Surat Diamond Bourse: India’s Shining Jewel

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All that glitters is not gold Diamond. A new dazzling jewel has emerged in our beloved India, marking an emotional pinnacle of achievement for the nation. Surat, renowned as the diamond city, has added another gem to its crown with this architectural marvel. I’m talking about the Surat Diamond Bourse, which was recently unveiled by Prime Minister Narender Modi in Surat, India. 

If you’re wondering what is so grand about it. It’s just another corporate building, right? Gurugram, Bangalore, Mumbai have tons of it. No. The grandeur lies in its massive structure which spans across 35.5 acres. Not only this, the radiant structure surpassed the iconic US Pentagon, becoming the largest corporate complex in the world. 

Before we move on to discuss the Diamond Industry, here are a few pointers that encapsulate the features of this behemoth.

• It has 9 interconnected towers, each having 15 floors.
• 4500 office spaces, yes you heard it right. It has space for 4500 corporate offices each ranging in size from 300 to 7500 square feet.
• The bourse also hosts 27 retail outlets catering to global and domestic buyers seeking exquisite diamond jewelry.
• 3000 crores is what it took the government to build the entire space.

Here’s an interesting thing. The company that built this is in one of our smallcase portfolios. But more on that later. Let’s quickly jump to the Global Diamond Industry.

The Good, The Bad, and The Ugly of the Diamond Industry. 

Diamonds may be forever, but the market for diamonds surely isn’t. 

Global demand for natural diamond jewelry in the first half of 2023 has been negatively affected by the weaker macroeconomic environment, especially in some of the main diamond-consuming countries. Following very high growth in global consumer demand for natural diamond jewelry in 2021, demand in 2022 remained unchanged from 2021 levels in US dollar terms. However, performance varied among regions, with the US seeing a slight increase, China experiencing a steep decline due to COVID-19-related lockdowns throughout the year, and India witnessing healthy growth. 

Consumer Trends: Millennials are the main consumers of diamonds. In the US, Millennials represented almost half of all acquirers and about 60% of market value in 2022. According to a report, 80% of non-bridal gift acquirers view the gift of natural diamonds as a testament to their everlasting love.

Source: Global Diamond Report, 2023: Debeersgroup.com

Killers: Lab-Grown Diamonds

The natural diamond industry is losing its shimmer to the ever-growing lab-grown diamonds. Lab-grown diamonds can be made in a matter of weeks in a laboratory with certain chemical and environmental requirements. The worst part? The human eye cannot spot any difference between a natural and a lab-grown, they are chemically the same, lab-grown won’t fade over time, they shine as bright.

Here are two charts that show how the LGD market is the new king of the market. 

Source: Edahn Golan Analysis

Source: Citi Report

The most interesting part? Lab Lab-grown diamonds cost 60-70% less than the natural diamonds. This percentage difference is based on a few factors. For one, the demand for mined diamonds remains much higher than for lab-grown diamonds and the market has a regulated supply, preventing too much supply from reaching the market at once and lowering the price. 

The diamond industry, or any industry for that matter is too vast to be covered in a single industry. This was my attempt to tell you where the diamond industry is headed and how this ultra-luxurious piece of stone is facing rough competition from a new but affordable little one in the market.

India: A Diamond in Making

“De Beers Forevermark, Vice President, has said that India is in a bright spot as compared to other global diamond markets. The company expects a YoY growth of 30-35% in India”

India’s diamond industry plays a crucial role in the global market, processing over 90 percent of the world’s rough diamonds and contributing US$23 billion to the world’s diamond exports annually.  While Mumbai has long been the center of exports for diamonds in India, Surat, also known as “Diamond City,” dominates in the processing of the precious gems. When it comes to precious stones, safety comes first. Surat Diamond Bourse accurately fulfills that purpose. 

In Surat’s biggest market, Mahidharpura, you’ll find buildings filled with traders working at desks, dealing with precious stones under bright lights. Some traders even take their business to the streets, checking out diamonds laid on cotton sheets. It’s common to see these traders walking around the city with valuable stones wrapped in white papers or small pouches sewn inside their shirts. But SDB has come to their rescue.

Not only this, The Surat Diamond Bourse is set to bring about a transformative shift in the Indian diamond trade landscape. Its goal is to revolutionize the industry by centralizing operations and offering top-notch infrastructure. The bourse’s strategic location and comprehensive facilities are anticipated to draw in major global players, injecting a new wave of foreign investment and trade. Moreover, this ambitious project is projected to create over 150,000 job opportunities, a significant boon for Surat’s skilled workforce. By streamlining operations and reducing costs, the bourse is poised to make a substantial impact on India’s diamond exports, reinforcing its standing as a global leader in the diamond trade.

Company Reveal:

Do you know which company has constructed this building? It is PSP Projects Limited. We have this company in Smallcap Compounders Smallcase and are sitting at 44% profits. We always believe in investing in fundamentally strong and undervalued companies that deliver nothing but growth.

IDEX – The International Diamond Exchange and the Diamond Price Index

We know that there are indices for so many commodities from crude oil to orange juice, but did you that there’s one for diamonds too? And, I am not talking about just an index, there is an international diamond exchange – IDEX. It is an international platform for diamond trading that also monitors the diamond price index. 

Look at these visuals, the first chart shows the aggregate total price of the most important types of diamonds combined and the second visual gives live numbers of the percentages of market share of different categories and their prices.

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Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all infor