India’s diamond industry set for revenue stabilisation: Crisil
Margins face pressure from subdued overseas demand and lab-grown competition, while disciplined supply and tighter financial management support credit stability.
India’s natural diamond industry is poised to stabilise this fiscal after three consecutive years of revenue declines, with resilient domestic consumption expected to offset weakening exports, according to Crisil Ratings.
Industry revenues are projected at USD 14.8 billion to USD 15.2 billion in the current fiscal year, broadly unchanged from a year earlier, signalling an end to the prolonged contraction rather than a broad-based recovery. The improvement reflects growing domestic demand, tighter supply management and a gradual normalisation of inventories, even as subdued jewellery consumption in the United States and China weighs on overseas sales.
Lab-grown diamonds gain acceptance
Domestic consumption is emerging as an increasingly important source of support for the industry. Its share of total industry revenues has risen from less than 15 per cent in fiscal 2024 to nearly 25 per cent, reducing the sector’s dependence on a limited number of export markets.
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Domestic revenues are expected to grow 12 per cent to 15 per cent this fiscal, supported by the expansion of organised jewellery retail, rising consumer aspirations and increasing demand for premium products. Exports, meanwhile, are forecast to decline 5 per cent to 7 per cent to around USD 11.5 billion, reflecting weak discretionary spending in major international markets.
The competitive landscape is also undergoing a structural shift as lab-grown diamonds (LGDs) gain acceptance, particularly in the entry-level jewellery segment of the US market. Their affordability is attracting price-sensitive consumers, challenging demand for smaller natural stones.
In the first half of fiscal 2027, lab-grown diamonds accounted for approximately 55 per cent of export volumes but just 10.5 per cent of export value, highlighting the widening divergence between volume and value segments.
Natural diamonds, however, continue to retain their appeal in premium categories, where rarity, branding and emotional value remain important purchasing considerations.
China factor
“The industry's resilience is being driven by value than volume. LGDs are gaining ground in entry-level jewellery, while natural diamonds continue to command strength in premium categories,” said Rahul Guha, senior director at Crisil Ratings.
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The pricing divergence is increasingly evident across diamond categories. Stones weighing more than four carats appreciated by high single digits between June and September 2026, while smaller diamonds faced pricing pressure amid competition from lab-grown alternatives.
China remains another significant headwind for exporters, with weak consumer sentiment and a sustained preference for gold limiting discretionary spending on diamond jewellery.
Supply discipline is providing some relief to an industry grappling with uncertain demand. Controlled rough-diamond procurement, lower inventories across the value chain and production restraint by miners are helping prevent excess supply and support price stability.
Industry's credit profile expected to remain broadly stable
However, improving market balance is unlikely to fully offset pressure on profitability. Operating margins are expected to decline by 40 to 60 basis points to 3.8 per cent to 4 per cent this fiscal, reflecting lower capacity utilisation, intense competition and subdued export demand.
Working-capital requirements are also expected to remain elevated. Debtor days are projected to increase to 90-95, while inventory days could rise to 165-170, keeping significant amounts of cash tied up in operations.
“Revenue stabilisation alone will not ease cash-flow pressures. Liquidity management and inventory discipline will be key to sustaining debt servicing as margins soften and working capital remains tied up,” said Rushabh Borkar, associate director at Crisil Ratings.
Despite these challenges, the industry's credit profile is expected to remain broadly stable. Interest coverage is projected at 2.3-2.4 times, while total outside liabilities to adjusted net worth should remain below one time, supported by continued accretion to net worth.
Crisil's assessment is based on an analysis of 31 rated diamond-polishing companies, representing more than a fifth of industry revenues, alongside feedback from industry participants.
The outlook suggests that India's diamond industry is entering a period of consolidation rather than a strong cyclical upswing. Sustained domestic consumption, disciplined procurement and prudent financial management are likely to underpin stability, while a recovery in US and Chinese demand could provide an additional boost to revenues and profitability.
