Can diamonds be for every pocket?


"Diamonds are undergoing a change of origin, from the earth's crust to being grown in a lab. The Indian consumer, specially the millennials are favouring them for their 5C's--cut, colour, clarity, carat and being conflict free. But what are lab-grown diamonds? Can they bring diamonds within everyone's reach? Can they make luxury sustainable? Host Kalpana Pathak talks to Smit Patel, Director at Greenlab Diamonds LLP, Pooja Seth, MD & Founder at Limelight Lab Grown Diamonds and Sutanuka Ghosal, Senior Assistant Editor, The Economic Times

Credit: EMI, © 2009 MD Music Company Limited"

This is an audio transcript of The Morning Brief podcast episode: Can diamonds be for every pocket?

BG Sound 0:01
This is the morning brief from the economic times.

BG Sound 0:14
Diamonds are forever, but square cut or pear shape. These rocks don't lose their shape. Diamonds are a girl's best friend.

Kalpana Pathak 0:29
Diamonds are indeed forever. The hardest metal on Earth and one that everyone aspires to wear. If they are a girl's best friend or not, I'm not too sure. Yet, they are a must for many, if not in jewelry, then for investment. But diamonds themselves are undergoing a change of origin from being crafted naturally in the earth's core to being grown in a lab. Lab grown diamonds have been around since the 1950s. But mainly for industrial purposes. They began making the presence felt only less than a decade ago, largely in the West. It's only now that India is catching up fast on this trend, especially with the festive and wedding season around and why not when they are easy on your pocket can be developed at a lower cost or environmentally friendly and certainly not blood diamonds. I'm sure you will be curious to know what a lab grown diamonds. How cheap are they? Are they synthetic? Are they as valuable as natural ones. It's the seventh of October from the economic times I'm Kalpana Pathak. And today on the morning brief, we explore can diamonds be for every pocket? For answers to these questions, I speak to Pooja Seth Madhavan who runs Limelight diamonds a lab grown diamonds retail chain Smith Patel, director of green lab diamonds, the largest cultivator of lab grown diamonds in the world. Smith is also the convener for the lab grown diamond panel at the gems and jewelry export promotion Council, which is an industry body. Also joining us is my et colleague Sutanuka Ghosal, who has been writing on the gems and jewelry sector for the last 15 years. But before we move forward, let's hear from a few Millennials what they think about lab grown diamonds.

BG Sound 2:27
Who doesn't like diamonds? I love diamonds.

BG Sound 2:30
For some reason I had to, you know, at some point propose to my significant other. I imagine I would be fine with a lab grown diamond as long as you can't tell the difference, right?

BG Sound 2:41
For me natural diamonds have a special attraction.

BG Sound 2:45
I don't think I would mind buying them. I've also heard that lab grown diamonds are slightly less expensive. So that's a plus.

BG Sound 2:54
I mean as long as they're harming the environment less and look just as good. It should be an even trade off.

BG Sound 3:01
What I believe is that buying natural diamonds serve a dual purpose. When I'm buying a pair of Solidaria earrings from a reputed jewelry outlet. I know that I'm getting the best quality.

BG Sound 3:13
I think they are a great accessory especially if you want to power dress or if there is like a slightly big occasion happening.

BG Sound 3:21
I imagined that lab grown diamonds would be a better alternative to natural diamonds.

BG Sound 3:27
Well cheap is not always the best. That's what I would like to say.

Kalpana Pathak 3:33
Did you know that lab grown diamonds are identical to natural diamonds. That means they are of the same size and have the same four C's that is cut, color, clarity and carat but since they are not mined, there is another C added to the character and that is of being conflict free. Let's hear more from Pooja who retains them through her outfit Limelight diamonds Welcome to the Morning Brief Pooja, please tell us what are lab grown diamonds.

