The rains outside did not dampen the enthusiasm at the much awaited Rapaport International Diamond Conference held at Taj’s Lands End on 14th Aug. 2013 in Mumbai, India. The conference was well represented by the Indian diamond industry. In her opening remarks Ms. Pooja Kotwani, Managing Director, Rapaport India, welcomed the gathering, giving background information about the mutli-service providing Rapaport Group and its activities. She also announced “Rap Ex”, which will be launched very soon by the Group.
Session 1 was on the future of India’s diamond industry. The first speaker was none other than the Senior Analyst of Rapaport Group, Avi Krawitz who took the audience through the entire world Diamond Markets, touching upon how India has been currently dominating headlines, as the world is looking India’s rough buying and polished diamond dynamics. He said that while there is increase in rough prices, the price of polished is sluggish. He had a nice word to say about ALROSA, which he said was a dark horse before but now reaching out to journalists; as well as publishing its sales information, etc.
As far as economic challenges are concerned, Avi Krawitz feels the U.S. is not completely out of the woods but recovering, Japan was improving but Europe is a cause for worry as the crisis seems to stay put. He, however, feels that India and China are slowing down and feels that the Rupee falling has adversely affected the diamond industry in India.
Giving a rather realistic picture of the Indian market and how it would be affected by the external economics, Dr. Suresh Surana, founder of RSM Astute Consulting Pvt. Ltd, saw the U.S. market growing given that the last 6 months it had been good. However, he felt Indian economy weakening and further moderation is expected. He felt the 12-percent rupee depreciation in the last 3 months is not good and in the next 7 to 8 months the rupee will be on a downward slide. Going by India’s export / import performance, he felt competitiveness of India’s businesses needs to be restored. And most importantly, according to Surana FDI should be encouraged. Indian market should also look for other ways for funding like IPO as soon borrowing from banks would become tough.
The panel discussion following the session was rather interesting as Rajiv Mehta, Director, Dimexon Group and Nitin Goenka, MD, Goenka Diamond & Jewels Limited came across as a refreshing duo with loads of confidence. In reply to Martin Rapaport’s questions on the present condition of the Indian industry and bank financing, Goenka said he saw challenges as just an opportunity to make changes in ways of doing business. He did not see any major problems with rough procurement in the future. ALROSA’s roughs, he said, was much more than De Beers nowadays; and he says buying roughs from African countries was another option and there he was entirely sure that confidence will be restored in the market.
Rajiv also felt the onus is on the diamond industry. Industry members, he said, should act responsibly in all aspects of the business, and not forget that the money from banks / IPOs is borrowed money and not one’s own. As far as his Group is concerned, he said they do things differently, trim core business, sell B to B and that ‘efficiency’ is the buzz word.
Biju Patnaik, Senior VP, ABN AMRO NV, stressed on transparency in the working of the company and that a company should stay sustainable. Banks should also look at the company and see if it can service the loan continuously. According to him, it depends on banks to decide whether to cut back credit or not. He also felt that India’s liquidity is not bad, but recovering of loan is difficult.
Session 2 was on diamond manufacturing and recycling of diamonds
To speak on the future of manufacturing was the Group Executive Director of Shrenuj & Co. Ltd., Vishal Doshi who was of the opinion that there was good money in diamond manufacturing, provided companies work more efficiently. According to him, manufacturers should first change their mindset that there is easy money to be made in manufacturing. Doshi said that gross margins achieved by mining companies have grown by 4 percent while manufacturers have recorded a decline in gross margin of about 2 percent. Listing the main challenges currently faced by the manufacturing sector is margin pressure, skills transfer and research and development besides synthetics and recycled diamonds.
Citing supply of rough as the main problem faced by manufacturing sector, Arnav Mehta, Director, Blue Star Diamonds felt rough supply is so volatile and due to this there is decline of workers. But he felt that all was not gloomy as more mining companies were coming up in Zimbabwe and Canada. And as Argyle was also going underground and so rough supply will become better, he said. Arnav also felt that mining companies are increasing prices and are not ready to reduce prices so that their bottom line is protected.
On the topic of recycling of diamonds, Ezriel Rapaport, Director of Global Trading, Rapaport Group gave a rather rosy picture saying that ‘recycled diamonds are forever’. According to him, in the U.S., recycled diamonds are available much more and this makes sense for jewellers to source diamonds from recycled jewellery. The import of polished goods by the U.S. is down because companies are sourcing locally, that is recycled diamonds. Ezriel said that this recycling market has been in existence in the U.S. for more than a decade and it makes sense to source polished diamonds from there... yes, through Rapaport of course.
Session 3 was on Transforming Jewellery Retail Markets
The keynote speaker Kent Wong, the managing director of Chow Tai Fook Jewellery Group took the audience through some of the trends affecting China’s jewellery market. Saying that he sources polished diamonds from India, he said China’s culture is similar to India and that consumers behave in somewhat same way as in purchasing jewellery for festivals, marriages and look for value for money. He described Chow Tai Fook’s partnerships with Forevermark as very successful. He also said that China’s capita income and consumption has grown 200% and that there are a large percentage of affluent consumers today. Wong maintained that China is the biggest online jewellery market in the world. His company started internet and mobile online business 2 years ago and is doing pretty well.
