Diamond processors' margins rise

The Indian diamond jewellery processing industry is experiencing a shift in consumer behaviour. With the revival in post-economic slowdown, foreign orders and encouraging festival demand from local markets, consumers are opting for higher value-added stones now in each jewellery item. The realisation for per carat diamond processing has almost doubled in the past year.

Mehul Choksi, chairman of Gitanjali Group, said while confirming better realisation and the shift in consumers taste: “Selling prices have not moved up significantly since June. It has just increased 10 per cent since then.”

Icra, a credit rating agency, said in a report that the per carat realisation jumped to $495.1 in June as compared to $270.2 in the same month last year. In rupee terms, the selling price was Rs 23,052 in June, versus Rs 12,905 in the corresponding month of the previous year.

Higher realisation will benefit Indian jewellery makers significantly. Companies that had booked raw materials when prices were hovering at lows early this year could earn better profit. Now, prices of both, precious metals like gold and silver and stones like diamonds and colour stones, have significantly gone up. Therefore, buying raw materials at the current price for jewellery making will not accrue much profitability for companies, as they will get a manufacturing margin of five-six per cent and a retailing margin, if they sell through branded stores, of 15-20 per cent.

Gems and jewellery form 13 per cent of India’s total merchandise exports. Of overall jewellery imports in the US, 26 per cent comes from India. Total jewellery exports from here rose 61.9 per cent to $15.22 billion in April-August as against $6.4 bn in the corresponding period of last year.

Gold and silver prices have surged 26 per cent and 22 per cent, respectively, in the past year. Gold prices are around $1,348 an oz, while silver also surged to $23.25. A top industry official also said both rough and polished diamond prices have moved up to the all-time high of the pre-economic slowdown level of August 2008.

The demand outlook is also positive, with domestic jewellery demand set to rise 15-20 per cent due to the ongoing festival season, followed by the wedding season. Overall growth in the Indian economy, coupled with high disposable income in the average middle class, will boost Indian jewellery demand, Choksi said. Gitanjali Gems has chalked out mega plans to introduce new jewellery designs and cuts for the Diwali season.

Indian diamond processors and jewellery makers are estimating to perform better on exports, with sales expected to rise 30-35 per cent.
 

CHANGING TREND
	Value				Realisation/carat
	Rs crore	Growth*	$ mn	Growth*	Rs	$
Oct  ’08	6,213.9	0.8	1,278	-18.1	15,283	314.2
Jan ’09	4,416.6	-13.1	904	-30.0	13,682	280.2
Apr ’09	4,508.4	-10.1	901	-28.4	14,413	287.9
Jul ’09	5,951.4	5.2	1,239	-6.5	13,770	286.6
Oct ’09	6,988.0	12.5	1,496	17.1	17,562	375.9
Jan ’10	7,857.7	77.9	1,710	89.0	16,221	352.9
Apr ’10	8,641.4	91.7	1,942	115.6	16,050	360.7
Jun ’10	10,253.7	74.2	2,202	78.7	23,052	495.1
Source: Icra                                                                                                                                      *in %

Rajiv Jain, chairman of the apex trade body, the Gems & Jewellery Export Promotion Council, said: “Orders are full for the ensuing Christmas and New Year seasons from the US. Looking at orders, we anticipate 30-35 per cent rise in orders from the past year, thus reaching the level of August 2008.”