CHENNAI BECKONS DIAMOND INDUSTRY

Diamonds have always had an invincible charm in Chennai. The report analyses the diamond industry’s prospects and growth in the city.

Published on:

20 Jan 2009, 10:09 am

Chennai has always been touted as a city with a proverbial love for gold, but now diamonds appear to be creeping up the popularity charts. The new-found love for diamonds clearly represents a break with Chennai’s conservative tastes in jewellery with its firm emphasis on the yellow metal. According to prominent jewellers like Syed Ahmed, Chairman, LKS Diamonds, diamond jewellery forms a chunk of 15% of the total sale of jewellery in Chennai, while Shantakumar, Managing Director, Kirtilal Kalidasa, believes that the potential for diamond jewellery in Chennai is an impressive Rs600 crores per annum.

The Chennai consumer is known for a fastidious interest in quality and will disdain diamonds which are less than VVSI, IF or IS in clarity and E, F or G in colour. Says the softspoken Radhakrishan, Managing Director, GRT, Chennai: “Clients in Chennai are different from the ones in the north. Here people will not tolerate any flaws or ‘inclusions’ in their diamonds.” GRT was established 45 years ago in Chennai and has one of the largest showrooms in south India. It has been receiving the award for the best diamond showroom from De Beers for the last three years.

In fact, it is Chennai’s persistent interest in quality which has prevented diamond sales from truly igniting the market. “Since our customers are very concerned about the quality of their diamonds, there has not been a very great increase in the volume of diamond sales,” admits Ahmed. “But that is also because unlike gold, people attach a lot of sentiments to their diamonds here.” A flaw in a diamond is referred to as a ‘doshum’ which, consumers in Chennai believe, attracts evil forces to the wearer and hence customers are willing to pay extravagant sums of money for a flawless stone.

But despite its obsession with quality and the resultant low sales , Chennai’s attractiveness as a diamond market remains undiminished. Shantakumar points out that the diamond market in Chennai is growing at a brisk rate of 13%-15% year on year, while Princeson Jose, Chairman, Prince Jewellery emphasizes the immense potential of Chennai as a diamond market and dismisses the “markets of Mumbai, Kolkata and the north as places where low grade diamonds sell. Even the US and Europe are chiefly markets for low grade diamonds.”

The city has a large segment of working women who prefer delicate diamond jewellery in the price range of Rs10,000-Rs20,000. “But diamond jewellery which is less than Rs10,000 will also sell in Chennai,” says H M Sultan CEO, Sultan Gems and Jewellery who is also the secretary of the Gems and Jewellery India International Exhibition. However, opinions differ with Anand Singhi, partner, Surendra & co., revealing that “in my business diamond items which are priced at Rs1,00,000-Rs2,00,000 are the fastest selling. My product line is more niche, with original designs and high-end in terms of value. These are doing better for me.” Chennai is also the only city in India which offers a buyback guarantee on the sale of diamond jewellery. “In no other city in the country will you get this generous offer,” asserts Ashwin Raj Vummidi, partner, Vummidi Banguru Chetty & Sons.

To cater to Chennai’s swiftly changing tastes a gauntlet of shops has mushroomed on Cathedral Road, T Nagar and Alwarpet. They cater to the spiffy NRIs who arrive in November-December and July each year and the local Chennai consumer who splurges money around Divali, Pongal and the wedding season in January and February, with a tranche of money laid aside for the second wedding season in May and June. Most jewellers wish to expand, with Bangalore and Hyderabad being perennial favourites. Ashwin Raj Vummidi also favours the Tier-II cities of Coimbatore, Madurai and Vishakhapatnam, while Princeson Jose is eyeing Kochi and Thiruvananthapuram.

But expansion plans have been temporarily put on hold as the global recession has goosed the economy. Ashwin Raj Vummidi is candid that the recession has cleaved into his company’s profits, with sales dropping by at least 30%. “When people are facing job losses, pay cuts and bonus cuts, they will postpone unnecessary purchases and losses,” he says bluntly. “Diamonds are a luxury item, in this situation you will not buy them.” Anand Singhi is even more acerbic about a recession which is threatening to curdle the diamond industry’s dreams. Says Singhi: “This has been a very bad year for the industry. Psychologically speaking, people are shying away from buying diamonds. In fact, I feel that the GJIIE should be postponed this year. But people just want to portray a rosy picture to the world when even the biggest players in the industry are affected!” As the diamond trade is capital intensive, Singhi also advises jewellers to liquidate their vast inventories even at low margins.

The secretary of GJIIE, H M Sultan, defends the decision to hold the exhibition this year. He points out that jewellers in the south wish to stock in advance for various festivals like Akshay Tritiya and Ugadi, the Telegu New Year and GJIIE affords the opportunity to do so. He agrees that “even we as the organizers are not very comfortable with the present situation, but we have done all the preparations with a confirmed list of 150 participants and a conservative estimate of 7000-8000 visitors.”

Since the effects of the recession in India are not as severe as they are globally, chances are that Chennai’s diamond dreams may continue to shine bright.