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17 august 2012

A news from Mumbai has rocked world's biggest diamond cutting and polishing centre in Surat, Melvyn Thomas of the Times of India says on Classic Diamonds (India) Ltd., one of the few listed diamond companies based in Mumbai, has informed the Bombay Stock Exchange (BSE) that a consortium of bankers, including State Bank of India (SBI), have withdrawn various working capital and export financing facilities given to the company and asked the company to repay their outstanding balances on August 7.

The company also informed the BSE that it is in the process of negotiation with the banks, which are covered by way of mortgage of various properties and assets of the company in Surat and Mumbai.

Last year, the company surrendered its sightholder status to Diamond Trading Company (DTC) after posting a huge loss of $5.5 million during the year as compared with a net profit of $1.1 million in 2010. It also closed down its 2.20 lakh square feet diamond cutting and polishing factory in Surat's Ashwani Kumar Road, explaining that it did not require such large manufacturing facility after the company surrendered its DTC sight.

Subsequently, the company also closed down its jewellery manufacturing unit in Mumbai's SEEPZ location in March 2012. In November 2011, the company had shut down the SEEPZ unit in Mumbai following the strike by workers on the issue of wages and informed the BSE about permanently shutting down the unit in March.

Classic Diamonds (India) Limited was one of the leading diamond companies in the country and the first among the few listed companies with the annual turnover of $100 million. The company is promoted by a Palanpuri Jain Chandrakant Bhansali and it was one of the leading DTC sightholder company till few years ago. Its reported sales of $40.5 million (Rs 2.26 billion) in fiscal 2012, represented a decline of 55 per cent from previous year. The company posted a net loss of $5.5 million (Rs 303.9 million) during the year as compared with a net profit of $1.1 million (Rs 60 million) in fiscal 2011.

Industry sources said the financial problem with Classic Diamonds started during the economic downturn in 2009. More than dozen-odd diamond companies in Surat and Mumbai went bust for not paying the dues to the bank running into Rs 2,500 crore. But, Classic Diamonds managed to cope up with the deteriorating situation by posting $1.1 million worth of net profit in 2010.

However, the company could not drag for long and it started showing signs of financial weakness with the closure of its jewellery unit in SEEPZ in Mumbai and the diamond manufacturing factory in Surat.

"The company has shifted its headquarters from Opera house in Mumbai to JSS Road in Girgaum in Mumbai. The banks have started a strict recovery of outstanding payments and there is no other way for the company promoters," a source close to the company promoters said.