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Informist, Wednesday, Sep 25, 2024

 

MUMBAI – The revenue of India's natural diamond polishing industry is likely to decline 25-27% to a decadal low of around $12 mln in 2024-25 (Apr-Mar) due to muted demand in key export markets and a fall in prices, according to CRISIL Ratings. The demand for natural diamonds has declined in key markets like the US and China, while the prices have declined by 10-15% amid oversupply and a shift in consumer preference towards lab-grown diamonds, CRISIL Ratings said in a report.

This will be the third successive year in which the revenues of diamond polishers will decline, the report based on an analysis of 40 diamond companies, which account for nearly one-fourth of the industry, said. The industry revenues had declined about 29% in 2023-24 and 9% the year before, CRISIL said.

 

India's diamond exports to the US in value terms fell 43% over the past two financial years, the rating agency said. Additionally, preference for gold jewellery is growing in China as the yellow metal continues to be perceived as a safer asset providing better returns amid economic uncertainty. A sharp fall in diamond prices over the last 2–3 years has hindered the revival of demand for natural diamonds, the report said. 

 

Lab-grown diamonds have gained market share because of their affordability and high resemblance to natural ones. The youth in key export markets are increasingly embracing lab-grown diamonds as limited disposable incomes are constraining discretionary spending, which is further eating into the share of natural diamonds, it said.

 

"LGDs (lab-grown diamonds), which resemble natural diamonds, are 90% cheaper. Their market share has increased to about 25% by value in the US from around 8% two years ago," the report said, quoting CRISIL Ratings Director Rahul Guha. "The share would have been higher, if not for the sharp fall in LGD (lab-grown diamond) prices owing to supply outpacing demand. As a result, revenue of natural diamond exporters may continue to face serious headwinds," he said.

 

Diamond polishers are limiting the purchase of roughs and have curbed manufacturing due to tepid demand amid decreasing prices, the report said. Miners, in turn, have cut production and eased inventory push, which has helped restrict the fall in prices of rough and polished natural diamonds.

 

"As miners and polishers prepare for continued weak demand, they are focusing on reducing inventory and costs this fiscal, which will lower working capital requirements. While receivables remain monitorable, controlled manufacturing and exports will mitigate receivables risk. Meanwhile, liquidity will likely remain adequate," the rating agency said. 

 

"Inventory levels across the value chain are expected to decline, mitigating pricing risks and reducing reliance on external borrowing over the medium term," Rushabh Borkar, associate director at CRISIL Ratings said. End

 

US$1 = 83.59 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Ashutosh Pati

Edited by Saji George Titus

 

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