International Gemmological Institute (India) Limited (IGIL) has posted strong financial results for the third quarter of the calendar year 2025, demonstrating resilience against new US tariffs. The company reported significant revenue and volume growth, with a confident outlook for sustained double-digit earnings growth in the near to medium term.
Background Details
- The United States is a critical market for IGIL, contributing approximately 30-35 percent of its total revenues.
- Effective from the end of August 2025, the US government imposed a substantial 50 percent tariff on certain Indian imports.
Q3CY25 Performance
- IGIL announced strong Q3CY25 revenues, marking a 21 percent year-on-year (YoY) increase.
- Certification volumes saw a significant jump of 26 percent YoY.
- Both natural diamond and lab-grown diamond (LGD) revenues showed robust growth, with natural diamonds up 29 percent YoY and LGDs up 24 percent YoY.
- LGD jewellery revenue grew by 26 percent YoY, while natural diamond jewellery revenue grew by 7 percent YoY.
- Average realisations declined by 5 percent YoY, attributed mainly to an adverse product mix favouring lower carat diamonds.
- Operating margins were largely maintained YoY, and earnings grew by a healthy 18 percent YoY.
Demand Traction Unaffected
- The company reported healthy double-digit top-line growth in Q3CY25, driven primarily by increased volumes, indicating a strong demand scenario.
- IGIL has stated that demand remains strong across its key end markets in India and the US.
- Crucially, the company has not yet witnessed any significant adverse impact from the 50 percent US tariff on Indian imports.
- This resilience has led IGIL to retain its double-digit growth guidance for the full calendar year 2025 and express confidence in sustaining this growth trajectory into the next year.
Growth Drivers: LGDs and New Markets
- Lab-grown diamonds (LGDs) are becoming increasingly popular due to their environmental friendliness, aesthetic similarity to natural diamonds, and significantly lower cost (approximately 75 percent cheaper).
- LGDs now constitute a substantial portion of bridal jewellery, especially engagement rings, in the US and are gaining traction in India due to their cost-effectiveness and appeal in fashion and everyday wear.
- The widening price differential between LGDs and natural diamonds in the US, expected from September 2025 due to the tariff, is anticipated to further boost LGD demand.
- As the global industry leader in LGDs with an estimated 55 percent market share, IGIL is well-positioned to benefit from this trend.
- IGIL is actively expanding its reach by tapping new consumers across the jewellery retail value chain, including B2B (manufacturers, wholesalers, retailers) and B2C segments.
- The company is also focusing on other product segments like natural diamonds, studded jewellery, and coloured gemstones, and has gained market share in natural diamond certification.
- IGIL is increasing its branding and awareness initiatives, including sponsoring the Women’s Cricket World Cup.
- Expansion into the Middle East market, particularly Saudi Arabia, Kuwait, and Bahrain, is also underway.
Strong Cash Generation and Reserves
- IGIL operates a highly cash-generative business, with estimated operating cash flows of approximately Rs 550 crore for CY2025 and minimal capital expenditure requirements.
- The company possesses strong cash reserves amounting to about Rs 750 crore as of June 2025.
- This robust financial position allows IGIL to actively explore inorganic growth opportunities, such as acquiring smaller laboratories with strong regional presence to accelerate expansion.
Valuation and Outlook
- At its current market price (CMP), IGIL is trading at a Price-to-Earnings (P/E) ratio of 22 times its projected CY27 earnings.
- Given the positive earnings outlook, strong growth drivers, and substantial cash generation, analysts recommend investors consider adding the stock to their portfolios.
Impact
- This news is likely to boost investor confidence in International Gemmological Institute (India) Limited, potentially leading to positive stock price movement.
- It highlights the resilience of the Indian gems and jewellery export sector against trade protectionism, particularly in the growing LGD segment.
- The strong performance and outlook could encourage further investment in companies focused on LGDs and certification services.
- Impact Rating: 7
Difficult Terms Explained
- LGD (Lab-Grown Diamond): Diamonds synthesized in a laboratory, possessing similar physical, chemical, and optical properties to natural diamonds but are significantly more affordable.
- YoY (Year-on-Year): A method of comparing financial data from one period (e.g., a quarter) to the same period in the previous year.
- CMP (Current Market Price): The prevailing price at which a security is trading on the stock market at a given time.
- P/E (Price-to-Earnings Ratio): A valuation metric used to compare a company's stock price to its earnings per share. It indicates how much investors are willing to pay for each dollar of a company's earnings.
- Tariff: A tax imposed by a government on imported goods and services.
- Operating Margins: A profitability ratio that measures how much profit a company makes from its core business operations for each dollar of sales.
- Realisation: The actual price received by a seller for goods or services sold.