A DIAMOND PERSPECTIVE « SUNNY SOLANKI SCMHRD
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A DIAMOND PERSPECTIVE «
SUNNY SOLANKI
SCMHRD
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CONTENTS OF THE PROJECT « Introduction of Diamond as gem
Properties of Diamond
Global Bird¶s Eye View on Diamond
The Indian perspective
The Status-Quo Diamond in various Indianstates
The Demand forecast Analysis
The Roadmap for the future
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Introduction to Diamond as a gem .. Diamond is one of the precious gemstones known to
mankind
Out of all the gemstones available it is the costliest aswell as Hardest
Diamond is highly cherished because of its Rarity,Eternity, and Purity
Diamond is perceived as a Status symbol and usuallyconsidered to be the prerogative of the rich people
Diamond Industry is Huge in terms of the value and
volume The most familiar usage of diamonds today is as
gemstones used for adornment. This usage dates backto ages
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Historical Significance of Diamond.. Diamonds are thought to have been first recognized and
mined in India
Major deposits of the stone were found along the riverslike Godavari, Krishna.
Diamonds have been known in India for at least 3000years but most likely 6000 years
Diamonds quickly became associated with divinity, beingused to decorate religious icons
They were believed to bring good fortune to those who
carried them. Ownership was restricted among various castes bycolor, with only kings being allowed to own all colors of diamond
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Properties related to diamond.. The characteristics related to the diamond can be
explained in the terms of..
Gemological Properties ( 4C¶)
Material Properties
Diamond is the hardest known natural material
They are found inside the earth in the alluvial deposits
Diamonds are then mined with the help of differentprocesses like kimberley etc..
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4 C·s of Diamond 1. Cut :
Diamond cutting is the art and science of creating agem-quality diamond out of mined rough
The cut of a diamond describes the quality of workmanship
Round Brilliant Cut, Tolkowsky, Genesis cut etc.. aredifferent types of cuts
The cut increases polishing and thereby luster of the
stone
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4 C·s of Diamond continued « Color :
A chemically pure and structurally perfectdiamond is perfectly transparent with no hue, orcolor
The color of a diamond may be affected bychemical impurities and/or structural defects inthe crystal lattice
The GIA has developed a rating system for color in
white diamonds, from "D" to "Z" (with D being"colorless" and Z having a bright yellow
coloration)
The GIA system uses a benchmark set of naturaldiamonds of known color grade
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4 C·s of Diamond continued« Carat :
The carat weight measures the mass of adiamond.
One carat is defined as 200 milligrams (about0.007 ounce).
The point unit²equal to one one-hundredth of acarat (0.01 carat, or 2 mg)²is commonly used fordiamonds of less than one carat
A weekly diamond price list, the RapaportDiamond Report is published by Martin Rapaport,
It is currently considered the de-facto retail price
baseline.
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4 C·s of Diamond continued« Clarity :
Clarity is a measure of internal defects of adiamond called inclusions
The number, size, color, relative location,orientation, and visibility of inclusions can allaffect the relative clarity of a diamond
There are various clarity standards as VVS1, VVS,VS1, VS, S1etc..( where VVS1 being the best)
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Scientific Properties« Luster :Admantine
Molecular Weight :12.01u
Crystal habit : Octahedral
Refractive Index : 2.415-2.418 Fracture : Conchoidal
S.G : 3.53
Hardness :10(Mohs Scale)
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G lobal bird·s Eye view on Diamond« The global gems and jewellery industry is estimated at
146 billion USD at retail prices in 2005.
The industry has grown at an average compoundedannual growth rate of 5.2% since 2000
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Continued«
Diamond studded jewellery is the largest segment of thisindustry(2005 sales esimated at USD 69 Billion).
It has grown at CAGR of 5% in the last 5 years
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G lobal diamond jewellery.. Diamond jewellery has been growing at an average of
5% from the last 5 years
The growth is attributable to 2 factors
Strong economic growth in key consumer nations
Aggressive marketing effort by large diamond cos..
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Continued..
Value addition at the two ends of the value chain is thehighest with interim segments adding lower values
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G lobal diamond value chain« In order to understand the nature and to do structured
analysis ,the diamond industry is divided into 3 majorvalue addition areas«
Sourcing of stones : Refers to upstream end of value chain like Mining, Extraction, and Processing
Jewellery Fabrication : This stage involvesdiamond studded jewellery Fabrication
Diamond retailing : This stage covers variousactivities related to the retailing of the product.
