Rapaport Magazine

Family ties run deep

A close bond with kin forms the backbone of many successful Indian diamond companies.

By Vinod Kuriyan

There is a “secret sauce” that major multinational enterprises say is essential for success in the global arena. Innovative thinking, ground-breaking strategies, unmatched customer assurance and a whole slew of similar characteristics are all part of the recipe. But for the Indian diamond-processing firms that now span the globe, there’s one ingredient that is absolutely key: family.

Not only does family make for trustworthy relationships and dependability, it establishes a business ethos and sets standards that then permeate these successful companies, giving them many of their winning traits. Family, for many of these firms, drives innovation and assures customers.

Every Indian diamond company acknowledges the importance of those relationships and takes them even further with community outreach and corporate social responsibility (CSR) programs. Schools, hospitals, professional training institutions, and massive disaster relief initiatives are all essential parts of Indian diamond firms’ operations.

Building Relationships

Diamond manufacturer Rosy Blue is no exception. The global firm is the result of concerted family action, but the relationship with the community provides the energy and ideas that drive change, says CEO Dilip Mehta.

Mehta likens living and working in the Indian diamond-cutting hub of Surat to California’s Silicon Valley. “You meet people, and you come up with ideas. You energize each other. Problem-solving becomes easy when you meet so many people and get their input. This is the big advantage that Surat has. If you just sit in your factory and concentrate on your manufacturing, you don’t get new ideas.”

Dilipkumar Lakhi, who heads sightholder Lakhi Group, recalls how the family business his grandfather established in 19th-century colonial India (now Pakistan after the partition) grew and prospered because it projected an aura of dependability and trust (see box).

Lakhi’s siblings take an active role in the business in India and overseas. The eldest brother, Motiram, runs the operations in Hong Kong, while India-based Girdharilal manages Vishindas Holaram, the base company for the Lakhi Group. Brothers Deepak and Prakash respectively head Sparklers International in Dubai, and Vishinda Inc. in New York. Girdharilal’s sons Manish and Ritesh manage polished sales.

Family and community provided the impetus for Vallabhbhai Patel, who founded manufacturer Kiran Gems with Babubhai Lakhani and Mavjibhai Patel in 1985. Most of the people in his village were in the diamond industry. Encouraged by an uncle, Patel would help his father on his farm and then travel to the city of Bhavnagar to learn how to cut and polish diamonds. Eventually, he got a job as a diamond cutter.

“When we started out, we didn’t have any management taglines or buzzwords to use,” recalls company director Rajesh Lakhani, who runs the group’s Mumbai operations with his brother Dinesh. “We had a simple plan. We would build our business on the ethos of hard work and commitment that we had absorbed from our families and community.”

When Vasantlal Mehta founded Blue Star in 1966, his core group consisted of his sons Akshay, Anuj and Ashit. That tight family unit was essential as the newly minted company bought and sold rough and polished diamonds, farming out manufacturing to small cutting shops in Mumbai and Surat.

Ethics and a commitment to quality were the big drivers for brothers Sevantilal and Ramniklal Shah when they founded Venus Jewel in 1969. At a time when the Indian industry was churning out huge volumes of low-end diamonds, they saw an opportunity to establish a new paradigm of quality and craftsmanship.

The human touch

Dilipkumar Lakhi’s son Chirag shares his father’s solid belief in the family heritage and all that it represents. The value of customer assurance resonates strongly with him. “A family member dealing with a customer projects a much greater sense of assurance than an employee, no matter how highly trained and accomplished,” he says. “It is also better for the business, because there is that extra impetus to make whatever adjustments need to be made in order to close a deal.”

He notes that “we have 5,800 assortments. Our sorting and grading are that precise. And our customers know that the family stands behind all of that. The human factor plays a big role no matter how much technology changes the business.”

The ideas generated by close family and community interactions are essential to success, affirms Rosy Blue’s Dilip Mehta. “The dynamics of the industry are constantly changing, and one has to adapt. Looking to the future, my guess is that the most cost-efficient and creative people will always prosper in this industry. You need the human touch. Technology is all very well, but you must see what your consumer wants.... Even artificial intelligence (AI) gets its original input from humans. Technology has no heart. And our product is not a necessity; there is heart and passion and feeling involved. You have to translate all of that to your product.”

