India's Lab-Grown Diamond Industry: Top 4 Stocks Poised for Growth

The world of diamonds is evolving, and India is positioned to become a major player in the lab-grown diamond (LGD) sector. Lab-grown diamonds are fast becoming a preferred choice for consumers due to their affordability, sustainability, and ethical sourcing. These diamonds, created in a controlled environment using advanced technology, offer the same sparkle as natural diamonds but at a fraction of the cost.

A recent buzz in the market involved Tata group’s Trent entering the lab-grown diamond space, signaling that major companies see significant potential in this growing industry. As India becomes a global hub for diamond cutting and polishing, it is also emerging as a key market for lab-grown diamonds, poised to see a 15-20% annual growth in consumption.

In this blog, we will explore four companies that are capitalizing on the growing demand for lab-grown diamonds. These firms are positioned to benefit from the shift in consumer preferences and the expanding market for synthetic diamonds.

1. Senco Gold: Diversified Jewellery Player with LGD Ambitions

Senco Gold is a well-established name in the Indian jewellery industry, offering a wide range of gold, diamond, and platinum jewellery. The company has over 136 showrooms across 13 states in India, featuring a vast selection of handcrafted jewellery designed in collaboration with local artisans.

Recognizing the growth potential in lab-grown diamonds, Senco Gold is creating a separate business vertical dedicated to LGDs, luxury leather handbags, and perfumes. This new venture aims to tap into the increasing demand for synthetic diamonds while complementing its existing jewellery offerings.

Senco Gold’s recent IPO in July 2023 has seen strong market performance, and the company continues to expand its presence, launching new jewellery designs and opening more showrooms. The company's revenue growth target for FY25 is set at 18-20% year-on-year, driven by increased sales during the festive seasons.

However, a key risk for Senco Gold is its heavy reliance on West Bengal, where over 60% of its revenue is generated. The company is working on reducing this concentration by expanding into other regions, and rising gold prices are expected to support its operating margins in the coming years.

2. Goldiam International: Focused on Lab-Grown Diamonds and Expanding Retail

Goldiam International is making significant strides in the lab-grown diamond sector, with a focus on expanding its retail presence. The company has received large orders from US retailers for lab-grown diamond jewellery, and 80% of its recent orders are for synthetic diamonds.

The company plans to open a chain of retail stores across India under its new brand, Origem, aiming to capture market share in the growing LGD space. Goldiam’s strategy is to leverage its supply chain and distribution capabilities to become the largest organized retailer of lab-grown diamonds in India.

Goldiam International’s financials are strong, with a 38.4% year-on-year increase in revenue for the June 2024 quarter, driven by higher sales of lab-grown diamonds. The company’s management has provided a growth guidance of 15-20%, with margin expectations of 18-22%. While the company is well-positioned to benefit from the growing demand for lab-grown diamonds, investors should remain cautious of the risk of oversupply, which could impact pricing in the future.

3. Trent: Tata Group’s Bet on Lab-Grown Diamonds

Trent, part of the Tata Group, is another major player entering the lab-grown diamond industry. The company has launched its LGD brand, Pome, which is currently available in select Westside stores in major cities like Mumbai, Bengaluru, Hyderabad, and Gurgaon.

Trent is known for disrupting the apparel market with its budget-friendly Zudio stores, and it aims to replicate this success in the lab-grown diamond sector. Pome’s pricing is competitive, with solitaire engagement rings offered at significantly lower prices than their natural diamond counterparts.

Trent has been a standout performer in the stock market, with its share price increasing by over 280% in the past year. This growth has been largely driven by the success of its Zudio outlets and strong consumer demand for affordable fashion. The company’s foray into lab-grown diamonds is expected to further boost its revenue and market presence.

With its extensive retail network and experience in launching successful brands, Trent is well-positioned to capture a significant share of the lab-grown diamond market in India.

4. Dev Labtech: A Leader in Lab-Grown Diamond Manufacturing

Dev Labtech is a company focused on the manufacturing of both polished and lab-grown diamonds. It uses advanced microwave plasma chemical vapor deposition (MPCVD) technology to produce high-quality synthetic diamonds, which are certified by GIA and IGI.

The company generates nearly all of its revenue from the sale of polished and lab-grown diamonds, with a small portion coming from rough diamonds and the jewellery business. Dev Labtech recently signed a memorandum of understanding (MOU) at the Vibrant Gujarat 2024 summit to expand its lab-grown diamond manufacturing capacity.

In addition to expanding its production capabilities, Dev Labtech is also investing in renewable energy. The company has applied for a solar power project in Gujarat to support its diamond production operations.

Shares of Dev Labtech have risen by 33% in the past year, reflecting investor confidence in the company’s growth prospects. As it continues to invest in capacity expansion and innovation, Dev Labtech is well-positioned to benefit from the increasing demand for lab-grown diamonds.

Conclusion: A Bright Future for Lab-Grown Diamonds

The lab-grown diamond industry is on the cusp of significant growth, with India emerging as a key player in the global market. As consumer preferences shift towards more affordable and sustainable options, companies involved in the production and sale of lab-grown diamonds are poised for success.

Senco Gold, Goldiam International, Trent, and Dev Labtech are four companies leading the charge in this space, each with its own unique strengths and strategies. While there are risks associated with price fluctuations and competition, the long-term potential of the lab-grown diamond market is undeniable.

For investors looking to capitalize on this trend, these companies represent attractive opportunities in a sector that is ready to shine.

Disclaimer: This article is for informational purposes only and should not be considered as financial advice. Investors should conduct their own research before making any investment decisions.