About International Gemmological Institute (India) Limited

The Pre-Acquisition Group's primary business is the provision of services related to the certification and accreditation of natural diamonds, laboratory-grown diamonds, studded jewelry and colored stones as well as the offering of educational programs. The Pre-Acquisition Group is part of the International Gemmological Institute (“IGI”) group, and is responsible for the operation of the business under the “IGI” brand exclusively in India and Türkiye. IGI is one of the established reputed certifiers in the global market.

The Post-Acquisition Group, IGI is the world’s second largest independent certification and accreditation services provider based on revenue for CY2023 among global peers for diamonds, studded jewelry and colored stones certifications, with a global market share of approximately 33%, based on the number of certifications of diamonds, studded jewelry and colored stones performed in CY2023. For the certification and accreditation of laboratory-grown diamonds, which according to the Redseer Report is the fastest growing sub-segment within the overall jewellery market with a CAGR of approximately 19% from CY2019 to CY2023, IGI is the global leader with approximately 65% of the market share based on the number of certifications for CY2023. According to the Redseer Report, IGI also has a global market share of approximately 42% in terms of the number of certifications of studded jewelry in CY2023.

IGI’s operations first started in Belgium in 1975 through the establishment of IGI Belgium, and as of September 30, 2024, IGI has a global network of 31 branches which are equipped with IGI laboratories across 10 countries and 18 schools of gemology across 6 countries. As of September 30, 2024, IGI had over 7,500 customers located across 10 countries, including laboratory-grown diamonds growers, natural diamond and colored stone wholesalers, jewelry manufacturers and retailers.

As of September 30, 2024, the Pre-Acquisition Group had 843 permanent employees with an average age of 33.59 years old. The Banker the International Gemmological Institute (India) is RBL Bank Limited.

India’s Jewelry Market Overview
The Indian jewelry market stood at ~INR 5,300 billion (USD 64 billion) in CY 2023. Due to the COVID-19-induced lockdowns, footfall in jewelry stores was reduced; weddings, which generate most of the jewelry demand in the country, were postponed, and weddings took a backseat. This resulted in a dip in jewelry purchases as a gift or celebratory gesture, leading to the market shrinking by ~28% to reach ~INR 3,400 billion (USD 41 billion) in CY 2020. However, the market rebounded after the pandemic, driven by pent-up consumer demand, growing at a CAGR of 16% to reach ~INR 5,300 billion (USD 64 billion) in CY 2023.

In the Indian jewelry market, gold has traditionally held the largest share, representing around 87% in CY 2019. Post-COVID19, gold jewelry observed a 14% growth from CY 2020 to CY 2023 to reach ~INR 4,300 billion (USD ~52 billion) due to pentup demand and weddings returning to pre-pandemic scale, but the share of gold jewelry reduced to 82% in CY 2023. Its contribution to the overall market is expected to decline to 70-75% by CY 2028 as other categories become more prominent.

Diamond-studded jewelry, the second-largest segment, accounted for around 7% of the market in CY 2019, growing rapidly to INR ~780 billion (USD ~9 billion) by CY 2023, contributing ~15% to the overall market. The diamond-studded jewelry market is expected to drive India’s jewelry market by growing at a projected ~20% CAGR from CY 2023 till CY 2028. 

The organized market drove ~35% of the Indian jewelry market in CY 2023, while the industry remains dominated by the unorganized segment comprising local jewelers & goldsmiths. The share of the organized market in India is much lower than that of global leaders like China and the USA, where the organized market holds 60% and 80% of their markets, respectively. Following the trend in developed markets, the share of organized jewelry retail in India has rapidly increased in the past two decades, increasing from a meager 2% in CY 2000 to ~35% in CY 2023. From being dominated by traditional jewelers, the market is witnessing a shift after the emergence of organizations in the form of key industry leaders providing sophisticated retail experiences across the country.

Traditional family jewelers have prominently controlled the Indian jewelry market till CY 2000. The early 2000s were marked by the emergence of an organized market with the first few players launching retail stores in India. Further, dominant local players started their regional expansion and began deploying franchise models. Multiple players also launched multiple subbrands from CY 2000 to CY 2010, leading to further growth in the market. Post CY 2016, supply-side reforms like the introduction of Goods and Services Tax, mandatory gold hallmarking, and demonetization further pushed the growth of organized retail. The organized market share is expected to increase to contribute to 40-50% of the market by CY 2028.