Pooja Seth 4:04
So lab grown diamonds essentially are absolutely real diamonds which are grown above the earth instead of growing below the surface. Basically what we do is we take a natural diamond we cut a thin layer of that and we place it under the plasma reactor. And then the exact environment that the diamond gets below the surface of the Earth is recreated above in this reactor. So the same temperature pressure is set and gases are infused. And as we know diamond is nothing but made out of carbon. The carbon from the gas slowly starts separating and starts forming layers on top of this natural diamond seed and that slowly grows into a rough diamond. Now is there any difference between this rough diamond that we get from the labs versus the rough diamond that we get from the mines? Absolutely no different they are exactly the same. They're carbon composed. They're the same chemical optical thermal physical characteristics, the most easiest example is the test tube baby example, it's the best way of understanding what lab drones are just like how in, you know, in the IVF technology, what we are doing is simply taking the DNA, but developing it in a different environment. Similarly, even in lab grown diamonds, all we're doing is taking the DNA from a natural diamond, but developing it in the reactor. And because you know, these diamonds are not mined 70% of the cost that As consumers we pay for a diamond is actually the cost of mining and extracting it from under the ground is something that gets completely saved, you know, in this technology. But of course, there's technology cost involved, which is why typically a lab grown diamond will cost you at least 1/3 of our mine diamond. Of course, lab grown diamonds have two categories. One is CVD diamonds, which are largely developed in India. So it's interesting to know that you know, the machine of producing these diamonds are also developed in our country. So we not only grow the diamonds, we actually indigenously develop the technology, the machines in India, then we grow the diamond. And of course, you know, India has always been the manufacturing hub of cutting and polishing diamonds. And there's another Technology called hPhD, which is largely developed in China, which does not exactly replicate, you know, what happens under the surface, but yet at the same time, it's a different method of producing lab grown diamonds.

Kalpana Pathak 6:27
Could you tell us something about Limelight diamonds and how you started it?

Pooja Seth 6:30
So actually, I don't belong to the diamond industry at all? Neither did I have any family background in the jewelry industry. I was in London for nine years, I graduated from London School of Economics studied at Harvard, was an investment banker in London. But after spending so much time, you know, I just had thing of coming back and doing something entrepreneurial back in India. So without any plans, I just actually moved back to India. And then I happened to meet you know, this scientist, Mr. Bacul Embasia, and he's now grown to become the largest CVD diamond grower. So when I went and I visited the labs, and you know, I saw how, you know, this technology is being developed in my country. And then I just simply asked a question to him saying, Where are all these diamonds? You know, we're, we're producing so many diamonds, where are they all going? And, you know, he answered that, hey, you know, US as a market has fully established and developed. So 98% of these diamonds are actually being exported, then, of course, my banking mind started working. So I said, hey, no way, you know, when you look at the kind of consumption patterns that are happening in the US for these diamonds, it is the millennials who are purchasing these diamonds. And you know, which country in the world has the largest millennial population, it is India, you know, so it was, in my mind, it was a no brainer to establish this as an opportunity for my country. Since these diamonds are growing in our country, we are cutting and polishing it here. So why not then produce this as a product to India first. So that's how I started limelight as a brand.

Kalpana Pathak 8:04
Great. So Pooja, why is the demand for lab grown diamonds rising in India,

Pooja Seth 8:09
I think we are seeing similar patterns to what had happened in the US as well see, I mean, the major benefits of lab grown diamonds are a you know, because they're not mined. They have of course, they are eco friendly, they save upon all the environmental damage that comes that is associated with mining. So there is absolutely no compromising quality. You know, just like how you have different colors and different clarities in natural diamonds, you get exactly the same in this, there 1/3 of the cost of natural diamonds. Even in the US there was a survey that was done amongst the millennials, which said, you know, 3000 Millennials were surveyed, and they were asked, you know, if you are given $5,000, and you were asked to choose between a one carat natural diamond and a one and a half carat lab grown diamond, which one would you prefer and why? So 70% of that survey chose lab grown diamonds. And that was primarily because they said I get a bigger rock in the same price. So why wouldn't I go for it? And of course, you know, it's already established that these are absolutely real diamonds. So, you know, then because there's no compromising quality, why wouldn't I just upgrade myself. And that is the similar trend that we are seeing in India as well, which is every millennial, you know, girls of today are people who don't want to hoard on jewelry, they don't want chunky jewelry sitting in their lockers, they rather spend all that money and you know, making different types of experiences traveling across the world. So that's the shift that we're seeing in consumer preferences, which is increasingly shifting towards, you know, lab grown diamonds as a preference because they're eco friendly as well as pocket friendly.

