Q4 FY 23 con-call notes
Business overview
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Business impacted owing to the record high inflation in US market coupled with high interest rates leading to a squeeze in discretionary spending
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Order book stands at 100 cr – to be delivered in next 3 to 4 months . Running at full capacity utilization currently
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LGD category seems to have bottomed out and margin should improve in the next quarters from what we have seen recently
As per this article (dated Feb 2023) from an industry professional, predicted sales of Lab Grown Diamonds is likely to reach $10 billion mark this year.
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Avg ticket size in LGD for FY 23 is around 1100 $ whereas for natural diamonds its around 530 $ . LGD has a much higher ticket size owing to preference for LGD (natural diamond pricing for same style is 10 times that of LGD.) even if they are spending twice on LGD – they are getting same style & look as Natural diamond. Also owing to Goldiam’s strategy to showcase higher end bridal jewelery, within the LGD space.
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Online vs offline – Offline stores account for 74% contribution while online accounts for 26%. Focusing to grow online sales further in coming year
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Point on capacities coming in Gujarat, Rajasthan region with new players entering. For Goldiam, distribution is the key lever that would be key differentiator vs other LGD players – end to end integration and selling to large US retailers within the desired timeline. That has helped in gaining prominence among US retailers as being a preferred supplier of LGD.
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Focus has always been on distribution, rather than adding capacities without sales/ order book being locked in.
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Most diamonds are manufactured by CVD process. Same process followed by them too and no considerable difference in yield per machine. No advantage as such enjoyed by other LGD players
Future outlook
- As part of plans to mitigate the risk posed by muted demand in US (owing to inflationary headwinds), evaluating markets like India
- Currently at Market evaluation stage. Looking at end of FY 23 – to give concrete information
- Will be using Solitaire in presentation to Indian consumers – this would enhance margins owing to the backward integration.
- Price points likely to be anywhere between 25,000 to 4 lakh Rs
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No single large organized retailer in India is selling LGD currently. Only natural diamond jewelry.
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Evaluating other markets like UAE and Australia as well . UAE as a market is still inclined towards natural diamonds; while Australia market has shown some interest for LGD
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US though remains the largest market. They are the largest consumers of diamonds in the world and remains one of the most lucrative markets in the world. Has a structured customer base. Per unit profitability will be higher. And that’s the reason why the main priority and focus will remain on on US market .
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Point on adding new retailers in US – Prefer to work with top 5-6 retailers (Signet, etc) and look to increase wallet share and ticket size with these retailers ; rather than adding new retailers – which is likely to create more competition in our designs among them and would be unviable for us
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Sourcing of diamond seeds – Sourcing from suppliers in Japan, Germany and Turkey, etc. Pricing has been stable and have seen 15% drop in pricing in last 3 months
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Jewel fleet – will be serving more as a sales tool to sell more Goldiam products to smaller format retailers in US
My takeaway – after an year of explosive growth in last year, the current FY 23 was more of a consolidation phase. We may see one or two more quarters of bit of subdued demand. Once inflation in US eases, discretionary spending should rise from H2 onwards.
I think they are referring to LGD jewellery market here, which is a part of LGD market as a whole.
Disc: Invested
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