Traceability, Trust & Certification In Loose Stones and Studded Jewelry Market
Certification consists of the physical analysis of a stone provided by independent3 laboratories. It is a structured process that includes both scientific analysis and manual assessment. Some of the most common problems faced by stakeholders in the loose stones and studded jewelry supply chain are related to traceability, standardization, and authenticity. The grading system serves to standardize product evaluation among jewelers, laboratories, and consumers worldwide.

Historically, studded jewelry and loose gemstones have been graded through visual inspection. The process was very subjective and depended largely on the skill, expertise, and judgment of the individual involved, including the parameters selected. This posed a challenge to reliable valuation and comparison of diamonds originating from different parts of the world. The situation has improved drastically since the latter half of the 20th century, with certification laboratories and institutions setting their respective standards for certification.

The major global peer set4 of diamond certification companies include Gemological Institute of America (GIA), Gemological Science International (GSI), Hoge Raad Voor Diamant (HRD) Antwerp, Solitaire Gemmological Laboratories (SGL), and International Gemmological Institute (IGI)5 . All these players have a presence in India along with global reach in at least 5 countries.

Certification plays a key role in the global loose stones and studded jewelry market. While metal quality can be determined based on its purity, the properties of diamonds are not visibly distinguishable to the human eye and require an expert assessment. Diamonds are made of carbon and other impurities, which impart essential characteristics (such as color) to the stone. Hence, “purity” cannot be used as a parameter for diamond quality analysis, unlike metallic elements such as gold, silver, and platinum. Thus, it is nearly impossible to have a single standard for diamond certification. However, the key common standards include cut, clarity, color, and carat weight. Often, metrics of fluorescence, symmetry, etc., are also evaluated. These standards would vary in terms of rigor, transparency, and scope across industry players – leading to variability in diamond grading. 

Brief history of gemstones and diamond certification
Diamond certification involves thorough analysis conducted by independent laboratories, blending scientific examination and subjective evaluation. Today, the diamond grading system serves as a crucial communication tool across the industry. Over time, this system has evolved and been influenced by technology, collaboration, and a deeper understanding of diamonds.

In the 1800s, diamond grading faced challenges, especially in determining color consistency. Terms like “Jager” and “Cape” denoted diamond origins (based on their mining locations), and grading metrics were largely inconsistent, complicating the grading system. In 1941, a US-based gemological laboratory became the first firm to introduce a standardized grading system.

The creation of 4Cs (Carat Weight, Color, Clarity, and Cut) in 1953 has since replaced subjective descriptors with objective letter grades, which have emerged as internationally recognized standards.

Diamonds are also tested on their fluorescence, which is the property of diamonds to emit visible light when exposed to UV rays. The degree of fluorescence impacts a diamond’s brilliance; very strong fluorescence can make it look hazy. The intensity of fluorescence is reported in a range from “none” to “very strong” after optical measurement of the visible spectrum of light generated by passing UV rays through a diamond.

Diamonds, Studded Jewelry and Colored Stones Certification Market
Diamond grading takes place once the diamonds are cut and polished. They either get certified as loose stones or, after getting studded in the jewelry, for which a certificate is issued detailing the diamond’s various attributes as the studding permits. Since the founding of the business in 1975, IGI has advanced various technical and industry practices in the loose stones and studded jewelry certification segment. In 1980, IGI USA was the first to issue jewelry identification reports among its global peers.

In CY 2023, ~33 million carats of loose-cut and polished diamonds, both natural and LGD, were produced. These 33 million carats of cut and polished diamonds translate to 70-75 million number of diamonds – spread across various carat weights. Natural diamonds exhibit a skewed concentration towards smaller diamond sizes, with ~50% of diamonds measuring less than 0.5 carats. This is mainly due to the conditions needed to form large and rare diamonds. Mining processes often break larger stones, and smaller diamonds are more practical and cost-effective to sell and buy. This is different in the case of lab-grown diamonds, where only ~35% of the loose gemstones measure less than 0.5 carats, as they can be produced in larger sizes more consistently under controlled and optimized growth conditions. Unlike natural diamonds, they aren't subject to the unpredictable factors of natural formation and mining, allowing for the creation of larger diamonds that meet market demands more effectively.

