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15 october 2014

As if the current challenges were not enough, the Standard Chartered Bank’s recent decision to lower exposure in the gems and jewellery industry has come as the ‘last straw’ to the Indian diamond industry. With Antwerp Diamond Bank going in for liquidation and many other lending banks insisting on extra collateral, the move by Stan-Chart has the industry in a flux. According to industry insiders, it all started with Winsome Group, India’s largest bank defaulter and the diamond financing banks have become extra cautious in their exposure to the industry.

Besides this, the Indian diamond companies are in a frantic hurry to install the synthetic detecting machines in their offices going by the manner synthetics are making an entry into the natural diamond business. India banks have directed forensic audit on Winsome and government agencies are probing the money trail following the Rs 6,500 crore-credit default. But for Winsome, its business is proceeding as usual and the Group has consolidated its position as a leading player in man-made diamonds, with operations in Singapore, Malaysia and the US.

There was some excitement in Surat, with diamantaires who were lobbying with the state government for two-lakh square metres of Navsari Agriculture University (NAU) decided to back off and have now come up with a fresh proposal for land. Another matter that made the Surat diamantaires unhappy was when the customs and central excise department reportedly approached diamond units for the recovery of outstanding import duty on machines and equipment imported fr om Israel, Antwerp and China. Diamond companies in Surat that had imported state-of-the-art technology for diamond cutting and polishing, may have to cough up over Rs 150 crore in duty.

However, when the officials from Ras Al Khaimah (UAE) and India’s leading diamantaires gathered for a high-level meeting recently at the Surat Diamond Association (SDA) premises, the results brought back the smile on their faces. During the meeting, the visiting officials formally invited the Indian diamond manufacturers for setting up their manufacturing units in Ras Al Khaimah (UAE). A rainbow at the end of the tunnel?

Meanwhile, the Gem & Jewellery Export Promotion Council (GJEPC) of India announced the provisional figures of the previous month. India’s cut and polished exports for the month of August 2014 has recorded $1,920.05 million (29.04 lakh carats), registering a decline of 18.58% as against $2,358.12 million (36.08 lakh carats) during August 2013. Exports of rough diamonds recorded $115.73 million (26.63 lakh carats) for August 2014 as against $124.70 million (55.22 lakh carats) in August 2013, a decrease of 14.08%. Rough import for the month of August 2014, too, shows an increase of 26.82% recording $864.39 million (74.15 lakh carats) compared to $681.59 million (92.51 lakh carats) in August 2013, though carat-wise indicates a decline. For the month of August 2014, polished imports registered a marginal decline of 2.55 percent, with $511.35 million for the month of August 2014 from $524 million in August 2013, despite the government of India taking all steps to stem polished diamond imports.

While many diamond industry leaders have taken steps to start diamond manufacturing units overseas, Accenture, the consultancy firm which was roped in by GJEPC of India thinks otherwise. Accenture, which was expected to give suggestions to speed up exports from special economic zones (SEZs) in India, is not in favour of local companies setting up units in other countries. It has warned that setting up units abroad could slow down India’s gem and jewellery export.

But one consolation was that India’s Current Account Deficit (CAD) narrowed sharply to 1.7 per cent of GDP in the April-June quarter of this fiscal. This is attributed mainly on account of reduction in trade deficit, and a steep decline in gold imports, according to a Reserve Bank of India’s notification. CAD narrowed sharply to USD 7.8 billion (1.7 per cent of GDP) in the first quarter of the 2014-15 fiscal, from USD 21.8 billion (4.8 per cent of GDP) in the year-ago period.

Will Indian diamond processors ever be satisfied with the rough supply available to them? Looks like they never will, going by their aggressive participation in the De Beers sightholders contract registration. De Beers, which accounts for about 40 per cent of global supplies of rough diamonds, during August 25-29 called for registration from diamond processors for the period 2015 to 2018. “Indian diamond processors are ensuring rough diamond supply which is mandatory for any business, including diamond-cutting and polishing. Therefore, participating in De Beer’s sightholding aggressively makes sense,” Vipul Shah, Chairman, GJEPC said.

There’s never a dull day at the Bunder diamond project as one can see. While one section of the media said Rio Tinto was not rushing to advance the building of a diamond mine in Madhya Pradesh, as the company’s ability to take on capital expenditure is constrained by falling global commodity price, another report quickly followed that the environment impact monitoring committee of India met recently and came up with the recommendations that Panna diamond mine ought to be closed by June 2017.This was revealed by Field director of Panna Tiger Reserve RS Murthy, who is a member of the monitoring committee. The outcome of the status of the project is awaited.

Not to be left behind in the R&D sector, the Indian company Dharmanandan Diamonds unveiled the 'Virtual Showcase' - a 3D Diamond Viewer for retailers at the September 15-19 Hong Kong Jewellery & Gem Fair. The company has introduced several technology products for the diamond industry in recent years, aimed at upgrading retailers and revolutionizing the way diamonds are purchased. Dharmanandan Diamonds successfully launched an iPad application in 2010, and the 'i-Seller' at the Las Vegas show in June. But being more advanced than the i-Seller, the ‘Virtual Showcase’ allows retailers to project 360-degree videos of actual diamonds to customers on a large screen within the comfort of their showroom, providing a complete and realistic view of the diamonds

Another novel thing trending in India is fashion designers entering the jewellery-designing arena. Forevermark, the diamond brand from the De Beers Group of Companies unveiled its collaboration with designer Manish Malhotra, one of India’s most influential tastemakers. Ace designer Suneet Varma has now joined hands with a jewellery brand to create statement necklaces, chandelier earrings and handcrafted bangles, after serving the fashion world with best of couture garments. And, there is a possibility that many more are in line…

E-commerce comes of age in India with Ratan Tata, 73, now chairman emeritus of Tata Sons, subscribing to fresh shares of the three year-old e-commerce player Bluestone. This is the second investment made by Ratan Tata in the e-commerce space. Earlier Tata made investment in the New Delhi-based Jasper Infotech Pvt. Ltd that owns and operates Snapdeal.com displaying a wide range of goods - from jewelry to kitchen and furnishing.

