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Background

The International Gemmological Institute (IGI), founded in 1975 by Marcel Lorie in Antwerp, Belgium, is a leading global authority in diamond, gemstone, and jewellery certification. With 31 laboratories and 19 schools worldwide, IGI offers extensive grading and educational services, including the first ISO accreditation for both natural and lab-grown diamonds.

Details of the Issue:

* Total issue of ~Rs. 4225 Cr (at upper price band) consists of fresh issue of Rs. 1,475 cr (3.54 cr shares) and offer for sale worth Rs. 2,750 cr (6.59 Cr shares).

* Proceeds from the fresh issue will be utilized for the payment of the purchase consideration for the acquisition of IGI Belgium Group and IGI Netherlands Group from the Promoter; and for general corporate purposes.

Investment Rationale:

* IGI dominates India's diamond certification market (50% share) and leads in labgrown diamond certifications (65% share).

* Expanding international footprint.

* With 29 laboratories and 18 gemology schools across 10 countries, IGI's extensive network enhances its credibility and reach.

* Future growth potential.

Valuation and Recommendation:-

IGI holds a dominant position in lab-grown diamond certification with a 65% global market share, positioning it to benefit from the growing consumer preference for sustainable options. The affordability of lab-grown diamonds enhances their growth prospects, while natural diamond certifications expects to foresee steady growth. In India, IGI collaborates with domestic as well as international jewellery retailers for cobranded reports which enhances their overall market presence. There are no listed comparable peers globally having similar business dynamics. However, IGI has delivered strong financial metrics – i) Revenue growth of 32% between CY21-23, ii) attractive operating margin profile of ~65-70%, and iii) ROE and ROCE stood at 56.6% / 91.5%, respectively. Further, IGI’s has a strong market position and has a potential to benefit from anticipated demand in the diamond certification sector. Thus, we believe issue is valued at a reasonable valuation of ~42x to 9MCY24 annualized earnings and recommending SUBSCRIBE to the issue.

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