International Gemological Institute Limited analyst Q&A

The first question is from the line of Umang Mehta from Kotak Securities. Please go ahead.

Hi, thanks for the opportunity. My first question is on yo ur outlook for FY27 on both growth and margins. I hear you mentioned 15% revenue growth and 20% EBITDA growth. Possible to share any color in terms of segment-wise how are you thinking about the year? And in terms of margins, any tailwinds from INR depreciation that we have kind of factored in?

Hi, Umang. Yes, thanks for this question. Yes, I think over the last two years, the company has been intending to deliver around 15% of revenue growth and 20% of EBITDA growth. So that trend is what we expect to continue for this financial year as well. Again, the quarter performance obviously has been driven exceptionally by the growth in LGD and as well as natural diamonds as well as, yes, lab-grown jewelry. We've had a little soft quarter on natural diamond jewelry. We expect the major chunk of the growth to come through increased capacity build -up that's happening in LGD and our increased penetration in natural diamonds. So I think those two strategic priorities which have been on record for the last two years continues to be our core focus areas and we expect to, you know, build on whatever strength we have at the current moment. From a margin standpoint, I think our focus has been in terms of ensuring that we make the right investments for the business. While margins are important, but that is not the sole driver of the decisions that we take within the organization. There are significant interventions , etc that we are working on. Tehmasp mentioned about AI, ML, that work, that project is going on. There is a big focus on building the brand in terms of various brand initiatives , etc. So from that standpoint, I think these are critical investments for the long haul. We don't expect any erosion of the margins, so we will ensure our guidance for the year should be to maintain margins at the same levels as what we have seen in the last year.

Got it. Thank you. And the second question was on your performance of subsidiaries. Possible to share any color on how both of them have done for the full period?

See, I think just to set this in context, we have businesses which roll up to the holding company in Belgium, which has the Belgium and the US business under it, and we have the other businesses rolling up under Netherlands. Importantly, we need to understand that the Belgium and the US office, they play a very critical role in engaging with the retail considering that these are the largest markets from a consumer standpoint. With the strength and leverage that IGI has in India, working closely with the growers and where, you know, we work very closely with the growers and manufacturers here, our teams in the US and Europe are therefore expected to engage with the retailers so that they partner with IGI as their certifier of choice. I think from that context, the business has been doing pretty well. The subsidiary business delivered around 14% revenue growth for this quarter and EBITDA growth of over 25%. EBITDA margins have also slightly improved, 100 basis points in the subsidiary business for this quarter. Obviously, we are also making significant investments from a leadership recruitment standpoint in the US, etc. which, you know, ties in with our strategy to build greater focus and scale up the business in the US. That combined with the AGL acquisition, you know, these are important steps that the organization is taking to ensure that the synergies of the brand that AGL gets with the operating size that IGI has, we are able to therefore scale up some of the oth er businesses in conjunction with the gemstone certification opportunity that AGL presents to us. So, I think the quarter has been good, not only in India but also the subsidiaries, and we hope that this trend continues into the future as well.

Sure, Eashwar. Thank you so much and all the best.

Thank you.

Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead.

Yes, hi, good evening. So just had two or three questions. First was on the, you know, strong realization growth. You mentioned mix is the key driver here. Just wanted to get your sense, Eshwar, that is pricing per segment, has that continued to be stable like it has been in the last two quarters? Is that a correct assumption?

Hi, Harit. Yes, we haven't had any structural changes to the pricing during this quarter, Harit , that continues to stay okay.

Okay. And any broad outlook you have on that for, you know, the near to medium term? Do you think that it should broadly remain , pricing should broadly remain in the same range and then whatever happens to mix happens depending on the growth? Is that the right way to think about it?

Yes, that's the right way to look at it, Harit. I think mix finally is a derivative, is just an outcome, yes, just an outcome. But yes, our focus remains on ensuring that each of our core business segments continue to perform well.

Great, fantastic. The second thing was on natural diamon d jewelry bit. So, you've seen two quarters of value growth coming down here. Do you look at this only as domestic jewelry market, you know, shifting more towards gold, that near -term impact that's there which is affecting the segment overall? Is that the right way to think about it and should that normalize? And within natural diamond jewelry, if you could just give a little bit of color on, you know, how your US initiative in terms of the leadership change that you alluded to, how that is fructifying, any key account wins, or anything which you can kind of, you know, give any color to?

Yes, so I'll take the second question first, Harit. I think we're building up a leadership in the US. We have had a new recruit who's been in this , now in, our organization for three, four months. We are also helping to fortify the sales organization there. So, there is going to be a little bit of work that has to happen in terms of building an organization to meet the requirements of, you know, sustaining a growth business in the US. So that is work in progress currently. And coming to your first question, yes, thanks to the increased prices of gold coupled with the volatility, I think that is what is causing a little bit of distress is what we understand from the market. We'll see how that pans out. Hopefully, things settle down over the next quarter or two and hopefully this comes back on track.

Great. My final question was on the comment that you made that, you know, there has been capacity additions in the Indian market from the grower perspective. Could you give a little bit more color on this, you know, in terms of -- given that prices have not really kind of gone up at their wholesale level, you know, what's driving capacity addition? Is it just the kind of volume off-take that they are seeing in the global market, Indian market that is driving this? Some sense on this?

Yes, we alluded to this last time as well, Harit, in terms of the expectation that the industry is having, is probably, to double from wherever they are today over the next three years. I think that has been one of the key considerations because there is still a lot of demand that's still coming in and that's the reason why people are adding a little bit more capacity. So, I think, again, these are initial days for the lab-grown is what we believe because the Indian consumer has also come into the fray, right, hopefully in the near future. We see some of those trends in the way lab-grown jewelry business is moving as far as IGI is concerned. I guess these are just starting points for this segment.

