Rapaport Magazine

Industry Ready for a Happy New Year

India Market Report

By Zainab Morbiwala
RAPAPORT... The passing year saw diamonds’ market value and demand shine with its target audience. Where gold is losing its sheen in terms of preference with customers, more and more people are opting for diamond jewelry instead. The size of the global gems and jewelry industry in 2005 is estimated at $146 billion at retail prices. The industry has grown at an average Compounded Annual Growth Rate (CAGR) of 5.2 percent since 2000. Diamond jewelry is the largest segment of this industry — with 2005 sales estimated at $69 billion — and it has grown at a CAGR of 5 percent over the past five years.

Rapid Growth Projected

A recent survey conducted jointly by international accounting and consulting firm KPMG and The Gem & Jewellery Export Promotion Council (GJEPC) threw some interesting light on the gem and jewelry industry globally. According to the report, India is the fastest-growing diamond jewelry market — growing at a rate of 19 percent in 2005 — in retail-value terms. In its efforts to further boost the industry and make India a major trading hub for gems and jewelry, GJEPC has embarked on a number of initiatives, such as setting up research, training and development facilities, lobbying for reforms on the tax and regulatory front, and establishing Special Economic Zones (SEZs) for jewelry trade.

Raman Singh, chief minister of India’s Chhattisgarh state, said the region, which is rich in minerals, is set to become one of the biggest centers for diamond production when it begins diamond production in 2010. According to an online report, Indian officials said that several diamond companies are already involved in exploration in the area, including De Beers, Jindal Steel and Power, Admas Prospecting, Geo Mysore Services India, and ACC Rio Tinto Exploration. De Beers has been prospecting in the Raipur, Mahasamund, Durg, Dhamtari, Kanker, Jashipur and Rajnandgaon districts.

Commenting on the industry dynamics, Anaggh Desai, chief executive officer (CEO) of Damas India, said: “The Indian diamond industry is one of the fastest growing, coupled with the growth in the economy, and that growth is of interest to Damas. As a leading jewelry retailer, Damas is very bullish on the 20 percent compounded growth predicted, and is targeting a much higher growth for Damas India over the next couple of years. The government seems to be moving in a positive direction, keeping a pretty open mind in its dialogue with the industry. The key area of branding is something the industry is hopeful of resolving at the earliest possible time.”

According to Anil Shah of Venus Jewels, “For the financial year 2005-2006, total exports from the gems and jewelry sector were around 17 percent of overall exports. The present central and state governments have been positively helpful and they favor the Indian diamond industry. Yet there are certain issues that need to be solved for the betterment of the industry. These include solving the problem of octroi taxes and value-added tax (VAT) in Maharashtra, building an international airport at manufacturing places like Surat and establishing research and development programs for improving the manufacturing techniques for large-size diamonds.” Talking about the cuts that are moving, Shah cited good demand for “round diamonds in sizes 1.00 to 1.99 carats in the price range of $1,800 to $3,000.”

Gitanjali Acquires Samuels

In a significant acquisition milestone by an Indian jewelry house, Gitanjali Gems Limited, a Diamond Trading Company (DTC) sightholder and one of the largest integrated diamond and jewelry manufacturers and retailers in India, has acquired U.S.-based Samuels Jewelers Inc. Gitanjali Gems acquired a 97 percent stake in the specialty retailer — which operates 97 stores spread across 19 states and has current revenues of $100 million — for $44.7 million. The acquisition is being financed through internal capital and proceeds from the company’s recent issuance of $110 million in foreign currency convertible bonds (FCCB).

Mehul Choksi, Gitanjali chairman, said, “We are aggressively pursuing opportunities that will synergize with the company’s philosophy to add incremental value at every level of the supply chain, thus ensuring greater shareholder value and boost to the bottom line.”

The company has also entered into a preliminary agreement for a 50-50 joint venture with leading retail chain Sulieman Al Othaim of Saudi Arabia that will give Gitanjali access to the mainstream retail markets in Saudi Arabia.

The Marketplace

• Overall polished market is slow because of Christmas vacation break, but local market is moving better.
• Stars and melee in VVS/VS are in very good demand. H+/VVS are difficult to source.
• 0.08 to 0.18 carats in I1-I2 and VVS are in good demand.
• There is some movement in 1/5, 1/4, 1/3 for very low piqué goods.
• 0.50 carats are in good demand for I1, I2 and VVS.
• 0.70 carats are in very good demand in I2+.
• 0.90 carats are in very good demand in SI1+ and extreme shortages exist for VVS/H+.
• 1 to 1.99 carats are seeing shortages for premium sizes in VS2+/H+.
• Movement is slow for 2 carats.
• Demand is very good for 3 carats+ in VS2+/I+. 5.00 carats+ are extremely difficult to find.

• Demand is very good and there are shortages in VS2+/I+ under 1 carat in princess, marquise and pear.
• Demand is very good for 1 to 1.50 in princess, marquise, pear and oval in SI1+/I+.

Article from the Rapaport Magazine - January 2007. To subscribe click here.

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