80% of the cost benefits. Kalyan, operating as a volume-driven market leader with gold savings schemes and old gold exchange programs making up a significant chunk of sales, might pass through 40-50% to consumers to maintain volume growth Transcripts +1.
The demand picture is also worth watching. India's gold jewellery demand declined 24% by volume in 2025, though value increased 12% as consumers shifted toward lighter pieces . Lower prices could stimulate this demand. Senco might see volume growth of 10-15%, while Kalyan could see 15-20% recovery as affordability improves. However, average ticket sizes might decline 5-9% for Senco and 3-7% for Kalyan as gold prices normalize.
Looking at Return on Capital Employed (ROCE), both companies stand to gain. Senco's ROCE of 16.27% could climb to 18.5-19.5% as capital employed reduces and operating profit improves. Kalyan, already at 22.46%, could reach 24-25%. The improvement comes from both sides of the equation—less capital needed and more profit generated.
Of course, there are risks. The West Asia conflict poses supply chain vulnerabilities, with the GCC region supplying over 30% of India's gem and jewellery imports . Gold price volatility remains a concern, though hedging provides some protection. Then there's the regulatory uncertainty—while the current move uses import pricing rather than duty structure changes, future policy could shift either way.
The broader policy context suggests the government is using import pricing mechanisms for fine-tuning rather than dramatic duty changes. Historical duty hikes have had limited impact on demand and sometimes spurred smuggling, so gradual rationalization seems more likely than sharp increases . For the organised sector, which includes players like Senco and Kalyan, regulatory changes like mandatory hallmarking and GST requirements are driving formalization anyway InvestorPresentations.
What does this all mean for the next few quarters? Senco Gold, with its regional strength in East and North India and design-led differentiation, is well-positioned to capture margin benefits while driving selective volume growth. Kalyan Jewellers can leverage its scale advantages and franchise model to drive volume recovery through competitive pricing. Both companies are likely to build inventory at current lower prices, optimize their product mix toward lightweight and studded jewellery, and adjust hedging ratios based on price trajectories.
The market has already signaled its approval—Senco Gold surged 11% and Kalyan Jewellers rose 5% on the announcement . But the real test will be in how these companies execute their strategies over the coming quarters. In a business where gold prices can swing wildly and consumer sentiment shifts with the geopolitical winds, having lower input costs provides a cushion that every jeweller welcomes. The question now is how wisely they use this breathing room.
