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

[sameernics]

What Goldiam meant by saying entry level lab-grown jewelry items…what is the value of item that they are talking about? Secondly, what they mean by full certification or complete certification? is there a partial certification option in between?? These require a deeper follow-up.

Does that mean…the customers will blindly purchase whatever retailer sells to them in future? knowing that India’s market presents a complex landscape where consumer behavior oscillates between price sensitivity and value-seeking. As per a Deloitte study in 2023, 45% of Indian Shoppers are Price Sensitive, 35% are Value Seekers and 20% are Environment Conscious.

In other words, would anyone buy if I just say a piece of stone is a natural diamond or LGD without any valid proof?

[tilokanimeet]

Lemme write a note what was said in the above video by Tehmasp Printer at 6:35.

“IGI now have high demand of cerficates for big size of LGD’s compared to smaller carat. In future if any chance smaller size of LGD’s which are like super cheap goes into a zone where customer no longer demand a certificate than that would be considered in jewelry & we certify that also.”

Note: This is just written in simpler words, for exact precise statement watch the video.
Disc: Invested

[Sharon_Bayross]

Cut carat colour clarity is what differentiates a diamond lab grown or natural and the proof is by certificate. I know I am stating the obvious but bear with me. Some years back women brought gold beads necklace of a certain weight paid a huge amount and years later when they went to sell or remake they found that the beads were stuffed with wax and they paid a huge amount for the wax. Without certification how will anyone distinguish between the quality of the diamonds they buying to that the kids play with. In-house certification compared to a reputed third party certification which one would you trust. Yes the prices for lab grown is going down yes but the positive here is that it is now accessible to most. More can afford to buy a LGD. Where people used to buy gold for special occasion like marriage or new job or milestone in life can now consider buying LGD. More watch companies can consider buying them and using LGD this will need certification. The business model looks strong. Just that I am unable to understand the promoters pledge. All that I know is that somewhere in sept 2023 the shares were pledged. Can someone please explain the logic of the pledge and its impact.

[sameernics]

As such the promoter pledge is indirect. Because, 100% pledge of promoter holdings in IGI India is due to a financial arrangement at the parent company level. On September 7, 2023, BCP Asia II HoldCo III Pte. Ltd. (the Parent) pledged its entire shareholding in BCP Asia II TopCo Pte. Ltd. (the Promoter) to DB International Trust (Singapore) Limited, acting as the security agent. This pledge was established as collateral for a facility availed by the Parent. Consequently, while the Promoter itself has not directly encumbered any shares of IGI India, the shares are indirectly encumbered due to the Parent’s pledge of its holdings in the Promoter. As a result of this structure, the promoter’s shareholding in IGI India, which stands at 76.55% post-IPO, is considered fully pledged.

[Rushabh_Doshi]

Westside in India recently introduced a new brand Pome to offer lab-grown diamond (LGD) jewellery. The offerings include earrings, rings, necklaces, and bracelets suitable for gifting during the festive season, workwear, and other western wear occasions. The jewellery offerings are sold without any certification.

[sameernics]

@Rushabh_Doshi So in the absence of any certification, the probability of scamming the customers with fake diamonds in the name of LGD is high??

[Puch]

So how do you know if you are buying a diamond or a piece of glass?

[sumit_kumar]

Exactly as more branded name comes into lgd, the need for certification will decrease the market is reacting to that and even the price of lgd is falling drastically as the new capacity is coming.
Better stay way from businesses where clarity is not there and even skin in the game of management is not there.

Disc. Not invested just tracking.

[Puch]

LGD’s are cheaper than diamonds but not that cheap where you blindly trust a retailer. Even a 0.5c LGD costs upward of Rs 35,000!

[sameernics]

The foundation of a diamond valuation is a bit complex and dependent on Cut, Color, Clarity, and Carat, which I think only a gemologist certificate will confirm that. How does this equate with other luxury handbags, shoes etc.??

[satishwe]

Company updated the ppt stating earlier numbers were erroneous.

[Jugal_Doshi]

The certification holds value because LGD holds value.

The reason for LGD’s value is “cost of making” and “natual diamonds” value.

