IGI India A Global Leader in Diamond Certification with Unmatched Market Presence

Stock Opportunities Not-so-Hidden Gems
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This report is very detailed.
Thanks for sharing this!

How did one can get access to more of these?

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How and where. someone can get this kind of research report?

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There are a few telegram channels that update most research reports, like @researchreportss or @EquityResearchReportIndia. You may join either.

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Very helpful . Was looking for similar resource for some time now.

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The report is an initiating coverage by Morgan Stanley on International Gemmological Institute (IGI) India Ltd, focusing on its certification business and growth prospects. Here’s a summary of its key points:

  1. IGI’s Market Position

Second-largest independent certification provider for diamonds, studded jewelry, and colored stones.

33% global market share, with 65% share in lab-grown diamond (LGD) certification.

Holds 50% market share in India, serving 9 of the top 10 jewelry chains.

  1. Growth Drivers

High barriers to entry: Trust and credibility are crucial in the certification industry.

Growth in lab-grown diamonds (LGDs):

IGI is a first mover in LGD certification (started in 2005).

LGD certification volume is expected to double by 2028, growing at a 22% CAGR.

80-90% of LGD demand comes from the U.S., but India leads in production.

Global certification market growth: Expected to increase by 5-10% annually.

  1. Financials & Valuation

Revenue CAGR of 14% (CY24-28e).

PAT CAGR of 19%.

EBITDA margin expansion from 54.6% (CY24) to 58.8% (CY28).

Valuation uses a probability-weighted forward P/E multiple:

Base case (60%): 47.5x P/E.

Bull case (25%): 60.2x P/E.

Bear case (15%): 23.8x P/E (50% discount to base case).

  1. Risks & Key Monitorables

LGD “proof of concept” is still developing—if it shifts to fast fashion, certification demand may decline.

Macroeconomic cycles and sanctions on natural diamonds could impact pricing.

Competition from GIA (Gemological Institute of America) remains strong.

  1. Investment Outlook

Rating: Overweight (OW) (indicating bullish outlook).

Target Price: Rs. 617 (Base Case), Rs. 858 (Bull Case), Rs. 285 (Bear Case).

IGI benefits from first-mover advantage, economies of scale, and strong growth in LGD certifications.

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NOTE : COPIED FROM ABOVE THIS THREAD

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Can we somehow get information about the lock-in period ?
Like for how long they have pledged the shares ?

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Here are brief pointers regarding the potential impact of lab-grown diamonds becoming fast fashion items on the certification business:

Impact on Certification Business

  1. Decreased Need for Certification:

    • Fast fashion lab-grown diamonds may reduce the perceived need for certification, especially for lower-value pieces.

  2. Consumer Awareness:

    • Continued consumer interest in quality and authenticity may sustain demand for certification, even in fast fashion.

  3. Market Segmentation:

    • The diamond market is diverse; high-end segments will still likely demand certified stones, preserving the certification business.

  4. Ethical Considerations:

    • Certification may remain important for substantiating ethical and environmental claims associated with lab-grown diamonds.

  5. Technological Advancements:

    • As production costs decrease, a wider variety of lab-grown diamonds may emerge, including those that do not require certification.

Conclusion

While the certification business may face challenges due to the rise of lab-grown diamonds in fast fashion, it is unlikely to disappear entirely, especially in higher-end markets and among ethically conscious consumers. The future will depend on balancing accessibility with the assurance of quality.

Answer from Perplexity

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The share of lab-grown diamonds in both the fast fashion and higher-end markets is evolving rapidly. Here are key insights based on the search results:

Market Share Insights

  1. Overall Market Growth:

    • The global lab-grown diamonds market is projected to reach approximately $24.5 billion by 2025 and $49 billion by 2032, with a compound annual growth rate (CAGR) of around 10.4% during this period[1].

  2. Fashion Jewelry Segment:

    • The fashion segment is expected to capture a dominant share of about 35% of the lab-grown diamonds market, driven by consumer trends towards ethical and sustainable products[1][5].
    • Lab-grown diamonds are particularly appealing in fashion jewelry due to their affordability and customization options, aligning with contemporary consumer preferences[5].

  3. Higher-End Market:

    • By 2032, it is estimated that 40% of engagement rings will feature lab-grown diamonds, indicating significant penetration into the higher-end market[1].
    • Major brands, including luxury retailers like Pandora, are actively expanding their lab-grown diamond offerings, suggesting a growing acceptance in the premium segment[2].

  4. Consumer Demographics:

    • Millennials and Gen Z are anticipated to account for 70% to 75% of the lab-grown diamond market share by 2032, reflecting their preference for sustainable and ethical options[1].

  5. Engagement Rings:

    • A survey indicated that approximately 25% of couples in the U.S. purchased lab-grown diamonds for engagement rings, highlighting their increasing acceptance in traditional high-value segments[1].

Citations:
[1] https://www.persistencemarketresearch.com/market-research/lab-grown-diamonds-market.asp
[2] Lab-Grown Diamond Jewelry Market Forecast to Almost Double in Size by 2025
[3] Lab-grown Diamonds Market 2024 Latest Analysis Report
[4] Lab Grown Diamonds Market Size, Share & Growth Report | The Brainy Insights
[5] Lab Grown Diamonds Market Analysis | Size & Forecasts
[6] Lab Grown Diamonds Market: Size, Share & Analysis 2032
[7] CVD Lab Grown Diamonds Market - Size, Share, Industry Forecast Report [Latest]
[8] Lab-grown diamond industry - statistics & facts | Statista

Answer from Perplexity: pplx.ai/share

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India is an aspirational country, and as we improve our per capita income, I believe the demand for Lab-Grown Diamonds (LGD) will increase. However, from my observations, especially having four females in my household, it is challenging to convince them to choose LGD. For them Wearing a Natural Diamond serves more as a confidence booster than anything else.