Forevermark’s Managing Director, Sachin Jain spoke about how brands can be successful. He felt more could be done to retain the attention of the consumer. Consumer behaviour assessment is vital and that ideas should be created around the brand and focus on storytelling.
Tanishq’s Vice President, Marketing & Sales Sandeep Kulhalli, was of the opinion that most consumers in India may not be well versed and understand diamonds. The industry, he felt, should educate the public.
The star of the afternoon session was indeed Ghanshyam Dholakia, MD of Hari Krishna Exports who came as a breath of fresh air, full of confidence about the diamond / jewellery business. He stressed that companies need to be trustworthy and transparent in their dealings with banks, suppliers, client’s et al; and hard work will surely bring success. He brushed aside people who said there are very many problems and no profit in the diamond industry. According to him, whoever felt so should leave the industry and do something else. So, Dholakia rightfully asked “If you are not making profits, why are you still in this business”? amidst clappings of approval.
An expert in retail business, B.S. Nagesh, founder of TRRAIN, Shoppers Stop, a foundation working in the retail sector, felt that in India’s general retail space the 35 to 55 year old consumer should be the new and emerging target. He believes that that it is that age range that has money to spend. Also, he stressed those Indian retailers should focus on building capability rather than capacity to spur growth.
Session 4 had something for all to sit up and listen. Using a novel idea of a newspaper format and a pinch of humour, Colin Shah, the MD of Kama Schachter, a jewellery manufacturer and wholesaler, traced India’s economic growth as well as the factors affecting demand in India. Colin said that growth will remain moderate in the medium-term. He added that organized retailers are expected to grow at a stronger pace than unorganized sector.
Claiming that Chinese are passionate for diamonds, Michael Huang Managing Director, Diamond Index Group said that demand for engagement rings have raised y-o-y in the country. Demand for diamonds per se has risen as more young and middle class are purchasing high end diamond jewellery. According to Michael, everyday jewellery like rings, earrings etc are also in very high demand. His advice to anyone who is interested in doing business in China is to understanding local market and have a local team too. And also, it is better to do cash business, he concludes.
It was ‘Sin-Thetics’ for Session 5 when the participants learnt how the growth and penetration of undisclosed synthetic diamonds are affecting the market.
Marc Brauner, the co-chief executive officer of International Gemological Institute (IGI) Worldwide, mentioned about how IGI, in 2012, found over 600 undisclosed CVD synthetic diamonds in one of its labs. Though the initial panic has subsided, Marc cautioned that production of synthetics has increased of late. And the threat of non-disclosure will continue to grow, negatively affecting the diamond industry. He felt the industry should accept this development and not try to fight it. This, he said, will ensure that these goods come to market with full disclosure and will be a different sector by itself. Marc estimated the value of production of man-made diamonds to grow from $500 million in 2012 to more than $1 billion in 2014.
The retail market is the one that needs protection from undisclosed synthetics said Mehmet Can, General Manager of HRD Turkey. As it is the smaller stones that get mixed with synthetics, Mehmet felt that the industry should work towards introducing certification for stones below 0.30 carat sizes.
All the wise men had had their say. But what did one take away from Rapaport’s International Diamond Conference? Lots and much more than we bargained for. The two Chinese speakers who went all out to promote their industry and country were astute businessmen, very articulate while explaining their businesses and what they had to offer. The Indian diamantaires should take a leaf out of their book for succeeding as fast they did. One noticed that the Chinese businessmen did not elaborate on the problems or challenges they faced in their journey to the top. Instead, they seem to have used hurdles (who doesn’t have), as a stepping stone to do better.
Thinking aloud, does any industry or businesses anywhere in the world not have problems and challenges? Or is it only we Indians who are facing challenges all the time? Touching upon the rough shortage situation in India, Martin Rapaport’s advice to the Indian manufacturers is to stop buying roughs from miners because of unsustainable market conditions. According to him, miners are raising prices and rough is ahead of the polished. So why manufacture diamonds at all, when it is so hard to make money? It seems better to just buy polished. Makes a lot of business sense? Sure it does. No doubts about that but it took a Russell Mehta to explain about the way Indian manufacturers do business. Personally, he will protect his capital by all means, but he would also keep his factories running, as he had a responsibility towards his workers and their lives. Coming back to Martin’s advice to not manufacture but instead buy polished goods. Yes, Ezriel Rapaport, the director of trading at the Rapaport Group will supply the diamonds. According to him, recycled diamonds are an emerging segment in the marketplace. And as per his estimation, there are more diamonds available for resale in the U.S now than those being mined in South Africa today. The down trend in recent years in the U.S. has triggered this massive selling of jewellery by consumers. And retailers therefore have found a new source of diamond supply through the recycling way. Not to forget, the likes of Rajiv Mehta, Nitin Goenka and Ghanshyam Dholakia, who gave the real picture of the Indian diamond industry.
Aruna Gaitonde, Rough&Polished, Mumbai
