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Last Updated : Sep 20, 2016 04:18 PM IST | Source: CNBC-TV18

Worst is over for diamond industry: Lypsa Gems

Lypsa Gems is going to issue 21 lakh fresh shares to investors at Rs 81 per share. Promoter stake will fall to 33 percent from 36 percent post issuance of shares.

Lypsa Gems and Jewellery reported weak numbers in the first quarter of current fiscal. This was due to an excess of polished diamond supply that led to a fall in prices, says the company's Chief Financial Officer (CFO) and Director Jeeyan Patwa.

But he assures that prices of polished and rough diamond are finally seeing a rise after 3-4 years. Expect the company to report better earnings in the current quarter, he says.

The company is going to issue 21 lakh fresh shares to investors at Rs 81 per share. Promoter stake will fall to 33 percent from 36 percent post issuance of shares.

The company expects to raise Rs 16-17 crore from share sale, says Patwa. The funds will be used to venture into jewellery retail.

Below is the verbatim transcript of Jeeyan Patwa’s interview to Prashant Nair & Reema Tendulkar on CNBC-TV18.

Prashant: The intermission to exchanges tell us that you are going to be considering on the October 21st issuance of 21,00,000 shares to investors at Rs 81 per share. Can you provide some details because the share price is far below what you are going to allot these shares at? Who is buying?

A: We are in talks with a strategic investor from the diamond industry. He will be bring tremendous value to the company and it will be premature to reveal names right now but we are going to consider and finalise everything on October 21st.

Prashant: You will be selling, you will be issuing fresh share?

A: No, we will be issuing fresh shares.

Prashant: Your promoter holding is already about 36 percent odd, right? So that will fall down more?

A: Yes, it will go down to 33 percent.

Reema: How much stake are you looking at allocating to this strategic investor?

A: So, 21,00,000 shares that will be issued fresh to him to an equity of 2.10 per shares we are looking at around 9 percent for the new strategic investor and we will come down from 36 to 33 percent.

Reema: What are you planning to do with the funds that you would have raised?

A: It will be used for expansion, so we are going to look at couple of new projects like jewellery retail as well as buying more rough from direct source.

Prashant: You are raising about Rs 16-17 crore right?

A: Yes.

Prashant: Could you just tell us what does the company exactly do are you on the retail side as well because I understand from your website that you polish diamonds?

A: We are traditionally a midstream diamond company. However, we realised that there is more value add to be captured by being on the retail side. So we don’t have full-fledged presence on the retail side. We have some high end jewellery customise that we do called Oropel and then we sell contemporary cheap jewellery for the millennial on all the major e-commerce platforms like Flipkart and Amazon.

Prashant: What is your biggest brand?

A: It is called Lypsa Atelier. However, retail of jewellery is still a small business for us but we acknowledge that we need to grow this in the future and we are working towards that.

Reema: Your quarter one numbers were quite weak. Your revenues were down 67 percent, your margins halved to 4.5 percent what was the reason for that and how is the business environment looking right now. Should we expect a pick up?

A: The worst is over for the diamond industry after probably 3.5-4 years for the first time we are seeing an upward trend in polished diamond prices. We are hoping that this is the start of whole cycle and we are going to see diamond prices going up. If we look at rough prices as well prices have stabilised, supply has stabilised. There was a demand supply mismatch; there was an excess supply which has dried up now. Now we are finally reaching a state of equilibrium, so we are going to see most diamond companies doing quite a well now.

Prashant: Right now so you basically just polish diamonds and supply it to large retailers, right? That is the majority of your business?

A: We buy rough, we assort rough to specialist assortments and we sell rough to specialist manufacturers as well. We cut and polish 60 percent of the diamonds in our factories which are sold to jewellers to diamond dealers in all major global diamond centres. Then we do a bit of jewellery but that is quite insignificant and we will be growing that in the future.

Prashant: Do you supply to Titans?

A: No we don’t.
First Published on Sep 20, 2016 03:36 pm