Dilipkumar Lakhi echoes this sentiment about technology versus human interaction, though he adds that “you need to keep learning new things every day. You must constantly stay in touch with the market and be aware of changes. Most importantly, always remember: Goods are for selling. If you need to stockpile them, you’re doing something wrong.”

Leveraging an ethos

Kiran Gems’ Lakhani recalls how the company’s formation leveraged its community roots and ethos to build the business. “Those who had marketing savvy and client connections were the ones who were at the top of the business. But we knew we had to integrate from the ground up and set up a strong manufacturing base. We knew for sure that the future would belong to those who had both manufacturing and marketing capabilities,” he says. The company started its own manufacturing unit in 1992, a move that started it on the path to becoming the manufacturing and marketing behemoth it is today.

The Shah brothers, meanwhile, were able to leverage their company’s reputation for quality and ethics to make fundamental changes in the way it did business. While it was the norm for Indian firms to supply goods on 120-day credit terms or longer to their clients, Venus Jewel took a bold step — one that many thought was suicidal at the time — and announced that it would only supply goods on immediate cash terms. Even though there was a temporary drop in business when the new terms were announced, clients quickly flocked back to buy goods that were cut to unmatched quality standards.

In the years that followed, Venus Jewel set an international industry standard in ethical business practices, employee welfare and pricing, as well as a benchmark for diamond cutting and polishing quality. The exceptional quality enabled them to increase their rough size allotments, becoming the first Indian firm to cut and polish diamonds of 2 carats and above on a large scale. Venus Jewel helped blaze the trail that has made India the premier source of high-quality large diamonds.

At Blue Star, the role of family evolved with time. “My grandfather Vasantlal was originally a diamond broker,” recalls the founder’s grandson Arnav Mehta. “The second generation assumed different roles. My father, Akshay Mehta, oversaw manufacturing in India, my uncle Anuj attended to clients and the polished business, while my uncle Ashit moved to Belgium to procure rough diamonds for the business and also began trading in rough.”

They, in turn, passed down their skills to their children, he says. “As family members of my generation entered the business — Arjav in 2002, myself in 2004, Anshul in 2007, Arpan in 2009 and Achal in 2014 — our fathers and uncles mentored us in the different areas they managed and gradually handed over their responsibilities to us.”

Venus Jewel saw a similar progression. The second generation of the family came into the business in the 1980s with Anil, Rajesh and Hitesh absorbing the group’s ethics and work ethos. The third generation of Devansh, Samveg and Akshat has undergone thorough training in every aspect of the business, and they are now involved in daily operations.

Connections everywhere

Kiran Gems’ strong belief in the human connection extends to the community of customers it engages via online platforms and social media. “With our massive production, we have to reach a huge audience,” Lakhani explains, adding that the company has invested heavily in its own human capital to focus on training and upgrading skills. “One way to stay on one’s A-game is to ensure that employee skills and capabilities are at the cutting edge. These are the things that will drive growth for us.”

But it goes further than simple business acumen. “Every employee, in a way, is a part of the Kiran family,” says Lakhani. “If you want to excel, you have to begin by focusing on your ethics.”

Besides the customer and internal relationships, Chirag Lakhi says his company’s ethos has strengthened ties with its peer group of diamond manufacturers. “All the big manufacturers in the market today have, at some time or other, bought rough from us. They all know that our business will always offer goods that are viable in terms of price and that we’ll never gouge anyone.”

Furthermore, he adds, “that assurance about us exists downstream as well. We have never gone chasing customers. They come to us because they have heard about our work ethic. To maintain that assurance, we value our human resources. Without our personnel, we are nothing.”

Matters of the heart

Romance was one of the driving forces behind the formation of Rosy Blue. Dilip Mehta, who had worked in the diamond-cutting hub of Surat, got engaged after visiting Antwerp in 1970. “My wife was from an Antwerp diamond family. That was my introduction to Antwerp,” he says with a smile.

Mehta’s elder brother Arun had started B. Arunkumar & Co., his own diamond-cutting business, along with his uncle Bhanuchandra Bhansali. Arun Mehta knew that in order to expand his business to international markets, he would have to rely on family, and he turned to his younger brother.