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G lobal mining Destinations«. The majority of global mining for diamond takes place in
African countries like South Africa, Botswana, Angola,Namibia and U.S, Australia, Canada etc..
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G lobal Rough Production.. In value terms the World Diamond rough production
stood at 12.7 billion USD
The rough in volume terms has grown at a healthy rateof 31% between 2002 to 2005 totaling to 171 millionCarats
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Sourcing and Trading «
This stage in the diamond value chain has been non-transparent and discreet.
But now a days ,due to more professional players,financial reporting , consolidation among the playershas led to change in the manner in which it wasoperated.
The current industry has 4 diffferent channels whereeach player can add value as..
Centralized distribution
Direct Selling
Rough Trading
brokerage
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The processing stage (Cutting and Polishing)« The mined diamonds are known as rough diamonds
Processing in essence means cutting and polishing of the roughdiamonds
Cutting refers to sizing of the diamond to maximise its yield
and refraction of light While Polishing refers to act of finishing facets to enhance the
µBrilliance¶ of the stone.
The diamond Cutting and Polishing industry is facing a lot of competition and is estimated at 19.3 billion USD
The art of processing is seemed to have originated from Indiaand India is ranked 1st in global diamond processing industry
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Role of De Beers
De beers is the largest diamond mining company in theworld
The co was founded in 1988 and is based inJohanasburg, South Africa..
The De Beers currently holds 40% of the worldsDiamond mines by value
The co produces and controls hugh reserves of diamondmines
The Sales and marketing arm of De Beers is a companycalled DTC (Diamond Trading Company)
DTC sells around 45% of the worlds rough by value tothe worlds leading Diamondtaires called as µSightholders¶
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DTC continued..
These sightholders are selected on the basis of theirability to add value to diamond, their adherence to DTCrules and Diamond Best Practices Principles..
It operates with a punchline µA Diamond is Forever¶
DTC in India operates with 4 different brands likeNakshtra, Arisia, Asmi, and Sangini..
Its campaigns show diamond as a symbol of commitment, love, regality, mystique ness have beenhighly successful in creating high recall value for the
brand
DTC in last 10 years helped Indian market to getconsolidation
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W hat's moving the market..
Growth in the diamond jewellery sales have renownedinterest in diamond mining deposits.
As per µDiamond Facts 2005¶(Diamond industry Report-Northwest Territories Canada) total expenditure ondiamond exploration in 2004 was estimated to be around$300 million
Out of two-thirds were invested by industry majors likeDe beers, Rio tinto, Alrosa and BHP Billiton
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INDIAN PERSPECTIVE OF DIAMONDS..
Diamond and jewellery has been part of Indiancivilization from since its recorded history
But the real growth has been from last 2 decades
In 1966 the export turnover of the industry was just 220million which has now grown to 15 billion in 2005-06
It is now contributing to the 18% of the indian exportsand securing healthy foreign exchange
Indian Gems and jewellery is now backed by full fledgedgovt agency called Gems and Jewellery export promotioncouncil (GJEPC)
There are some far reaching changes expected in indiangems and jewellery sector
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Indian gems and jewellery Industry
Indian gems and jewellery has grown rapidly inconsumption terms (CAGR of 10% in last 5 years)
As per 2005 figures it is estimated at USD at 12.17Billion
It is estimated to grow at 7.64% to reach to 13.1 USDBillion in 2006-07
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Diamond mining Destinations in India..
Golconda in A.P has the distinction of being the 1st
diamond mining site India
It has large reserves of diamonds even today
In rest of India, diamond mining is done in Orrisa, U.P,Chattisgarh, A.P, Karnataka etc,..
India's known diamond reserves are currently estimatedat 4580336 carats as per country's National MineralSurvey
Some 84000 are to be sold every year
Kimberley Process is followed while exploration is done
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Indian Diamond CPD Industry«
India is largest player in the diamond processingindustry ,processing over 57% of worlds rough stock of diamond by value
In volume terms it accounts for almost 92% of worlds
rough cutting and polishing(11 out 12 diamonds in theworld are processed by india)
India¶s exports of cut and polished diamonds are stoodat USD 11.8 Billion in 2005 and around USD 12.5 billionin 2006
The majority of the cutting and polishing in india is done
in Surat, Mumbai and jaipur In the face of severe competition the CPD industry is
likely to consolidate and integrate vertically as well ashorizontally
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India·s Presence in gems and jewellery value chain
Mining Processing fabrication consumption
Diamond
Gold
Platinum
others
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The share of CPD in 2010 and 2015..
