Diamond jewellery markets eroded by 1% due to Nirav, Mehul frauds

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December 16th, 2019

Surat: The $2 billion worth of bankruptcy frauds involving diamantaires Nirav Modi and his uncle Mehul Choksi along with rupee depreciation have led to erosion of diamond jewellery market in India by 1%, the US-based Bain & Company says in its ninth annual report. The report titled ‘Strong origins: Current perspective on the Diamond Industry’ by Bain & Company and Antwerp World Diamond Centre (AWDC) predicts that polished diamond sales will drop 10-15 per cent by the end of 2019 because of slowing demand for diamond jewellery globally, lower diamond content in jewellery designs, inventory optimization by major retailers and declining available financing for midstream players in India.

According to Bain & Company, the slump in bank lending has contributed to lower liquidity in diamond cutting and polishing sector. Available financing has dropped by $5 billion, or 30%, since 2013 – with $2 billion of that decline occurring in the past two years after bankruptcy frauds involving Nirav and Mehul. As access to affordable financing became harder, cutters and polishers reduced their rough purchases by around 30% this year to help work down inventory and improve cash flow, according to the report.

Traditional diamond banks curtailed their exposure to diamond sector. Indian banks adopted a more conservative approach following poor performance and challenges of Indian financial sector at large. Cutters and polishers reduced rough diamond purchases by about 30% to offload inventory and improve their cash flow. In 2019, access to affordable financing became even more challenging for midstream players. Colin Shah, vice-chairman of Gems and Jewellery Export Promotion Council (GJEPC), told TOI, “Bank financing in India is a real challenge for diamond sector. The lending norms have become tighter and there is large-scale reduction in lending to the sector. The organized players in gems and jewellery sector have shown growth in single and double digits this year and the unorganized sector sharp decline. But, we hope that by mid-2020, the diamond sector will rebound and regain its lost lustre as new markets are opening up.”

Source: The Times of India

Disclaimer: This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.



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