Kalpana Pathak 9:45
Very well Pooja, but Indian consumers are different from American consumers. Do you think this demand will sustain going forward?

Pooja Seth 9:53
Yeah, absolutely. I mean, it depends on which sort of consumer profile you're speaking of, because when you speak about them Millennials, you know, the mindset of a millennial sitting in India versus the mindset of a millennial sitting in the West is not very different, you know, and this is a Deloitte Report also, which has come out on the millennials of our country, which also speaks the same, you know that their top priority is climate now, yes, of course, there are the older audiences also who believed that natural diamonds, you know, are of an investment category, but lab grown diamonds aren't. But that's not the case either. Because, you know, lab grown, diamonds have resale, they also have buyback, they also have exchange, it's an upgrade for everyone, in the sense that anybody who only purchased like today, only 4% of Indian consumers ever have actually consumed diamonds. So this has opened up a completely to a new category of people who are always aspiration of diamonds but couldn't afford and now you know, being able to get a diamond for themselves.

Kalpana Pathak 10:54
Alright, Pooja, though you've touched upon this, but I'd like to ask you, again, are lab grown diamonds also looked at as an investment option and will the value appreciate going forward?

Pooja Seth 11:06
Now, maybe, you know, the investment banker in me is perhaps talking a little more strongly. But if we actually look at the underlying truths of diamonds in general as an investment opportunity, I don't think diamonds have been the best investment the track record of diamond prices over the last 10 years. Actually, on an absolute basis, diamonds have had zero almost zero to negative returns. But the way I look at it is let's say you wanted to make a 130 pointer sized or a half a carat size bangle, you know which bangle studded with all half carats that in, let's say natural diamonds would cost you anywhere between 30 to 35 lakhs and the same thing in lab grown diamonds will cost you about 10 to 12 lakhs the amount let's say 35 to 10 lakhs so that's about 25 lakhs worth of savings, which when put into mutual funds will give you a far higher return than whether natural diamonds or lab grown diamonds would give you you know, so I think the savings that lab grown diamond brings to the table and then the savings when put into better assets can definitely give you much higher return on investments. So from that perspective, they are definitely a better investment by and yeah, and otherwise they definitely have resale opportunity as well. So no consumer is left at a loss with lab grown diamonds for sure.

Kalpana Pathak 12:29
Thank you Pooja for that valuable tip on investing at $1.3 billion. The export of lab grown diamonds in India have doubled over the last financial year. The gems and jewelry export promotion Council expects the lab grown diamonds industry to generate 10 lakh jobs and produce 150 million carats of diamonds. This can help India achieve an export turnover of 40,000 crore rupees in the next three years. Smith Patel, Director at Green lab diamonds has been exporting lab grown diamonds for years now. And it's very bullish on the sector. So Smith, right now, from India, are we exporting most of these lab grown diamonds?

Smith Patel 13:10
Yeah, till date, we've been exporting most of our lab grown diamonds around 80 to 90% of our diamonds have been exported either loose diamonds or either studded in jewelry. And in India, what US was four years ago, India is today in terms of the acceptance of lab grown diamonds previously, the jewellers was scared to like you know, stock it because people might think they are cheating us they are giving us different diamonds, this is not a diamond. But once people have started understanding that this is a diamond, it's just grown in a different way rather than mined. But the properties are completely the same, it has the same chemical, it has the same optical structure, people have started understanding it and the acceptance has become more and more.