Prices of Natural diamonds have come down lately.

And LGD is just a manufactured piece, what if the manufacturing cost itself comes down drastically and LGD prices come all the way down.
Would you want certificate in that scenario??

[abhishekbagaria]

That’s very interesting scenario. If LGD prices come all the way down, then there is no difference in prices between LGD and any other fake stone. So there is no incentive to sell a fake stone instead of LGD. So no need for certificate.
Now still there will be difference in prices between different qualities of LGD, based of size, color, clarity etc. But for that you wont need a third party certificate, the retailer’s declaration should be enough?
Now will we have any market left for LGD, if prices touch rock bottom. The exclusivity factor is all gone. It will be like your fashion jewelry. Which one wears till one likes and then throws it off.

Now what happens to the market of Natural Diamond. You have something available with similar physical and chemical properties, which is available at dirt cheap price. From naked eyes, you cannot make out the diff between Natural and LGD. My guess is the rock bottom price of LGD, will break the diamond market in general, and majorly impact the prices of Natural diamond also.
And the need of certification in natural diamond will become 100%.

We all agree the the biggest and only risk to IGI is that the LGD prices may hit rock bottom in coming 3-5 years. Now that risk is applicable to all the companies dealing in LGDs. Goldiam International business model is totally dependent of LGD now. Cant see that risk playing out in its price. Today it went up by 3.5%, and is 100% up inspite of the fall, in last 1 yr. There are so many retailers and startup ventures entering this space. All should be facing the same risk. That risk is applicable to all companies focused on LGD.

IGI even has atleast 30% biz outside LGD. Why it is only company punished for this risk? Cant understand. Any ideas?

[PeruRaj]

what if like the luxury/branded items, the maker of the LGD established their trust with people (by selling their own LGD in their shops) and don’t need a third party to certify their products.
for a certain near future, people might need certification till they trust the manufacture/maker, but once the trust is established, they don’t need a certification right.

[Jugal_Doshi]

Exactly my point.
I second that @abhishekbagaria @PeruRaj

Must must watch this (Tanishq CEO on LGD):

S4E5: Building The 3,00,000 Cr Crown Jewel Of Tata Group

He is saying that the prices in wholesale have collapsed by 98% to $80 in 10 years and likely to come down even more.
Also added that Westside is going to sell at 30k a carat.

Why would anyone want to spend money on certification for that piece. Premium imitation, gold plated jewelry also hovers in this price range.

Nobody asks for certification/proof.
As long as you have decent trust on the Fashion player (not even jewelry), you wont ask for anything else.

LGD is infinite supply, natural is rare that why they hold some value.
Something which is manufactured can not be treated as an asset. Over the time, because of improvements costs reduces (because it is simply manufacturing, nothing else)

(Some are views, some are comments of Tanishq CEO)

[murali603]

I feel that lot of retailers trapped with IPO allotted shares in IGI and defending their holding thesis.

With lot of business and industry risks and moderate growth of 20% IGI doesn’t deserve hefty valuations, 20 PE could be the reasonable valuation in the current market scenario.

Management is also very tricky they know the business risk when CNBC anchors asking the straightforward questions but no concrete answer from management, they are just repeating the IPO and Q3 numbers. I can guess from their typical answers that there is lot of risk involved in the business even though they have good market share, industry may see huge changes in the certification front going forward.

[HighCAGR]

Previous post:

In December 2023, I purchased a solitaire diamond from Caratlane for INR 3,56,000. The only paperwork I received was an invoice and a certificate from Caratlane. I was not aware of any third-party certification, nor did I request one.

Just last week, I visited a Tanishq store to buy a gold chain and spoke with the manager there. I inquired about lab-grown diamonds and their certification. According to him, Tanishq currently does not have IGI certification for all their pieces sold; they only provide it for lot imports and can issue one if specifically requested. Typically, an invoice suffices for their sales.

While at Tanishq, I showed the manager my Caratlane invoice and asked about the possibility of selling or exchanging the diamond. To my surprise, he informed me that I would need to return to Caratlane for the best value, as they usually do not accept diamonds from other resellers. Despite the fact that Caratlane and Tanishq are both owned by Titan and come under the same group, Tanishq was unwilling to offer anything substantial, stating that the maximum they could provide would be 40% of the original value.

