Gems & Jewellery News

Romancing the stone, and not breaking the bank

Affluent Indians who are looking for more bling for their budget are finding out that diamonds are a good deal this festive season. Customers who are in the market for solitaires – the most expensive and sought-after stones – are realising that they can afford to buy more carats than their budgets would previously stretch to, so they’re upgrading their gems.

And, it’s all possible because prices are dropping for both natural gems as well as lab-grown diamonds (LGDs) as more manufacturers enter this segment of the jewellery market.

LGDs have seen price drops in the range of 45-50%, while the natural diamond category has seen a price drop of 35-40%, as the economic slowdown in developed markets of the US and China has hurt demand for the gemstone.

Six months ago, a 1-carat LGD ring at the retail level was priced at ₹2 lakh. But now it costs ₹80,000-₹1 lakh. Similarly, a 1-carat natural diamond ring was priced ₹8 lakh six months ago but now it has dropped to ₹5 lakh, a decline of 37.5% . Diamond solitaire rings are flying off the shelves, as well-heeled customers take advantage of this trend.

“Customers come with a mindset to buy 3 carats of LGD. But when they find the price comfortable, they upgrade to a 5-carat,” said Pooja Sheth Madhavan, founder of Limelight Lab Grown Diamonds, the country’s largest LGD jewellery brand.

With LGD manufacturers marketing the stones as an investment proposition, offering resale and buyback opportunities, they are an attractive option for millennials, high networth individuals, and upper middle-class buyers, she explains. The exchange and buyback offers give customers the confidence to invest in bigger solitaires, say industry experts.

Shamlal Ahamed, managing director (international operations) of Malabar Gold & Diamonds, says that anniversary gifts are the top segment opting for upgrades. “Someone who had presented a 1-carat natural diamond solitaire to his wife five years ago, now comes to our store and upgrades it to 3 carats. Price fall is the main driving factor, while aspiration to own a higher caratage is increasing,” he said.

Added Suvankar Sen, managing director of listed firm Senco Gold & Diamonds, said: “We are seeing that the upgradation is happening among the upper-middle-class people, too. From a 25 to 30 cent (smaller size) diamond, they are upgrading to 1-carat natural diamond.”

India produces 3 million lab-grown diamonds annually with Mumbai and Surat being the largest hubs and these stones now account for 10% of the $6 billion domestic diamond market. India has seen a fast expansion by LGD players. Two years ago, there were 2,800 lab-grown machines. In 2023, the number of machines has gone up to 6,000. The volume of polished LGD has gone up to 4 million carats from 1 million carats two years ago.

“This festive season we are looking at a 25% growth compared to last year,” said G Viswanathan, chairman of Wondr Diamonds, which at present has 15 stores in south India and is looking to expand to other regions in India and Middle East. Wondr Diamonds has just two stores retailing natural diamonds.

Like natural diamonds, LGDs are made of tightly bonded carbon atoms. They respond to light in the same way and are just as hard as natural diamonds and are cut and polished like natural diamonds. The only difference is in their origin: while natural diamonds are mined, LGDs are produced in a controlled environment either through a high-pressure high-temperature process or through a chemical vapour deposition (CVD) process.

CVD has become more popular for producing jewellery-grade LGDs.

Lisa Mukhedkar, founder of LGD retailer Aukera, which opened its first store in Bangalore a few months ago, says that affluent Indian women are buying larger and larger stones. “There has always been a desire and aspiration for larger stones. With LGDs, those who had a carat are moving to 3 carats and 4 carats. Those who had only rounds are moving to emerald and princess and marquise cut,” she said.

According to a latest Jefferies report, the LGD category has grown strongly over the last four years, from approximately 2 million carats in CY18 to 8-9 million carats in CY22.

This is roughly 8% of average annual production of rough natural diamonds (115 million carats) in the last three years. The US is by far the largest market for lab-grown diamonds, accounting for more than 75% of global volumes, and LGDs now have a 10% share in diamond engagement rings compared to less than 3% two years ago.

Lab-grown diamonds have done well, even as overall diamond market struggled globally in 2023. Overall jewellery and diamond sales declined 9% YoY in the US in H1CY23.

While natural diamond sales declined 11% YoY, lab-grown diamonds have still done well growing more than 40% year on year. Natural diamond prices have also corrected sharply in 2023, falling more than 35% from 2022 peaks. While this could be partly due to weak macro issues, increased shift towards lab-grown diamonds has also had an impact, according to Jefferies report.

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