Lab-GrownOct 19, 2022
In India’s Lab-Grown Diamond Industry, Change Is the Only ConstantLab-GrownOct 19, 2022
Q&A: Jayen Shah, Founder of Mavuca Capital Advisors
National Jeweler chats with the career banker about the prospects for the lab-grown diamond industry and financing options.
Jayen Shah, CFA and founder of Mavuca, started his professional career in 1995 with Kotak Mahindra Group. He has held various leadership positions at ABN AMRO, Rabobank, The Royal Bank of Scotland PLC (Singapore branch) and Standard Chartered Bank. He joined IDFC bank in 2011. Under his stewardship, IDFC was named Best Bond House–India, 2015 by IFR-Asia.
Mumbai—A tech-enabled investment banking firm, Mavuca specializes in both debt and equity funding.
Over its short history, Mavuca has successfully executed 19 fundraising transactions, grossing more than INR 70 billion (more than $850,000) for marquee clients including L&T Group, KKR’s Virescent Renewable InvIT, JSW Steel, Welspun Enterprises and Shapoorji Group, among others.
National Jeweler recently caught up with the firm’s founder, Jayen Shah, via email to seek his views on the lab-grown diamond industry.
Here’s what he had to say.
National Jeweler: Why is the lab-grown diamond industry considered a sunrise industry?
Jayen Shah: Millennials and Gen Zers constitute probably the biggest growing demographically similar consumer segment.
Their consciousness toward environment, ethics and cost has triggered quickest acceptance and adoption of lab-grown diamonds.
On the other hand, lab-grown diamond technology has been around for more than 60 years. However, it is only recently that advancements in technology have made high quality, affordable lab-grown diamonds a reality.
On the other hand, lab-grown diamond technology has been around for more than 60 years. However, it is only recently that advancements in technology have made high quality, affordable lab-grown diamonds a reality.
On the cost front, experts opine that lab-grown diamonds are [significantly less expensive than] mined diamonds. Early adoption of lab-grown diamonds has been witnessed in the United States and Western Europe.
NJ: What is the market size of lab-grown diamonds globally and in India?
JS: Various estimates suggest that in 2021,lab-grown diamond sales have surpassed $6 billion and out of this, India’s contribution was $1.3 billion.
The market size of lab-grown diamond jewelry in 2019 was a meager 2 percent of [total] diamond jewelry [sales], which is expected to be up 8 percent [year-over-year] in 2022.
Some credible analysts project lab-grown diamonds to be a significant 25 percent of the diamond [market] in five years. Growth percentages are stupendous.
Besides jewelry, 5G networks, computer chips, and satellites use these materials. Thus lab-grown diamonds’ growth is likely to experience significant demand surge due to its multiple uses.
NJ: What are the advantages to Indian manufacturers?
JS: Realizing the immense potential of lab-grown diamonds, the Indian government, after the successful rollout of PLI (production linked incentives) schemes for 14 sectors, is now in discussions for introduction of similar incentives for lab-grown diamond manufacturing along with two more sectors, bicycles and toys.
The extant PLI schemes have a proposed outlay of INR equivalent of $24 billion and aim to create 6 million jobs in the next five years. The launch of the PLI scheme is further likely to boost lab-grown diamond manufacturing in India.
Further, the RBI notification from July 2022 on International Trade Settlement in Indian rupees is [designed] to boost international trade for India. The lab-grown diamond sector may reap the benefits of relatively stable exchange rates for its capital goods imports.
For exporters, export-import trade being settled in INR will even out the uncertainties of forex fluctuations and enhance the operational convenience.
NJ: What financial constraints do Indian manufacturers face in terms of capacity expansion?
JS: The Achilles’ heels for any sunrise industry are some of the usual “teething” problems, such as:
- Time taken for technology stabilization, product adoption and quality framework;
- Volatility in product pricing;
- Limited or non-availability of “seconds” market;
- Fragmentation of market players;
- Higher financial risk-reward; and
- Perception of enhanced credit risk.
Some of the Indian banking and financial institutional lenders have taken initial steps to analyze and model these risks. These lenders, with suitable mitigating factors and “margin-of-safety” have lent funds toward setting up lab-grown diamond manufacturing facilities.
