The US administration- led by President Donald Trump has imposed a 10 per cent additional tax on natural diamonds, which affects about one-third of India’s diamond exports. This, according to a report by Crisil Ratings, will exacerbate the impact on Indian diamantaires from already-subdued demand and intensifying competition from lab-grown diamonds (LGDs). In the milieu, export revenues of diamantaires is expected to decline by around 8-10 per cent in fiscal 2026.
That said, Crisil added, calibrated inventory management across the value chain will support realisations, thus helping reduce the decline in export revenues, and limit the erosion of operating margins, helping contain the players’ financial leverage and credit metrics.
Crisil analyzed 43 diamantaires which account for nearly one-fourth of the industry revenue, to release the findings.
In FY25, the export volumes of natural diamonds remained constrained by lower demand from China and competition from LGD in the US. Even as polishers pushed sales during the fourth quarter of the financial year in order to avoid tariffs while the price erosion was limited, revenues from natural diamond exports dropped by 17 per cent to around $13.3 million.
Rahul Guha, Senior Director, Crisil Ratings, said, “This fiscal, realisations on natural diamonds are poised to rebound 3-4 per cent amid limited inventory across the value chain as diamantaires are aligning their rough purchases with visibility in sales of polished diamonds. Additionally, production cuts by miners will curtail price erosion. This contrasts with LGD, whose prices may reduce from a tenth of the price of natural diamonds last fiscal to a twelfth in the current fiscal, resulting in a wider price gap between natural diamonds and LGD.”
The rise in price gap, in turn, could shave a further 12-14 per cent off natural diamond export volumes, marking a third consecutive year of weak demand after an aggregate degrowth of 32 per cent in the last two fiscals, stated the Crisil report. This might make it difficult for the natural diamond polishers to pass on any tariff-led price hikes to customers. For the record, India will remain the primary port of call for polishing diamonds.
Himank Sharma, Director, Crisil Ratings, said, “Natural diamond polishers, traditionally operating at thin margins of 4-5 per cent, will have limited ability to absorb the tariff-induced price rise. As a result, miners and retailers may need to step in to absorb some of the price shocks. Consequently, we believe the operating margins of polishers may dip 20-30 basis points to 4.3-4.5 per cent this fiscal.”
Credit profiles of diamantaires might witness some working capital respite as weak demand will lead to a further 5-7 per cent cut in inventory levels across the value chain, after a 10-15 per cent decline last fiscal. This, Crisil explained, will limit the need for debt-funded working capital, although receivables from export customers will remain monitorable amid tepid demand, geopolitical issues and global uncertainties.
As a result, diamantaires’ financial leverage – total outside liabilities to adjusted net worth – and interest coverage will remain rangebound at ~0.8 time and ~2.5 times, respectively, this fiscal.
All said, Crisil concluded that key monitorables for the segment will be slowing demand for natural diamonds in key geographies, intensifying competition from LGDs, potential revisions in tariffs and rising geopolitical tensions.