Some major Indian lab-grown diamond companies now have the option to get their gems graded directly in their factories, thanks to a new service provided by the International Gemological Institute (IGI).
In a draft prospectus filed last month in India, IGI India disclosed that it has set up "lab units" within the facilities of large diamond growers, utilizing the growers' employees and equipment for grading.
IGI began offering this service in 2021. As of March 31, the company had established 12 such facilities in India and one in the United States.
"Our factory and mobile lab facilities provide certification services at the client's site," the prospectus states. "The lab facilities are equipped with necessary equipment provided by the client and staffed by our gemologists and the client’s employees, who receive training from us on certain basic steps of the certification process."
This arrangement, IGI believes, "helps solidify our relationship with these clients, giving us a foothold in their facilities, improving operational efficiency, and making us harder to replace."
While off-site grading—particularly at trade shows—is not uncommon in the industry, some experts express concerns over potential bias when grading is done within the producer's facility, especially when the grower's employees are involved.
IGI's prospectus acknowledges the risks associated with this arrangement but notes that precautions are in place.
"Since our factory and mobile lab certification is conducted on the client's premises, our oversight of third parties with access to the client's premises may be reduced," the company said. "While we conduct quality checks and periodic calibration of our gemologists to reassess and adjust their grading techniques, these measures may not effectively prevent all instances of gemologist or third-party grading errors or fraud."
IGI has indicated plans to expand its on-site grading services.
"As new entrants come into the lab-grown diamond manufacturing field and build strong relationships with them, we will strive to further extend our presence in on-site labs," the prospectus added.
A chart in the prospectus illustrates the recent growth in lab-grown diamond production and its popularity. In 2021, 35% of IGI's revenue came from lab-grown diamond reports, 33% from natural diamond reports, and 30% from finished jewelry and colored gemstones. In the first three months of 2024, 60% of IGI's revenue came from lab-grown diamond reports, 19% from natural diamond reports, and 20% from jewelry and colored gemstones.
IGI declined to comment to AIDI, citing the pre-IPO quiet period.
IGI India aims to raise $477 million through its initial public offering (IPO). The IPO proceeds will be used to acquire IGI Belgium and IGI Netherlands.
"Acquiring the overseas business into the Indian subsidiary must be done through acquisition," a source told AIDI. "There are two ways they can do it: The Indian entity can acquire these overseas businesses by raising short-term debt, then file for the IPO and use the IPO proceeds to repay the debt. But this means the Indian entity will have to bear the cost of raising debt, paying interest costs, and the acquisition process will take time, delaying the IPO."
According to sources, IGI's current valuation stands at $4 billion.
In May 2023, Blackstone Group's Singapore subsidiary, BCP Asia II Topco, acquired IGI for $569.65 million. The bid for an IPO comes just over a year after the acquisition, which some see as an attempt to capitalize on India's booming IPO market.
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