Kalpana Pathak 13:49
So if you can help me understand if I buy a lab grown diamond and tomorrow if I go and try to exchange it or resell it, well I get the same value as that of a mined diamond.

Smith Patel 14:00
So one of the reasons why India is accepting it more and more now because there has been price correction. Of course the price is determined by supply and demand in all industries, but because the demand or the supply is a lot more out here. Like there are more and more growers coming out in India and China in the US. We expected the price to be corrected for the market. But now that the prices are there, even the retailers we're selling it to have started giving buyback options. If the retailers are ready to give buyback to the end consumers, you can understand whether prices have been corrected to that there is not a lot of room to wiggle now.

Kalpana Pathak 14:35
All right. How many players in India are growing lab grown diamonds and how big is the market? Do you think for India right now and where do you see it in the next three to five years.

Smith Patel 14:46
India has been opening up with lab grown since around five years. And we were later to catch up I think it will continue to do so because of the skilled labor that is there in India. So once a rough is grown India has a advantage of cutting and polishing as well. That skill cannot be taught easily to anyone. And this market cannot move to any other country easily.

Kalpana Pathak 15:08
Can you give me some details about your company Smith and also the fact that since you're based out of Surat Surat, I'm given to understand polishes 90 of the 100 diamonds that they are in the market. So what about the workforce locally available?

Smith Patel 15:22
This is a very big blessing for the surat cutting and polishing industry. So when we started four years ago, we were in mine diamonds before this, my grandfather's time, this diamond business has always been like a family run business for most of the companies in India. When we started, of course, there was no lab role we used to import rough, we used to cut and polish and we used to try to export most of it. And that was the way of doing business out here. Since our company started four years ago, the blessing in disguise is that we are not dependent on any one for rough the skilled labor. Were the first people who are affected when something happened, which wasn't under our control. For example, in Russia, the supply becomes shot. If Russia rough cannot come to India, the first people that suffer are the cutting and polishing industry. They are depending on the rough, to be imported to be cut to be polished and then exported out here we have a consistent supply. So that is a very positive step towards and giving a consistent supply to our laborers because the value is the same. They don't get less for cutting lab grown against a mined diamond.

Kalpana Pathak 16:28
All right, okay. And Smith, a slightly personal question. Do you wear a lab grown diamond?

Smith Patel 16:33
Yes. I'm wearing a lab grown diamond in my ear right now.

Kalpana Pathak 16:37
And you gift it to your friends and family as well.

Smith Patel 16:40
What else will I gift them? So, so lab grown has become a very big part of gifting culture also, like you wouldn't believe this is a personal story. I'm telling you, my gym trainer in the morning, I had my first line of jewelry that came in my hand. I was very excited to show everyone I took it home. I showed it to my mother. And then when my trainer came and I showed him because like we'd like talking about stuff I showed him like this is what he got scared at first, he saw the pieces and he got scared he's like, this is like way too expensive. This looks way too out of my budget and I gave him the cost price. I told him the range which was from 20,000 to 70,000 jewelry 30 pointers forty pointer stones, one carat stones, and he got very emotional, he gifted two one for his wife and one for his mother on the same day. And that's when I knew that this industry has a lot of potential in the future because not only it opens up doors for many people who aspire to have a diamond, it is a diamond. People will be much more happier to wear it with different designs different styles. The future is very bright. That's all Ill say.

Kalpana Pathak 17:48
my colleague Sutanuka who has been tracking the gems and jewelry segment for the last 15 years share Smith's optimism. But the diamond cutting and polishing industry has struggled in the last few months. The day Russia invaded Ukraine, about 40% of the diamond market suddenly became inaccessible for the industry. According to care ratings data, Russia controls 29% of the rough diamond segment and mines 28% of the world's diamonds. In the absence of natural diamonds, lab grown diamonds came to the rescue of surat's diamond industry. Sutanuka Why is Surat a big market for manufacturing lab grown diamonds.