Of the total number of diamonds, the penetration of certification for natural diamonds is ~65% in CY 2023. These can either translate into loose gemstones or studded jewelry certificates. The majority of them are certified as studded jewelry, with IGI having a global market share of ~42% in terms of the number of studded jewelry certifications in CY 2023. IGI commands a global market share of 33% in the number of certifications of diamonds, studded jewelry, and colored stones performed in CY 2023.

The certification penetration for LGDs is higher at ~70% in CY 2023. One of the reasons for this is that LGDs are more likely to be produced in larger carat sizes, which are more commonly certified. The overall natural diamond certificate generation is expected to rise by ~3% till CY 2028. LGD Certification is leading the certification growth by volume expected to rise by ~25 %, leading to a projected total of 8-9 million LGD certificates in CY 2028. Overall, an estimated 22-26 million certifications were issued in CY 2023, which is projected to grow at a CAGR of 5-10% till CY 2028.

PROPOSED ACQUISITIONS
As on the date of this Red Herring Prospectus, the Company, IGI Belgium (which holds the IGI Belgium Group) and IGI Netherlands (which holds the IGI Netherlands Group) are held by their Promoter, namely BCP Asia II TopCo Pte. Ltd. IGI Belgium and IGI Netherlands, together with their respective subsidiaries, are responsible for operation of the IGI business outside of India and Türkiye, where the Company and its Subsidiary operates their business. As part of their proposed restructuring, the Company proposes to utilize a portion of the Net Proceeds towards acquiring 100% of the share capital of IGI Belgium and IGI Netherlands from the Promoter. Following the completion of such acquisition, the Company will become the 100% shareholder of IGI Belgium and IGI Netherlands, and will be responsible for operation of the IGI business globally.

INTERNATIONAL GEMMOLOGICAL INSTITUTE (INDIA) LIMITED COMPETITIVE STRENGTHS OF THE POST-ACQUISITION GROUP
1. They are the world’s second largest independent certification and accreditation services provider among their global peers for diamonds, studded jewelry and colored stones and in an industry characterized by barriers to entry
2. First mover and global market leader in providing certification services for the fast-growing laboratory grown diamond industry
3. Extensive range of services for certification and accreditation services provided to a diverse group of customers along the value chain
4. Education initiatives that support spreading awareness, building customer partnerships and their brand
5. Demonstrated track record of delivering growth in revenue, margins and returns 
6. Experienced professional management team backed by the largest alternate asset manager globally

INTERNATIONAL GEMMOLOGICAL INSTITUTE (INDIA) LIMITED GROWTH FACTORS OF THE POST-ACQUISITION GROUP
1. Maintain their leadership position in certification of laboratory-grown diamonds
2. Expand their presence in the natural diamond and studded jewelry and colored stone vertical
3. Expand their global laboratory network 
4. Continue to invest in building brand salience
5. Leverage their strength in education to increase awareness as well as build trust and transparency
6. Continue to invest in technology including AI to improve processes

INTERNATIONAL GEMMOLOGICAL INSTITUTE (INDIA) LIMITED RISK FACTORS & CONCERNS OF THE POST-ACQUISITION GROUP
1. The Company proposes to use the Net Proceeds from the Fresh Issue for the Proposed Acquisitions, following which the Company will be responsible for overseeing and managing the overall IGI business inside and outside of India. 
2. The valuation report obtained for the Proposed Acquisitions is based on various assumptions and may not be indicative of the true value of the IGI Belgium Group and the IGI Netherlands Group. 
3. The ability to invest in foreign subsidiaries or joint ventures is constrained by applicable restrictions under Indian overseas investment laws as well as laws of the relevant international jurisdictions.
4. The Pre-Acquisition Group derived a significant portion of the revenue from their top 15 customer.
5. The revenue of the Pre-Acquisition Group is primarily concentrated in the states of Gujarat and Maharashtra in India.
6. Due to the inherent subjective nature of the grading process, they may not be successful in the prevention of fraud, discrepancies, human error or quality control issues during their certification process.
7. Following the completion of the Proposed Acquisitions, their international operations could subject them to additional risks associated with information technology systems.