Shining future of Lab-grown Diamonds sector
Published by Sharekhan Education | February 10, 2023
Amit Pathak| Sharekhan Education
About Lab Grown Diamonds:
Lab-grown Diamonds (LGDs) are grown by scientists in a laboratory over a few weeks. They are optically identical to natural diamonds and share the same chemical makeup. They undergo similar polishing and cutting processes that give natural diamonds their characteristic luster. The key difference between natural and LGDs lies in how humans make them and their rarity. LGDs are significantly cheaper than natural diamonds leading to higher profit margins. They are not a direct competition with natural diamonds. One can perceive them as product extensions. LGDs offer a great entry point for aspirational buyers who want to own diamonds.
LGDs are more environmentally friendly as compared to natural diamonds. As per a report by Diamond Foundry, it takes ten times more energy to extract a natural diamond than it takes to produce one LGD. Nowadays, consumers gradually lay more emphasis on environmental impact while making purchases. LGDs also find use in machines and tools for industrial purposes. Their extra strength and hardness make them ideal for use as cutters.
Growth Prospects of LGDs sector:
LGDs are slowly gaining market share in the global jewelry industry as global reserves of natural diamonds deplete. LGDs are the fastest-growing segment of the jewelry sector. Their market share is estimated to increase to 10% of the worldwide diamond market by 2030 from the current 3%. India currently contributes around 15% of the global production of LGDs. Gem & Jewellery Export Promotion Council (GJEPC) expects that in the coming years the LGD Industry will employ about 1 million people processing 150 million carats of LGDs. Observers perceive India to become one of the largest markets for LGDs in the future.
The government of India is trying to promote an ecosystem to produce LGDs indigenously to reduce India’s natural diamond import bill of around $26 billion. It has permitted 100% FDI in this sector under the automatic route. Union Budget 2023 proposes to reduce customs duty on the seeds used in the manufacturing of LGDs. The Government will provide a grant of Rs.242 crore to IIT Madras for undertaking research on LGDs over a period of the coming five years.
About Goldiam International:
Let us discuss Goldiam International in this space. The company is the most prominent integrated exporter of LGD studded jewelry in India. It derives nearly 20% of its revenues from LGDs. The company manufactures jewelry in-house and is among the few players with a patent for the LGDs in India. It is an OEM to renowned global jewelry retailers. Its distribution strategy focuses on direct retail and e-commerce platforms. It is debt-free and has a strong independent board. The company is estimated to post revenue growth of 12% CAGR and PAT growth of 25% CAGR over FY22-25E. The operating margin would improve by 690bps to 25.8% over the same period.
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