Diamond market overview
Polished traders reported positive sentiment ahead of the Hong Kong Jewellery trade show (March 1 -5). In India, however, the mood has turned cautious, following the $1.8 billion fraud case involving Nirav Modi and Gitanjali Gems. Gitanjali, with over 2000 jewellery stores in India, has been a flag bearer for the De Beers efforts to promote the Forevermark. There are some in the trade that expect banks to tighten credit lines following the fraud claim. Meanwhile, the polished index continues to set new highs, ending the week higher at 117.69 from 116.87 at the beginning of January.
Rough traders continued to report healthy trading activity in the secondary market over the past week. Recent tenders by ODC and Petra, have also shown strong results. Petra Diamonds reported a 3% increase at its first tender for this year. Rough prices have increased by an overall 5% – 10% since the start of the year, according to Des Kilalea, analyst at Canaccord Genuity.
Corporate and events
Nirav Modi’s alleged fraud came to light only after he failed to secure fresh loans to service his existing debt. And, the news of the purported crime committed by Modi and Gitanjali Gems groups has once again brought the issue of illegitimate havala channels and round tripping of diamonds centre stage, Business Standard reported. The diamond business is predominantly involved in imports and then exports. Round Tripping is the practice of traders exporting the same stock of polished diamonds multiple times to borrow from banks against the receivables at a lower interest rate, said the Business Standard report.
De Beers, in its preliminary financial results for 2017, reports underlying EBITDA increased by 2% to $1,435 million (2016: $1,406 million) despite lower revenue following the one-off industry midstream restocking in 2016, miningreview.com reported. This performance was driven by improved margins, which benefited from lower unit costs, a strong contribution from Canada (driven by Gahcho Kué’s ramp-up and the closure of Snap Lake), and Element Six (which benefited from a recovery in oil and gas markets), said the miningreview.com report.
Four years after Jatin Mehta of Winsome Diamonds and Jewellery duped banks of Rs 7,000 crore, lenders have now initiated corporate insolvency process against the firm. The Ahmedabad NCLT gave a green light to initiate bankruptcy on 13th February and Sunit Shah has been named the interim resolution professional, Economic Times reported. Creditors have been asked to submit their claims by February 27. Under the insolvency process the board of Winsome Diamonds was suspended and the IRP vested with the power of the board, said The Economic Times report.