The cut and polishing diamond industry is set to see revenues plunge this fiscal to a decade-low of $13-15 billion, against an estimated $19 billion logged in FY20, due to stretched receivables from across the globe and weak demand.
Twisting the knife for India’s beleaguered diamond polishers is the shift in the Covid-19 epicentre from China to the US and the EU. Exports to these two geographies, which together account for over 45 per cent of India’s polished diamond exports, fell a staggering 41 per cent in February as the pandemic intensified. They and have plunged further since then, especially after the nationwide lockdown from March 25.
China and HK markets
Exports to Hong Kong and China, which account for about 45 per cent of the total, nosedived by 79 per cent in February. They have fallen even further since then as the demand for luxury goods such as diamonds, jewellery and watches crashed in those regions.
Assuming the pandemic starts subsiding by June and trade channels normalise over the next quarter, Crisil Ratings expects a revival in demand to be pushed into the second half of the fiscal.
Crisil forecast
The reduction in sales, coupled with potential inventory losses, will impact the profitability of Indian diamantaires this fiscal, said Crisil.
Subodh Rai, Senior Director, Crisil, said the inventory levels have increased 15-20 per cent over the March quarter.
With the pandemic hitting all major global markets, prices of cuts and polished diamonds fell an average 7 per cent in March, leading to huge inventory losses, he said.
Importers from Hong Kong and Mainland China buy polished diamonds from India on 120 days’ credit, compared with 45-60 days by their peers in the US and the EU. In February, even as payments from China started tapering, those from the US and the EU were regular. However, since March, payments from across geographies have reduced to 25-30 per cent of the actual monthly dues.
Domestic banks have been extending the due dates on post-shipment credit bills by 60-90 days on a case-to-case basis.