Rough Diamond Prices Expected to Hold in FY2024

Rough diamond prices are likely to remain firm in FY2024 as no major ramp-up in mining output (of rough diamonds) is expected over the next two years. This, coupled with recessionary pressures, shall continue to exert pressure on the revenues and profit margins of Indian cut and polished diamond (CPD) entities in FY2024, according to credit rating agency ICRA.

Sakshi Suneja, Vice president & Sector Head - Corporate Ratings, ICRA Limited said "While opening up of other spending avenues, unwinding of surplus liquidity globally and inflationary pressures in key consuming. After witnessing a sparkling performance in FY2022, Indian diamantaires are facing demand moderation in FY2023, led by regions of the US and Europe. The cost pressures also remain elevated due to firm rough prices (due to continued controlled and lower-than-pre-pandemic supply by mining companies)."

She added "Faced with lower demand, cut and polished diamond (CPD) entities’ ability to pass on these elevated raw material costs remains restricted, which would adversely impact their operating profit margins (OPMs). As a result, ICRA expects the revenues and OPMs of CPD players to decline by 8-10% and by 50 bps respectively in FY2023."

While CPD entities have maintained a strict control over the working capital cycle so far, which has limited their dependence on working capital debt, their ability to do so going forward remains critical from the credit perspective.

Source: Economic Times