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India's diamond industry likely to witness 15-20% decline in revenue in FY23: Crisil
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Crisil Ratings in its latest report has said that India's diamond industry is likely to witness 15-20 per cent decline in revenue in this financial year (FY23) due to falling demand and rising prices of rough gemstone globally. It said revenue of the Indian diamond industry is set to be cut 15-20 per cent to $19-20 billion this fiscal, compared with a decadal high in the last financial year, following a double blow from falling demand and rising prices of roughs across the globe.
The report stated that while volatility in rough diamond prices is typically passed on to the polished diamond prices -- albeit with a lag due to the long operating cycle in the trade -- tepid demand has kept polished prices from fully catching up with rough prices this time around. This could squeeze the operating profitability of Indian diamond polishers by 75-100 basis points to 4-4.25 per cent this fiscal. Accordingly, interest coverage may weaken marginally.
According to the report, a surge in Covid-19 cases has led to lockdowns in several regions in China, which is one of the largest consumers of Indian polished diamonds. Further, it noted that inflation and opening up of other avenues of discretionary spending such as travel and hospitality will dampen demand growth in the US and Europe in the near term. As for prices, the US sanctions on Russian diamond mining company Alrosa following the invasion of Ukraine has cut supplies of rough diamonds by almost 30 per cent.
The report also revealed that pent-up demand and the strong festive season saw Indian diamantaires stocking up on rough diamonds in the second half of last fiscal. While exports of polished diamond grew 48 per cent year-on-year last fiscal, rough diamond imports were up 74 per cent, with almost 40 per cent of the imports being in the closing quarter. The huge inventory build-up was corrected in the first quarter of this fiscal, following the onset of the Russia-Ukraine war at the fag-end of last fiscal and disruptions in the Chinese market because of new variants of Covid-19.