“At that time, India was entangled in a lot of red tape, with a replenishment license system that allowed a company to import rough diamonds to the tune of 70% of the value of the polished you had exported,” recalls Dilip Mehta. “We thought it best to have a company outside India. Antwerp, which was an established cutting center, was the logical choice. Its big advantage was the availability of ample financing — though there wasn’t much borrowing — which facilitated business operations. We decided to move closer to our customers and suppliers.”

He founded Rosy Blue Antwerp in 1973. “The business model was simple. I would buy rough in Antwerp for our cutting operations in India and then import the polished into Belgium for global distribution and sales. We needed an overseas platform to do business in the global arena. Given that I now already had a family connection in Antwerp, it would be easier for me to make the move rather than anyone else in the family.”

In 1974, the Rosy Blue group started its global expansion with sales offices in Hong Kong, Tokyo, New York and Israel. “We focused on selling Indian production overseas,” Dilip Mehta explains.

Despite being two separate entities, B. Arunkumar and Rosy Blue grew in sync. “One hand washes the other, as they say,” Mehta says. “As B. Arunkumar expanded, we could expand our own business.” More family members, including cousins, joined the team. “We had family in most of our offices, each dedicated to specific roles for specific markets. Having family gave us the advantage of being able to expand our expertise.”

The power to pivot

Because of its positioning outside India, Rosy Blue was able to move nimbly in response to changing global market conditions.

In the mid- and late-1970s, the big development in the market was the supply of sawn goods, which enabled Antwerp’s own diamond-cutting workforce of some 20,000 people to produce small diamonds and even single cuts for supply to the Swiss watch industry. However, all this changed with the diamond industry crash of 1980.

“With so many people going out of business, De Beers needed companies that could process these sawn goods,” recalls Mehta. “Hampered by the license system, which didn’t lend itself to change and adaptation, India was unable to take up the slack. As a result, Rosy Blue moved into cutting and polishing and started operations in Sri Lanka. That was the first step to our expanding our manufacturing around the world.”

This flexibility has been helpful more recently as well. “In today’s changed world, we’re moving our center of focus back to India,” says Dilip Mehta. “We took a pause to see where things were happening in the world. We have always moved out when the market didn’t make sense. We closed our Singapore and Thailand offices because we don’t have an extra family member to oversee things. We serve those markets from Hong Kong, where the business has critical mass.”

With a laugh, he adds, “You can talk about strategic planning and long-term views, but years ago, nobody had done any of this before, and there were no examples to follow to let you know if it would work. You adjusted and made it up as you went along. My generation started believing that anything is possible. Just apply your mind and ask the right questions. You’ll get answers. We understood things, but we really didn’t have a road map.”

Of course, family members’ roles in a business can get complicated as it evolves. “Although we function as a Hindu Undivided Family (HUF) [a government tax entity], we are aware that as the family grows, we need to differentiate between shareholders and management,” says Blue Star’s Arnav Mehta. “We strongly believe in the spread of the family and business globally. Our roles should be to focus on greater accountability rather than focus on just growth.”

Optimism in a changing world

While Venus Jewel has been at the forefront of information technology and automated procedures, what it truly believes will carry the company forward is its family relationships, its code of ethics, and its unswerving attention to quality.

As for Blue Star, says Arnav Mehta, “we want to turn into a customer-centric business. For the first 50 years, we focused on the supply side and created a backbone for the product. But looking ahead, we want to focus on the key driver of any business: the customer — and more importantly in our case, the end consumer.”

After all these years, Dilipkumar Lakhi still has the gung-ho spirit he had as a boy. “Whatever the market conditions, we’ll do business. We are market makers,” he says. proudly.

Dilip Mehta, too, is optimistic about the future. “People thought everything would come to an end with the Covid-19 pandemic. But they are now buying strongly again. People have suffered from what is called ‘frugal fatigue.’ They are tired of holding back and not wanting to buy anything. They want a return to normality. Everything is definitely not going to end — things are actually looking up. If you talk about the end of the world, you will work toward creating it . You’ll be depressed and do nothing. Optimism is what will move you forward.”

Article from the Rapaport Magazine - September 2021. To subscribe click here.

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