Lab-grown diamonds offer better volume and margin growth prospects: International Gemmological – CNBC TV18
They pointed out that while natural diamonds are valued for their uniqueness, LGDs drive volumes due to their machine-made nature.
This volume growth in LGDs has significantly contributed to the improvement in earnings before interest, tax, depreciation, and amortisation (EBITDA) margins.
Traditionally focused on grading natural diamonds, IGI has also capitalised on the rise of LGDs over the past four to five years.
The company, which certifies natural diamonds, LGDs, jewellery, and coloured stones, is currently in the process of raising ₹4,225 crore through an initial public offering (IPO) that opens on December 13.
In 2023, IGI ranked as the world’s second-largest independent certification provider, holding a 33% market share in diamond and jewellery certifications.
The company has raised ₹1,900 crore from 68 anchor investors at an upper price band of ₹417 per equity share. Investors include the Government of Singapore, ICICI Prudential Mutual Fund, Axis Mutual Fund, Abu Dhabi Investment Authority and Nomura AMC.
These are the edited excerpts of the interview.
Q: Your revenue mix has changed–LGDs which were near mid-30s are now near 60%. Because of the pace of growth in the space, it will constitute a larger proportion of your revenues. But what about margins? What is the difference between all three of these–LGDs, studded, and natural?
Printer: Overall, the margins have been at 66% which has now grown to 72%. So that itself is an indicator of how the thing is going. Natural is unique, rare and expensive, and as far as LGD is concerned, it’s more affordable.
Q: Where do you make more money?
Printer: We make more money from the volume aspect and we make money from the unique aspect. So it’s an overall mix. And we make money on diamonds and gemstones.
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We certify diamonds. We are an independent, neutral body, which gets audited by the International Organisation for Standardisation (ISO) and the Responsible Jeweler Council (RJC). RJC looks into the ethics of the business and ISO looks into the compliances and standardisation of our grading model. We are a third-party certification, and we get certified, and audited by a third party.
Q: What we are trying to understand is that LGD’s share is increasing, but it’s a lower-margin business. The other natural diamonds business was a higher-margin business. So how much is the gap in margins?
Iyer: While natural diamonds are unique, it is not a volume game, but LGDs is a volume game because it is machine made. So from that context, the volume synergies we get in LGDs are driving the EBITDA margin improvement, per se. Added to the fact that structurally, we have been always grading natural diamonds till the time LGDs made its entry in the last four, or five years.
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