Asian Star, one of India’s biggest manufacturers of small diamonds, wants finished jewelry to make up half of company revenue in the coming years as it combats weakness in loose goods.
The Mumbai-based company is highly exposed to the market for polished under 1 carat, which accounts for almost all of its loose business.
The segment has tanked, partly because of US majors moving into lab-grown. This has sapped profitability and prompted a strategic rethink, Asian Star CEO Vipul Shah told Rapaport News on Monday.
Asian Star’s group sales grew 14% year on year to INR 7.59 billion ($85.7 million) on a consolidated basis — including at subsidiaries — in the second fiscal quarter, which ended September 30, the company reported last week.
However, this reflected the offloading of loose-diamond inventory at low margins, Shah explained. While diamond sales rose 9% to INR 5.55 billion ($62.6 million), profit for the division before interest and tax slid 15% to INR 133.3 million ($1.5 million).
By contrast, jewelry sales jumped 23% to INR 2.34 billion ($26.4 million), with profit before interest and tax up 9% at INR 87.2 million ($983,743).
The company currently derives around 30% of its sales from studded jewelry, with loose diamonds generating the rest. Shah is targeting a 50:50 split in the next “year or two” by expanding its current business of supplying finished pieces to European and Middle Eastern brands and US independents. Once that is done, jewelry can grow further as a segment, he continued. Adding the extra value that comes with jewelry improves margins, he observed.
“We see a lot of challenging times as far as the [small] natural-diamond business [is concerned],” Shah said. “It’s come to a saturation point.” Group net profit slumped 36% to INR 121.3 million ($1.4 million) for the three months, the company reported. Revenue for the six months that ended September 30 rose 4% year on year to INR 14.87 billion ($167.9 million), with net profit down 14% at INR 314.8 million ($3.6 million).
Image: Asian Star jewelry. (Gem & Jewellery Export Promotion Council)