When I asked how much they would accept for an exchange if I had purchased the diamond from Tanishq, the manager indicated that they would offer a buyback at 65% for exchanges but still cash out at 40-50%, depending on the condition.

He confirmed that this is the industry norm. Generally, most brands are reluctant to accept diamonds from other retailers because it is challenging to verify and value them. In contrast, gold can be bought and sold anywhere, it doesn’t even require an invoice, as it can be tested and liquefied within minutes.

The resale situation is even worse for lab-grown diamonds (LGDs). The resale value they offer is only 15-20% within a year, as prices have dropped further. Additionally, it must be done through the same store or brand. When I asked if clients request LGD certification at the time of purchase, the manager stated that they provide their own invoices and certifications if the client requests them, and most customers are satisfied with this. He noted that many clients are not even aware of IGI certification, making it inconsequential to them.

There is no doubt that the demand for LGDs may increase over time as they become more affordable. However, companies may or may not pursue IGI certification, as there seems to be no mandate requiring it, based on my interaction.

Disclosure: I have already exited and currently see better growth opportunities elsewhere.

[garade]

@murali603

Management is also very tricky they know the business risk when CNBC anchors asking the straightforward questions but no concrete answer from management, they are just repeating the IPO and Q3 numbers.

true. anyone in leadership position not answering questions in a straightforward manner and only trying to show positive side is a red flag for me personally. i view it as them not having confidence in their business’s future.

[abhishekbagaria]

Just to keep things in perspective. The value of Diamond depends upon the 4Cs. In none of the purchase in India, in the invoice the 4 Cs are defined clearly, and nor is the customer aware of the same. Ideally the pricing of the Diamond in the first place is should be governed by the 4C, but there is total lack of transparency. So when the Customer goes to sell his diamond, he hardly gets 40% of initial investment.
Due to this total lack of transparency, the retailers generally love to deal with Diamonds, as due to this lack of understanding in the market, and they can make good margins.
In India, In B2C, there is no demand for Third party certificates, as the customers don’t know if anything like this exist and it is in the Retailer’s interest including likes of Titan, to keep the customer in the dark. That is why IGI has started with B2C advertisements, to make customers aware. Only if Customers starts demanding certificates, then only the B2C markets will change.

Even Titan, do not mention the 4Cs clearly in their invoice. So when you go to sell your diamond, they will assess your 4C, and accordingly give you the market price. You cant compare it with the existing diamonds in their shop, as that will be having diff 4Cs. So no way the consumer can question the valuation.

Where as in US B2C, market, customer do ask for certificates, and it is very common their. Certificates do improve the transparency in the industry and the related pricing, which is beneficial to the final consumer.

Currently IGI gets most of its revenue from B2B certifications. Which is required for exporting diamonds in Developed countries, and to also sell diamonds to local retailers. That market will grow as the adoption of LGD increases. Whether the certifications will start in the B2C market in India, in the ready made jewelries that only time will tell. The retailer for sure would not like that to happen. So it is true that current market for IGI is only B2B, and they are trying to expand in B2C.

For Natural diamonds case, given the total lack of transparency in valuations and given drops of 60% of value for resales, is it a good holder of value? The new generation is slowly understanding this. In China, for this very reason the consumer is shifting big time from diamonds.

I think the only risk for the likes of IGI and any other company dealing with LGD, is the total crash in prices of LGD due to over supply and reduction of production cost. As I said earlier, if there is a crash then I do not see a reason why Goldiam International will keep doing well, where as IGI will only suffer. Haven’t yet received any response to this till now.

[milan_j_shah]

Thanks. It ws useful to see the video that some HNI has sold in a big way. I think the biggest issue are the Q4 numbers. This was sold at a high valuation and to sustain this price, you need high growth. This growth was premised based on the big growth of lab priced diamonds. However, the Q4 revenue growth was only 3%. Also the management was trying to give out as little info as possible on lab diamond growth stats during the con call