IPO KYC | Blackstone-Backed IGI IPO To Hit D-Street | International Gemmological Institute

Summary

In this interview, Mr. Thas Printer, MD and CEO of IGI, discusses the company's remarkable growth, fueled by its leadership in lab-grown diamonds. With Blackstone's backing, IGI's valuation has soared from $570 million to $2.1 billion in just 18 months. The company is aiming to expand its global presence through strategic acquisitions and a focus on innovation. As IGI consolidates its position, lab-grown diamonds are driving rapid market growth, positioning IGI as a dominant player with 65% of the global certified lab-grown diamond market. Despite competition from GIA, IGI's long-established relationships and market expertise give it a solid competitive edge.

Takeaways

• 😀 IGI (International Gemological Institute) is the world's second-largest independent certification provider for diamonds, with a 33% global market share.
• 😀 IGI is set to raise ₹4,225 crore through an IPO, comprising both a fresh issue and an offer for sale by its promoters, including Blackstone.
• 😀 Blackstone invested in IGI at a valuation of $570 million in May 2023, and the company is now valued at $2.1 billion, reflecting strong growth in just 1.5 years.
• 😀 The IPO proceeds will help IGI acquire 100% of IGI Belgium and IGI Netherlands from Blackstone, consolidating its global presence and expanding its market reach.
• 😀 IGI’s financials show impressive growth, with a consistent **CAGR of 32%** over the last three years, particularly driven by lab-grown diamond revenues.
• 😀 Lab-grown diamonds now account for nearly **60%** of IGI’s total revenues, with the segment growing rapidly due to increased demand from Millennials and Gen Z.
• 😀 IGI holds a dominant position in the lab-grown diamond market, commanding a **65% global market share** and offering affordable alternatives to natural diamonds.
• 😀 IGI’s blended EBITDA margin stands at **56%**, with India contributing a higher margin of around **72%** due to its dominance in diamond manufacturing.
• 😀 Despite declines in lab-grown diamond prices, IGI remains confident in sustaining its margins due to economies of scale, AI integration, and automation.
• 😀 IGI faces competition from **GIA (Gemological Institute of America)**, the market leader with a 75% share, but IGI’s deep-rooted relationships and expertise in India provide a competitive edge.
• 😀 The natural diamond market is growing at a modest rate of **4% annually**, while the lab-grown segment continues to experience rapid growth, offering opportunities for further expansion.

Q & A

What is the primary driver behind IGI's recent valuation increase from $570 million to $2.1 billion in 1.5 years?

The valuation increase is largely due to IGI's expertise and legacy of 50 years in the diamond certification industry, combined with the rapid growth of lab-grown diamonds. Lab-grown diamonds have become a significant growth driver for the company, which has successfully capitalized on this emerging market.

How has Blackstone’s involvement influenced IGI's growth and business strategy?

Blackstone's involvement has provided IGI with the financial and strategic support to consolidate its market position and expand into new areas, particularly the lab-grown diamond market. This support has been instrumental in driving the company's growth and increasing its valuation.

What are the main uses of the funds raised through IGI's IPO?

The funds raised through the IPO, totaling 4,225 crore rupees, will be used to acquire 100% of IGI Belgium and IGI Netherlands from Blackstone, enabling IGI to consolidate its operations and further expand its global footprint.

What is the current market share of IGI in the global diamond certification industry?

IGI holds a 33% market share in the global diamond certification industry, with 20% of that share coming from natural diamonds and 13% from lab-grown diamonds.

How does IGI’s position in lab-grown diamond certification compare to its competitors?

IGI holds 65% of the global certified lab-grown diamond market, positioning it as the dominant player in this sector, far ahead of its competitors like GIA, which focuses more on natural diamonds.

What is the significance of lab-grown diamonds in IGI's growth strategy?

Lab-grown diamonds have become a key growth driver for IGI, contributing nearly 60% to its revenue. This segment's growth is driven by the increasing demand for affordable, sustainable alternatives to natural diamonds, particularly among Millennials and Gen Z.

How has IGI maintained its competitive edge in the lab-grown diamond market?

IGI has maintained its edge through a combination of early adoption, technological advancements, and economies of scale. The company has strong relationships with manufacturers in India, which is the global hub for diamond cutting and polishing, giving IGI significant leverage in the supply chain.

What are the financial performance indicators for IGI over the past three years?

IGI has demonstrated consistent growth, with a 32% CAGR in revenue, 36.8% EBITDA margin, and 37.6% PAT over the past three years. These figures reflect the company’s strong operational performance and growing market share in both natural and lab-grown diamonds.

What is the current market situation regarding the prices of lab-grown diamonds?

Lab-grown diamond prices have stabilized after a significant drop in recent years. Although the prices fell by 37% from 2020 to 2023, the market has seen steady prices for the past nine months. IGI is confident that prices will not decline further, as it would make the market unsustainable.

What risks does IGI face in terms of competition, particularly from GIA?

While GIA is a major competitor in the natural diamond market, IGI has a strong foothold in the lab-grown diamond certification space. GIA’s non-profit status and its focus on natural diamonds make it less likely to disrupt the lab-grown market. IGI also has a competitive advantage due to its deep relationships with Indian manufacturers, the center of global diamond cutting.