NJ: What are the highlights of these financing initiatives?
JS: Taking a step back, components of lab-grown diamond manufacturing facilities include: land, building, machinery, technology, back-up power facilities, supporting infrastructure, etc.
Plus, a steady energy supply is an absolute must for any lab-grown diamond manufacturing facility.
Another differentiating factor is the type of technology used to grow diamonds in the laboratory. It could either be the high-pressure, high-temperature (HPHT) process or chemical vapor deposition (CVD).
The cost of machinery to set up a manufacturing unit is significantly higher for HPHT as compared with CVD. Users of both technologies strongly advocate respective project viability, pay-back period, and ROIs.
Several early movers have been the public sector banks, like the State Bank of India (SBI). SBI has already shown interest in financing such brownfield/greenfield projects.
Some of the financing highlights are as follows.
- Financing format: term loan
- Tenure: up to seven years
- Amount of loan: up to 70 percent of the project cost. However, many lenders require cost of land purchase to be funded from promoters’ equity.
- Loan repayment with principal repayment moratorium for 12-18 months and, thereafter, principal repayments customized to projected cash flow generation.
- Financial covenants linked to operating parameters, such as debt/EBIDTA and/or debt service coverage ratio (DSCR)
- Security: first charge of land, plant and machinery
- Ratings: lenders prefer to have investment grade rating from SEBI-registered rating agencies.
Lenders will require a quality technical-economic viability (TEV) study with detailed project report (DPR).
Lenders will weigh on other qualitative factors, including management strength, technical expertise, technology type, equipment manufacturers, etc. Every financing case may have its specific transactional customization.
NJ: What about working capital financing?
JS: Some of the major operating costs of a lab-grown diamond manufacturing facility are electricity, scientists, skilled technicians, machinery maintenance, seeds and general administrative costs.
These accumulate to a relatively smaller proportion, though another major component that adds to the working capital is the credit period provided to buyers.
Several financing options exist, such as receivables discounting, factoring, and bank working capital financing for financial management of the receivables.
Also, the lab-grown diamond industry is a power guzzler. Therefore, the cost of [electricity] is very high. For long-term project viability and sustainability, lab-grown diamond manufacturers may consider long-term power purchase agreements with renewable independent power producers.
This story is one of three included in the special India Diamond Report newsletter. The stories are produced by an independent editor based in India.
This story is one of three included in the special India Diamond Report newsletter. The stories are produced by an independent editor based in India.
More on Lab-Grown
The Latest
Events & AwardsDec 20, 2024
Two Participants Complete Inaugural Ella Klein InternshipJamie Dunton and Gabriella Botelho are the first graduates of the program, created by the WJA Foundation and Julius Klein Diamonds.
CollectionsDec 20, 2024
Piece of the Week: Retrouvaí’s Ring for CharityIn the spirit of giving, Retrouvaí will donate $4,000 from the sale of this ring to the Los Angeles Regional Food Bank.
IndependentsDec 19, 2024
Michigan’s DeVries Jewelers Unveils New Location in Time for the HolidaysCo-owner Dan DeVries shared what it’s like moving into a space triple the size of its old store and how it feels to be a “real jeweler” now.
Brought to you by
De Beers Group Launches Holiday Campaign for Natural Diamonds‘Forever Present’ campaign revives the iconic A Diamond is Forever tagline and celebrates the diamond dream.
CollectionsDec 19, 2024
State Property Transforms Spain’s Generalife Gardens into JewelryAlong with the latest “Gardens” collection, the brand has released limited-edition designs offering more indulgent pieces.
Weekly QuizDec 19, 2024
This Week’s QuizTest your jewelry news knowledge by answering these questions.
CrimeDec 19, 2024
Alleged Jewelry Thieves Attempt Rowboat EscapeThe man and woman are accused of stealing jewelry from a shipping container then trying to flee by paddling a small boat out into a bay.
SourcingDec 19, 2024
The Second-Largest Diamond Ever Found Now Has a Name The 2,488-carat diamond recovered from a mine in Botswana has been dubbed “Motswedi” while its 1,094-carat sibling is “Seriti.”