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Export destinations for polished diamonds by
value..
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Indias diamond jewellery market«
India is one of the worlds fastest growing market fordiamond jewellery
As per DTC, the diamond jewellery market is estimatedat USD 1.5 billion ( Rs. 6600 crores industry)
Demand for diamond jewellery in India is grown at aCAGR of 43.5% in last 5 years
In last 3 years in a row, it is the fastest growing in theworld with average of 20% plus growth..
As per estimates the global diamond jewellery isexpected to be of USD 75 billion and USD 95 billion by2015
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The pie in indian G& J trade«
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Major players in the market..
Company Owner Key highlights
Asian Star co Ltd Shah and kothari Profits in the range
$5 million per yr.Highest exporteraward by DTC
Saushish DiamondsLtd.
Ramesh kumarGoenka
Largest Diamond co.T.O around $200million.100% export
oriented unitSui Raj DiamondJewelllery Ltd
Sui Raj group 5TH largest in india.T.O of $200 million.exports of processeddiamonds
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Continued«
Hindustan Diamondco.
50:50 joint venturebet govt of India andDe Beers
2nd largest diamondco in India.
Vaibhav GemsLtd(VGL)
Professionallymanaged businessorganization
T.O $40 million in2005..major exporterof many high qualitygems
Shrenuj and Co ltd. Shrenuj and Co ltd. T.O of $150 million.Large exporeter of diamonds.Sightholder of DeBeers.
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Continued..
gili Gitanjali group One of the largestdiamond groups inIndia. Niche player in18 carat brandeddiamond jewellery.Tie ups with severallifestyle stores
Intergold Rosyblue which isworlds largestdiamiond
manufacturing co
Largest diamondretailer in india. 24exclusive showrooms
across various cities.finest designs andquality.
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Indian States and Their performance«
Indian states show variable performance when it comesto diamond market.
Among the different Indian states ,Maharashtra, Gujarat,and Andhra Pradesh are leading in total diamond
consumption.
In an Industry of $1.5 billion USD (6600 crores),morethan 50% is accounted for in these states.
Other states like Rajasthan, Karnataka, Delhi are catchinup well to drive the growth seen in last few years.
A lot of the demand is attributed to increasing per capitaincome, changing lifestyles, consumption drivenbehavior.
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How is the Pie divided in the states«
Name of the state % share in the total diamondmarket
1. Maharashtra 20%
2. Gujarat 17%
3. A.P 14%
4. Karnataka 11%
5. Rajasthan 8%
6. M.P 5%
7. Others25%
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How The Pie Looks«
Maharashtra
Gujarat
A.P
Karnataka
Rajasthan
M.P
Others
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The Demand Forecast Analysis..
While making a demand forecast for the 6 Indian stateswe assume that Quantity demanded is equal to quantitysold..
India¶s GDP in the last 5 years is averaged at 8%
While the diamond industry in India has grown at ahealthy rate of 20% p.a in the same period.
So, we get a common multiplying factor as calculatedbelow..
Diamond % growth = India¶s GDP x common
multiplying factor«20% = 8% x 2.5
So, the CMF = 2.5
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Demand Forecast for Indian States..
Name of Indian state
ProjectedGDPgrowth(2007-2012)
Demand forecastof diamond salesgrowth in %
Maharashtra 9.5-10% 24-25%
Gujrat 9-9.5% 21-23%
A.P 8.5-9.5% 20-22%
Rajasthan 6-7% 15-17%
Karnataka 8-9% 18-20%
M.P 6-7% 15-17%
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Continued«
Name of Indian state
Present salesin crores
Growth %forecast
Projectedsales incrs(2007-08)
Maharashtra 1300 24-25% 1650
Gujarat 925 21-23% 1150
A.P 900 20-22% 1300
Rajasthan55
015
-17% 630
Karnataka 720 18-20% 875
M.P 300 15-17% 350
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Roadmap for the future..
The future of the industry is quite promising but thesector is facing competition from gradual decrease in theplain jewellery.
Competition from consumer durables has become a
major threat
Shrinking margins and shortened fashion cycles haveadded to the concerns
A way ahead is to tap the latent markets , use of technology, aggressive marketing policies, Anticipation
of fashion cycles and new product offerings will definitelyhelp to boost the demand.