Led by a 13 to 14 per cent decline in volumes along with the softening of average realisations by 5 to 6 per cent, the country’s cut and polished diamonds (CPD) exports are expected to decline to decade-low levels of USD 12.5 to 13 billion in the current financial year, according to a report by Icra. The exports are expected to witness a year-on-year (YoY) contraction of 18 to 19 per cent in FY25.
The worsened global macro-economic conditions and increased competition from lab-grown diamonds (LGD) caused the CPD exports to contract by 28 per cent in FY24. In the first four months of the current year (4M FY25), the CPD exports contracted by 19 per cent on a YoY basis due to sustained subdued demand conditions in the two key consuming markets – the United States due to inflationary pressures and China on account of changing consumer preferences away from diamonds, as per Icra.
“The CPD players have been facing a persistent demand slowdown in the US and China due to weak economic conditions and continued inflationary pressures. Demand from China has been additionally impacted by the renewed popularity of gold amid economic uncertainties prevailing in the country. Besides, geopolitical tensions and restrictions imposed by G7 countries on Russian diamonds have impacted demand across Europe,” stated Sakshi Suneja, Vice President and Sector Head – Corporate Ratings, Icra.
As far as the polished prices are concerned, they have been declining since April 2022 following a demand slack, dropping to an all-time low in August 2024. The pressure on the polished prices is expected to continue in the second half of FY2025 as well despite the onset of the festive season, as CPD players offload their current high inventory.
“The credit profile of Indian CPD players weakened in FY2024 due to stretched working capital cycle led by inventory pile-up amid a slowdown in demand and increase in global lending rates. The credit profile of the CPD players is likely to remain subdued in FY2025 following the reduced scale of operations, lower profitability and continued stretched working capital cycle,” added Suneja.
Icra expects the interest cover of CPD entities in its sample set to moderate to 2.7-2.8 times in FY2025 as compared to 3.0 times in FY2024 and 4.6 times in FY2023, with total outside liabilities to tangible net worth at 1-1.2 times as on 31 March 2025 as compared with 1.0 times as on 31 March 2024, and 1.2 times as on 31 March 2023.
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