With the countless challenges being faced by the Indian diamond industry, Diwali is not likely to be a glittering one for lakhs of diamond polishers in the cutting and polishing sector in Surat and elsewh ere. The slowing down of demand for gems, decrease in production, piling inventory and recent cases of diamond unit owners going bust, has badly affected the wages of the polishers.

But the show must go on … The World Diamond Mark Foundation (WDMF), in cooperation with the GJEPC of India, will organize an international World Diamond Conference, in December, focusing on the future of diamonds and diamond jewellery in the global luxury consumer market. The Indian looks forward eagerly for this conference will be a guidance of sorts to the industry at large. The GJEPC in affiliation with the Surat Diamond Association (SDA), will also host the India Gem & Jewellery Machinery Expo (IGJME) at The International Exhibition & Convention Centre, Surat, from 28th – 30th November, 2014.

The Indian diamond industry was shaken when the Antwerp Diamond Bank (ADB) downed its shutters, and traders here feared a liquidity crunch. KBC Group, the Belgian banking and insurance company, recently decided to wind down its business among the global diamond trading fraternity. According to Belgium-based traders, of ADB’s total global operations worth US $1.6 billion, roughly US $1.2 bn worth were from Antwerp, Hong Kong and India. And, of its total operations, about 60 per cent of it was being serviced to diamond traders of Indian origin. In India, ADB is learnt to have had direct financing worth US $200-230 million (Rs 1,200-1,400 crore) through its Indian branch. If ADB demands a short window for repayments, an immediate liquidity crunch among diamond traders is feared, especially those based out of Mumbai and Surat.

Jewellery exporters from India were a worried lot during the month as, unlike in the past, buyers were opting for ornaments in the mid-lower end of the spectrum, preferring lower-purity gold and small diamonds, especially coloured gems. Though signs of an economic recovery in the US have led to hopes of a rebound in India’s gems and jewellery sales in the coming season, exporters remain cautious.

Despite the growth in the domestic market, jewellers have to overcome the many problems. Jewellers like Titan Company approved the invitation and acceptance of deposits from customers for the purchase of jewellery under the Companies (Acceptance and Deposits) Rules, 2014. The company informed the Bombay Stock Exchange of the decision taken by its board of directors. However, some companies recorded good performance, too. Stocks of jewellery companies jumped up to 20 per cent owing to expectations the fall in bullion prices would lead to a sharp jump in retail sales during the coming festive season. Shares of Delhi-based P C Jeweller soared 20 per cent to close at Rs 258.25 a piece, while those of Shree Ganesh Jewellery rose 15 per cent to Rs 33.29. The Gitanjali Gems, Asian Star and Rajesh Exports stocks rose 6.55 per cent, six per cent and 4.61 per cent to close at Rs 73.25, Rs 1,325 and Rs 153.19, respectively.

It’s not all ‘dark’ in the Indian G&J industry… Industry leaders are also appreciated for their achievements and awarded annually by the GJEPC, which has announced that the Awards Ceremony will be held in Mumbai at Jamshedji Bhabha Theatre, NCPA on 10th October 2014.

The demand and supply situation during the month of September 2014 was as follows:

POLISHED

Rounds

0.005-0.15 cts, F-J / SI+, moving well

1/5, H-J / VS, good demand, selling well, shortage of goods in market

1/4-3/8, selling well 1/4-3/4, D-J / SI+, shortage of goods

1/2-3/4, white / pique, selling well, shortage of goods reported

0.80-0.90 cts, selling well; F-J / VVS - almost no goods in market

1.00-3.00 cts, D-K / SI to pique, selling well, less goods available

1.00-3.00 cts, H-J / SI1+ high demand for good makes

4.00+ cts, H-M / VS+ selling ok, but less goods available

Fancy Cuts

Emeralds and Stabbes (wide baguettes), 0.25-1.00 cts, good demand D-J / VS+, selling well

Marquises 0.25-5.00 cts, F-J / VS+, good demand, moving well

Princesses, pears and emeralds, 2.00-5.00 cts, good demand for H-K / VS, moving well, good demand

ROUGH

Makeables: good demand, shortage of goods

1-5 point: fair demand for makeables, very good demand for OW TTLB & TTLC, shortage of goods

6-20 point: v. good demand for crystals/makeables, shortage reported

Fancies:

21-50 point: good demand, shortage of goods

0.51-1.00 carat: good demand for makeables; crystals.

1.01-2.00 carat: very good demand for crystals, all fancy shapes; shortage of goods

2.01-4.0: moving well, less goods

5.00 carat+: good demand for $1,000+ makeables, crystals & all fancy shapes

Mixed lot: v. good demand

Aruna Gaitonde, Rough & Polished, India