Diamantaires expects 25-27% drop in revenue in FY2025: Report

Mumbai, Sept 25: India’s natural diamond polishing sector is expected to see a 25-27 per cent decline in revenue to a decade-low of USD 12 billion this fiscal due to falling demand in key markets and consumer preferences shifting to lab-grown diamonds, according to a report released on Wednesday.
The Crisil Ratings report said the main reasons for the decline in revenue were weak demand in key export markets such as the US and China, a 10-15 per cent decline in diamond prices due to oversupply and consumers shifting to lab-grown diamonds (LGD).
It was stated that the revenues of the natural diamond polishing sector, which has declined for the third consecutive fiscal year, are expected to fall by 25-27 percent on an annual basis this fiscal year, falling to $12 billion, the lowest level in the last decade.
The sector’s revenue had shrunk by 29 percent in the previous fiscal year and by 9 percent in fiscal 2023.
The report said diamond polishers have limited their purchases of raw materials and slowed production as demand has been weak due to falling prices.
Miners, on the other hand, helped stem the decline in prices of rough and polished natural diamonds by reducing production and reducing inventory.
As a result, operating margins will stabilize at 4.5-4.7 percent in fiscal 2025.
Overall, lower working capital requirements will limit reliance on external debt and support credit profiles over the medium term.
According to Crisil Ratings, weak demand from the US has led to a 43 per cent decline in exports to this market in value terms in the last two fiscal years, with the US share in India’s diamond exports falling to 35 per cent by fiscal 2024 from over 40 per cent two years ago.
On the other hand, the report stated that in China, which accounts for 28 percent of India’s exports, the preference for gold jewellery has increased as the yellow metal continues to be perceived as a safer asset that provides better returns amid economic uncertainty.
The sharp decline in diamond prices over the last 2-3 fiscal years has prevented the revival of demand for natural diamonds.
Also, youth in these key export markets are increasingly adopting LGD as limited disposable incomes restrict discretionary spending, reducing the share of natural diamonds, according to Crisil Ratings.
“LGDs, which are similar to natural diamonds, are 90 per cent cheaper. Their market share in the US has increased to around 25 per cent from 8 per cent two years ago. The share would have been higher if not for the sharp fall in LGD prices due to supply exceeding demand. As a result, revenue of natural diamond exporters may continue to face severe headwinds,” said Rahul Guha, Director, Crisil Ratings.
As miners and polishers prepare for continued weak demand, they are focusing on reducing inventory and costs in fiscal 2025, which will lower working capital requirements.
In the meantime, liquidity is likely to remain sufficient.
“Due to continuous price declines in recent fiscal years, polishers have restricted purchases and implemented production cuts while miners have offered flexible supply terms to partially ease working capital pressure for polishers.
“Inventory levels across the value chain are expected to decline in the medium term, easing pricing risks and reducing dependency on external borrowing,” said Rushabh Borkar, Joint Director, Crisil Ratings.
The inventory is likely to decline by more than 10 per cent on an annual basis this fiscal, leading to moderate dependence on external debt, the report said. (PTI)