Moreover, LGDs, similar to natural diamonds, should not be viewed as investment opportunities, as resale values typically return only about 10% of the original purchase price for LGDs, compared to 40-50% for natural diamonds.

With recent prices for LGDs dropping as low as 15000-20000, they might start being perceived as an alternative to artificial jewelry rather than a treasured possession. In contrast, gold continues to be the number one choice for aspirational jewelry, as it also offers a better return on investment, especially during these uncertain times with our depreciating currency. Regardless of opinions, gold will always remain the top choice, which is why its prices keep reaching new highs every few months.

If the price of LGDs continues to decline, they may become more affordable, but they will lose their aspirational value. This can be compared to the popularity of the iPhone in India—it’s sought after primarily because it is aspirational. Even though its more expensive than most phones, it still sells more than most top-tier Android phones, Reason - Aspirational.

Moreover, more than 80% of iPhones are sold on EMI (Equated Monthly Installments), illustrating that when a product is aspirational, people are willing to take loans to purchase it. This trend applies to luxury cars, SUVs, luxury bags, and watches as well.

For example, if you buy a Hermès bag or a Rolex/Patek Philippe watch, you might use it for a couple of years and even then sell it for a 30-50% appreciation, depending on the model and its demand.

In my view, if LGDs become too affordable in the future, there may come a point where people won’t bother with certification and will treat them as mere artificial accessories.

Disclaimer: No buy/sell recommendation; I have already exited around the 580 levels, just tracking as I am invested in other scripts in the jewelry sector.

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I have personally visited the United States twice, and I can assure you that it is not a country where people judge you based on what you wear or what you hold in your hand. Instead, they assess you based on the work you do and the contributions you make to society. The focus is more on innovation, while mass production is outsourced to countries like China, India, Vietnam, and Indonesia.

The per capita income in the U.S. exceeds $80,000, whereas ours is only $2,500. This disparity makes us aspirational, but unfortunately, we often equate aspiration with showing off.

Also, in the U.S., there are strict norms across all businesses for registration and certification making them mandatory. In contrast, this is not the case in India. A recent example is the requirement for hallmarking in gold, which only became mandatory in June 2021, despite the fact that we have been using, buying, and selling gold for centuries.

It’s hard to imagine that such a valuable and costly product did not require any form of authentication for so long. Meanwhile, we think that a product worth 15, 30, or 45 thousand would significantly benefit from being authenticated.

In my humble opinion, the whole concept of invoices or authentication should apply more to appreciating assets rather than items that can lose 80-90% of their value the moment you purchase them. It feels more like a “use and store” scenario, much like artificial jewelry.

I do agree the demand for LGD will increase there is no doubt about that, but that in itself would make it more affordable and less aspirational.

In the long run, I feel LGD will destroy both their own value and also that of natural diamonds due to lower demand.

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https://www.diamonds.pro/education/diamond-certification/ This doesn’t have a great opinion about IGI.

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that is the key i guess, as far as business from Indian customers is concerned. they shouldn’t get too affordable. whether they will or not we dont know, but the IGI ceo in the youtube video posted above talks about this saying “it becomes unsustainable to make LGD below a certain price”. he has vested interest, of course, so lets see…

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One basic question - Can the Jewelry shop owner who is selling the LGD can authenticate the diamond without certification.
Don’t Jewelry shop guy require certification in the first place, before selling to consumers, or can the sales guys in the shop authenticate it easily like Gold??

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Hello Everyone,
IMO: Diamonds have always been categorized as luxury in India.
They always were & they always will be…

Story:
I once asked someone close to me what are your views on LGD, would you ever buy it or not?
She replied, “I can’t, once I buy a single piece of LGD my whole collection will then be seen with the same perspective.”
That’s when I realized diamond are for riches & they will never stop buying those at least in India. LGD may be hitting market share now but in the near-term future I don’t see further potential in them. LGD’s could maybe craze for young people who want to gift a diamond ring instead of gold since LGD’s are cheaper than gold.

Conclusion: LGD’s market share may be rising but will never affect the original diamonds because the original diamond buyers won’t buy LGD’s & LGD buyers can never afford original ones eventually.

Note: These are just my views & are said on basis of India.

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LGDs have flipped the landscape. Traditionally, natural diamonds were considered symbols of wealth and exclusivity due to their high cost and controlled supply.

The main difference between traditional and lab-grown diamonds is how they are created, but they are chemically, physically, and optically identical.

Maybe Certification can play a role in differentiating LGD and NDs, its only going to be a difference in labeling, all else being equal.

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Unless you tell someone, nobody can differentiate between a natural and a LGD afaik. So, people can brag after spending less. We have a lot of people like that too. Just my semi-serious 2 cents to the debate.

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My two cents - all the arguments put up here reflects the consumer sentiments in India which might be true. But IGIL story or thesis is not India specific alone. LGD is a rage in US and Europe. Read the recent concall notes of Goldiam and Vaibhav global. IGIL has 65% market share in LGD globally and only player if we remove it’s competitior which is a non profit organisation, it’s the only player in the world. I have a small investment since IPO and will wait for the results to decide about the future course.

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Also LGDs are preferred by many environment/nature conscious people as no excavation needs to be done, no chance of bonded labor (blood diamonds), etc

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When results are expected. Results and management commentary /concall can give some more direction. In this market even good results/commentary not spared
Overall stock Market conditions to improve