India's diamond industry to follow strong FY22 with muted FY23: ICRA

By

Isabelle Crossley

Published
Mar 23, 2022

India’s cut and polished diamond businesses are expected to see their profit margins dip to 4.5% in the 2023 financial year amid high rough diamond prices and a moderation of demand, according to ratings agency ICRA. 

Following a strong performance in the 2022 financial year, the coming 2023 financial year is expected to see India’s CPD exports face year-on-year de-growth of 5% to 6%, according to a new report by ICRA, ET Bureau reported. High rough diamond prices, as well as other rising logistics costs will make the 2023 financial year more muted. 
 
“India is estimated to export $23-24 billion worth of CPDs in FY2022, reverting to its pre-pandemic levels, led by a pent-up demand on the back of improving economic outlook of key geographies including U.S. and China and partly aided by muted spends on travelling and other luxury items,” said ICRA’s assistant vice president and sector head Sakshi Suneja, ET Bureau reported. “Demand for CPD is, however, expected to moderate in FY2023 driven by the high base, opening up of other spending avenues like travel/ hospitality due to better vaccination coverage, unwinding of surplus liquidity globally and inflationary pressures.”

The 2021 calendar year had seen rough diamond prices increase significantly due to factors including controlled supply by mining companies and a  strong post-pandemic demand revival.

Although CPD prices did not rise to the same degree, strong demand enabled most CPS businesses to offset the financial pressure on their operating profit margins. The challenge in the coming financial year is that rough diamond prices are expected to remain high but demand is expected to weaken which will reduce CPD business’ operating margins. 
 
“Trade disruptions and further slowdown in demand, if any, as a fallout of the Russia-Ukraine conflict remain key monitorables in the near term,” said Suneja. “Alrosa, Russia-owned diamond mining entity, supplies ~30% of the rough diamonds globally and is an important source of rough imports for India. ICRA’s channel checks suggest that Indian CPD entities are not facing any major logistics hurdles at present and are procuring roughs from Alrosa in euros vis-à-vis US dollars earlier.”