Classic Diamonds: studded forever

Updated: Aug 1 2005, 06:46am hrs
Incorporated in 1986, Classic Diamonds (India) Ltd. (CDIL) is one of India's leading exporters of CPDs. Its business comprises of diamond manufacturing and exports. The company has set up a jewellery manufacturing unit at SEEPZ, Mumbai, exclusively for export of jewellery.

Exports of CPDs constitute the major portion of CDIL's business, accounting for 85% of sales turnover of Rs. 6,210 million in FY2004. Studded gold jewellery sales have also increased in recent years and accounted for 15% of sales in FY2004.

Exports were estimated at Rs. 6,154 million in FY2004. While CPD exports in volume terms have increased from 0.49 million carats in FY2002 to 0.64 million carats in FY2004, sales value of CPDs have increased from Rs. 3,499 million to Rs. 5,277 million. P/c realisations of CPDs have increased from Rs. 7,165 in FY2002 to Rs. 8,208 in FY2004. Higher raw material costs and slow increase in prices have resulted in CDIL's operating margins declining to 7.3% in FY2004.

However, higher interest cost because of higher debt levels (because of capacity expansion) resulted in an increase in interest cost, and a decline in net margins from 5.1% in FY2002 to 3.7% in FY2004. CDIL's sales aggregated Rs. 5,626 million in FY2005, representing a decline of 7.7% over FY2004.

However, higher employee costs resulted in a 21.2% decline in operating profits to Rs. 350 million in FY2005.

Operating margins declined to 6.2% in FY2005. Although interest costs declined, while net profits declined 46.2% in FY2005 to Rs. 120 million, net margins declined from 3.7% in FY2004 to 2.1% in FY2005.

CDIL has been able to maintain operating and financial performance through higher realisations from the retail diamond studded jewellery segment, and better operational efficiencies.

The Company expects to vertically integrate operations from processing of rough diamonds to manufacture of diamond jewellery. It has recently expanded its jewellery manufacturing capacity from 800 pieces to 1500 pieces per day. In addition, it has also acquired 180,000 sq. ft. in Surat, Gujarat to augment its diamond processing facility.

As part of its global retailing strategy, the company has acquired a controlling stake in Diamond Direct, a US based jewellery wholesaler. This acquisition is expected to enhance CDIL's direct access to large US retailers.