India’s natural diamond sector aims for steady revenue of $14.8–$15.2 billion this fiscal year, as a 5-7% export decline is offset by robust domestic consumption. While domestic growth of 12-15% provides a buffer, the industry faces margin pressure and structural competition from lab-grown diamonds, which are increasingly capturing the entry-level market.
India's natural diamond industry is navigating a period of stabilization, aiming for revenues between $14.8 billion and $15.2 billion for the current fiscal year. Despite this revenue target, the industry faces significant structural challenges as traditional export demand falters, forcing companies to rely more heavily on domestic sales to maintain financial performance.
Export Hurdles and the LGD Shift
International demand, particularly from major markets like the United States and China, remains weak. Exports are expected to decline by 5-7%, hitting approximately $11.5 billion. This sluggishness is being compounded by the rising popularity of lab-grown diamonds (LGDs). While LGDs have surpassed natural diamonds in terms of export volumes, their contribution to total export value remains limited at roughly 10.5%. This trend highlights a fundamental shift in the jewellery market; LGDs are aggressively capturing the entry-level segment, which is pressuring the pricing power of smaller natural stones.
Profitability and Inventory Pressures
Profitability metrics are under strain as companies struggle to balance inventory costs with shifting demand. Operating margins are forecast to remain tight, ranging between 3.6% and 4.0%. To navigate this environment, firms are dealing with high working capital intensity, with inventory turnover cycles stretching to 170 days. This high level of stock creates a risk of supply glut, compelling industry players to exercise strict control over rough-diamond procurement to protect price floors.
Domestic Resilience
Local consumption has emerged as a vital safeguard for the industry. Accounting for nearly a quarter of total revenue, the domestic market is projected to grow by 12-15% this fiscal year. This expansion is driven by organized retail chains and a clear consumer shift toward higher-value products. While this domestic growth acts as a buffer against international volatility, it is not yet enough to fully compensate for the global export decline.
Debt servicing remains manageable for most rated entities, with interest coverage ratios holding steady at 2.3 to 2.4 times. Investors tracking the sector may monitor how companies manage their inventory cycles and whether the premiumization trend in domestic markets can sustain long-term margins amidst ongoing global economic uncertainty and the structural encroachment of synthetic alternatives.