Brought to you by
Advocacy and Excellence: How Jewelers of America Is Committed to Elevating Our Industry For over a century, Jewelers of America has been the voice of the industry and valuable resource to jewelers across the country.
SourcingDec 19, 2024
Gemfields Reports Record Ruby Auction Results Despite Challenges at SourceThe average price per carat hit a record high for the miner, which said it remains unaffected by the conflict in Mozambique.
AuctionsDec 18, 2024
Alexandrite Ring Sells for Record-Setting $1.9M at Sotheby’sThe nearly 17-carat stone made history for the color-change gem that, according to the auction house, is experiencing a “notable surge” in the market.
WatchesDec 18, 2024
Historic Titanic Pocket Watch Winds Its Way Back to Tiffany & Co. More than a century after survivors gifted a Tiffany timepiece to the captain of the ship that rescued them, the jeweler has reclaimed it.
TechnologyDec 18, 2024
Picchiotti Utilizes AI in ‘Spotlight’ Video CampaignThe videos highlight how pieces from the “Xpandable” and “Reversible Xpandable” collections put the wearer in the spotlight.
IndependentsDec 18, 2024
Industry Veteran Steve Feldman Set to RetireFeldman reflected on 45 years in the jewelry industry and clarified that it’s not a total retirement.
Events & AwardsDec 17, 2024
Chanel to Receive Gem Award for High Jewelry ExcellenceThe luxury brand is being honored for excellence in high jewelry design in its “Haute Joaillerie Sport” collection.
SourcingDec 17, 2024
Frank Circelli, Founder of Gem Shopping Network, Dies at 75Circelli was a pioneer in the world of TV shopping who is remembered for his passion for gemstones and his big personality.
AuctionsDec 17, 2024
Blue Diamond Fetches $8.8M at Christie’sThe nearly 6-carat stone headlined the recent jewelry auction, which also featured Mica Ertegun’s jewelry.
CrimeDec 17, 2024
‘Black Bin Crew’ Robbers Get 14-16 Years in Prison The three men, who got their nickname because they’d toss the jewelry they stole into black plastic bins, were arrested back in August.
TrendsDec 16, 2024
Marion Fasel’s New Book Delves Into the History of Engagement Rings“The History of Diamond Engagement Rings: A True Romance” is a 128-page small-format book containing more than 165 images.
WatchesDec 16, 2024
Take a Look Inside the New Rolex Boutique on Rodeo DriveGearys opened a 6,200-square-foot Rolex store with a design that pays homage to the brand’s connection to the ocean.
GradingDec 16, 2024
GCAL By Sarine Expands 8X to 2 More Fancy Shapes The diamond cut grade is now available for marquise- and pear-shaped diamonds.
SourcingDec 16, 2024
Diamonds Do Good Announces 2025 Award RecipientsDDG said the honorees’ business practices embody a commitment to positive social impact, industry innovation, and community empowerment.
TrendsDec 13, 2024
Selena Gomez Said ‘Forever Begins Now’ to Marquise Diamond Engagement RingEstimates on the size and value of the solitaire diamond, which is mounted on a diamond pavé-set yellow gold band, vary.
TrendsDec 13, 2024
Piece of the Week: Martin Katz’s Tanzanite Drops These half-moon tanzanite earrings totaling 25 carats are part of a special trunk show taking place this weekend in Dallas.
Recorded WebinarsDec 13, 2024
Watch: The Highs and Lows of 2024The National Jeweler editors recap the top news, the best jewels, and their favorite stories of the year.
AuctionsDec 12, 2024
Tom Brady’s Watches Top $4M at Sotheby’s AuctionThe highest-grossing lot of the sale was the retired QB’s Rolex Paul Newman Daytona “John Player Special.”
SourcingDec 12, 2024
Grizzly Emerald Auction Garners $22.4MRecent expansion initiatives at the Zambian emerald mine have shown strong production numbers, said Grizzly founder Abdoulaye Ndiaye.
MajorsDec 12, 2024
Mark Henry Appoints New Director of SalesCarrie Forman joins the brand to guide it into the next phase of growth with major and independent retailers in the U.S. and abroad.
