During Prime Minister Narendra Modi's recent visit to the United States, he presented a gift to First Lady Jill Biden - an "eco-friendly" lab-grown diamond with a Surat connection. The 7.5-carat diamond, produced, cut, and polished at a firm in Surat, exemplifies India's prowess in the lab-grown diamond industry.
The lab-grown diamond, also called green diamond, took over 1.5 months to create using the Chemical Vapour Deposition (CVD) technology. Notably, the diamond was produced utilizing wind power and solar energy, making it environmentally friendly.
This has re-ignited buzz around the lab-grown diamond market, of which Goldiam International is a listed player. The company manufactures its own diamonds, cutting and polishing them, creating jewellery using in-house design capabilities, and exporting the finished products to retailers in the United States.
Last fiscal, it clocked a revenue of Rs 554.29 crore and net profit of Rs 85.18 crore. In the most recent quarter though, net sales stood at Rs 134.95 crore, reflecting an 11.44 percent decline from the same period last year. The quarterly net profit also decreased by 28.61 percent to Rs 16.11 crore, compared to Rs 22.57 crore in March 2022.
Despite the recent slippage in growth, it is unsurprising that several marquee investors have already put their money in the stock. Some of the notable investors in the company are Ramesh Damani (1.58 percent), Ashish Kacholia (1.1 percent), and Mukul Agrawal (2.29 percent). On June 23, the stock closed at Rs 128.85 on NSE, and commanded a market capitalisation in excess of Rs 1,400 crore.
The growth story around lab-grown diamonds appears to be strong. In 2022, India's lab-grown diamond exports surged by 51 percent to $1.78 billion (approximately Rs 14,500 crore) compared to $1.18 billion in 2021 and $0.445 billion in 2019. The government's support of the industry through Production-Linked Incentive (PLI) benefits further enhances its prospects. Earlier this week, brokerage firm ICICI direct noted that PM Modi's gift will draw attention to India's artificial/lab-grown diamond industry.
According to Goldiam management's earnings call, the realisation and margins for lab-grown diamonds are almost twice that of natural diamonds. Anmol Bhansali, Director of Goldiam, highlighted that the average realisation per product sold in the lab-grown segment is close to $900 to $1000, compared to $400 to $450 for natural diamonds. Bhansali expects the lab-grown jewellery business to yield margins between 30 and 35 percent, surpassing the 18 to 20 percent margins achieved by the natural diamond jewellery business. Goldiam International's stock currently trades at a price-to-earnings (P/E) ratio of 16x and may be worth keeping an eye on.
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