Sutanuka Ghosal 18:28
What has happened after this Russia Ukraine war, the supply from alRosa has come down natural demand from because of the sanctions rate is not coming actually. So what has happened a lot of workers about about 1.5 lakh workers were asked to go on leave, you know, and there was job loss looming over these people. So what happened the diamond tears in Surat, they decided that since the demand for lab grown diamonds are growing Next, put up a machine and start manufacturing lab grown diamonds and I have the workers who can cut and Polish. So the same worker, it doesn't matter to the worker that whether it's a natural diamond or whether it's lab grown diamond as long as he is getting his wages and as long as he's doing the same work. So that's why if you say that there are 100 Diamonds being sold, 90 are cut and polished by the workers in Surat. So basically the you have the infrastructure in place. You don't have to do anything. You just put up a machine and you start manufacturing it's very easy.

Kalpana Pathak 19:32
Okay, can you please tell our listeners about Alrosa?

Sutanuka Ghosal 19:35
Well, AlRosa is a Russian diamond mining company. It's partly owned by Russian government. So when the Russia Ukraine War started US and the European Union had put sanctions on Russia and on alrosa that they cannot sell their diamonds since us is our biggest market and when us put a sanction on something Indian diamond exporters, they are not being able to buy diamonds from aRosa, because they cannot sell it to the US you have to say the origin. So when you say the origin, you cannot say we have sources from AlRosa. So you lose your market, you lose your buyers. That is also one of one of the reasons why lab grown diamond is growing in Surat.

Kalpana Pathak 20:23
So why does China stand in the segment?

Sutanuka Ghosal 20:26
Well, China is there but what is happening because of the zero COVID policy and COVID lock downs and their relationship with the US deteriorating, you know, the China has taken a backseat that works well for India. I mean, a lot of people are thinking who had been thinking about China to invest in lab grown diamond, they're thinking now thinking about investing in India, because they've already infrastructure, there are workers who are ready to cut and polish lab grown diamonds.

Kalpana Pathak 20:59
Government is said to be considering bringing in a product linked incentive or PLI scheme for lab grown diamonds. How will that help?

Sutanuka Ghosal 21:07
Well, first of all, we want us to avail this Pli scheme the unit will be required to invest a minimum of rupees 50 crore and achieve a turnover equal to double the investment. So, what will happen that, under the scheme, the import of sophisticated machinery will be allowed at concessional import duty for a one year with a view to promote indigenous manufacturing of such machines subsequently. So if you allow to bring those machines at a lower cost, it is a helpful thing for the lab grown diamonds and it is beneficial in a way to the it's an incentive that you are getting which will definitely boost the production of lab grown diamonds. And one interesting thing has also happened that State Bank of India they used to give loans to the natural diamond players they're also thinking to give working capital support to the lab grown diamonds when SBI is giving this sort of working capital to Lab grown diamonds it means that they are thinking that this lab grown diamond is becoming a serious business.

Kalpana Pathak 22:15
The brightness and luster of a lab grown diamond may be the same as a natural one. But I guess the humane and non conflict angle of sourcing it makes it shine even better. I think it can be called Sustainable luxury one that is making an effort to cut our carbon footprint and make lives better. Unless you're a die hard fan of natural diamonds like some of my friends. You may want to consider buying a lab grown diamond. It'd be easy on your pockets may appeal to your conscience and will definitely shine as brightly as the natural one. You have been listening to Can diamonds be for every pocket? on the morning brief. Thank you Pooja, Smith and Sutanuka for your insights and thank you for tuning into this podcast brought to you by Team economic times.

Kalpana Pathak 23:07
Show producer Vinay Joshi sound editor Indranil Bhattacharjee, executive producers Anupria Bahadur and Arijit Barman. Do listen, like and share this episode. The morning brief is now streaming on Amazon music and Apart from Spotify, Apple and Google podcasts, and of course ET's very own audio platform ET play. The morning brief airs every Tuesday, Thursday and Friday. Thank you for listening. Have a good weekend. All external sound clips used in this episode belong to the respective owners. All credits and disclaimers in the description.

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