Absolutely. And last is bookkeeping on other expenses. You mentioned there's a n INR 25 million additional in the standalone to the subsidiary, right, which obviously gets netted off at a consolidated level.

No, this -- see, there are two elements there. There is a commission payout that happens, that gets eliminated. This 25 million is just an expense. There's no elimination there. So that's the reason you see a slight impact in the India EBITDA margin, but at the group consolidated level, the EBITDA margin has remained at the same levels.

And the INR 25 million, if you could just repeat as to why -- as to what was it regarding? Sorry, I missed that part.

We have had some expenses regarding the entire acquisition process for AGL etc.

Got it, got it. Oh, okay, got it. Perfect, perfect. Wish you all the best. Thank you.

Thank you.

Thank you. The next question is from the line of Smit Gala from RSPN Ventures. Please go ahead.

Yes, thank you for the opportunity and congratulations on a good set of numbers. So, my first question was, in the last quarter earnings call, we alluded that we are increasing our capacity in terms of gemologists, number of gemologists. So, in this quarter, we have not seen the reflection in the employee expenses, which is also after the acquisition of AGL. So when does the employee expenses see an increase given that we are hiring -- we are giving a massive hiring project?

See, I think, Smit, thanks for this question. I think if you would look at from a quarter standpoint, I think our employee benefit expense is up. So I think if you look at it from a quarter-to-quarter standpoint, the employee expense is up 16%. That's obviously because there has been additions not only in India but also in other geographies. And versus the previous quarter, I think the previous quarter already had soaked in some of those expenses. If I look at the numbers, INR 71 crores was the employee benefit in Q3 of CY25, which then became INR 73 crores in Q4 CY25, and this is Q1 CY26 is around another INR 74 crores. So slowly that is getting buil t up for some of the investments that we have made on people and capability within the organization. Smit, you there?

Yes, yes. I'm here. Yes, thank you. That was helpful. My second question will be, like, we have given that 16% to 17% volume growth, but while I tried to analyze the India export numbers for gems and jewelry, they have seen a decline continuously. So how is our company able to deliver the growth where export data as a whole is not showing promise?

Smit, I think this export data is in rupees or dollar million. I think you have to also look at it from a carat standpoint. Because what has happened is there is an increasing mix shift towards lab-grown stones which is getting exported, and while the carats have probably doubled, I think, from whatever I saw last time, obviously because of the way the pricing has evolved over the last two to two and a half years, I think there is a , the rupee component has probably remained the same. I think we have to look at it from a volume standpoint and not just value.

Okay, that was helpful. Thank you. I'll join back the queue.

Thank you. The next question is from the line of Pallavi from Sameeksha Capital. Please go ahead.

Yes, thank you for taking my question. This was again continuing on this previous comments on the marketing side, right? I just wanted to understand what's the team size there now in the US and, you know, to what size do we want to take it to?

Sorry, Pallavi, we are not very clear. Can you just repeat the question?

Yes, sir. So my question was on regard to what you mentioned earlier about the marketing team in the US, you know, and the ramp-up. So, you know, what's the size now and if we can have a sense of where we want to go in, you know, how long will that take?

See, our US offices actually operate as a marketing office where they are in touch with the retailers in the US and they get exact requirements of what the retailer wants in the US market. And that is translated to us and we certify accordingly. We are at the manufacturing end, so US is the marketing end for us and they give us all the relevant information what a US consumer and the US retailer wants . So, from that perspective, this information is translated to us and to the manufacturing units in India and we certify accordingly. So that is how we are ramping up the US marketing effort.

Right, I understand the marketing. So I just wanted to know the number of people we have for that on the street there.

No, I think our staff strength in US is not very large, but I think what the point that we are trying to make is we are trying to build some capability in the sales organization to capture the market there because it's such a large country, right? So we have to slowly build that capability. I think that's what we were alluding to in terms of building that capability for the long term.

Right. And natural diamond, which share we had gained in third quarter, does that continue for the US in particular?

Sorry, come again?

The natural diamonds on that side we had gained some market share in third quarter in the US is what you had alluded to. Is that continuing and how's that?

Yes, in quarter one (CY) we've grown 10% on natural diamond in what has been a very tough market. So I think our efforts continue in the same direction in terms of trying to, you know, build greater credence into that segment. Yes.

Right, okay. And my last question would be on this, you know, the export data that you mentioned about the value and, you know, LGD. So that would also in terms of volume what would have been India's growth in that? Would that number be available for LGD volume, carat- wise? Yes.

See, we have some information but again, it's not available in the public domain. These are just guestimates that we have basis what we speak to a lot of people in the i ndustry. But our understanding is , and it's logical actually because given the fact that the volumes have continuously been pretty robust and given the fact that prices corrected in the last two years, I think that corroborates with what people in the industry also talk. So I think from that standpoint, I think the volume data is something that we need to look at.

Right. But the US is fairly mature on the natural diamond side. So I was just trying to understand, you know, what is -- sorry, not natural, on the LGD side I believe it's like for engagement it's more than 50%.

Sorry to interrupt, but Pallavi, can you please re-join the queue for the follow-up question please?

No, I'll just take that question. I think, Pallavi, just to wrap this up, I think while the estimates are over 50% adoption for lab -grown diamonds, but what we understand is there is still over 40% still left, right? So I think that aspect is what is givin g this sort of momentum as far as manufacturing capacity ramp-up in India is happening.

Right. So that's happening for the US market you're saying but right now but earlier you alluded to it's India. It's just the same, you know, it's the same thing.

No, I didn't get that question, Pallavi. I'm sorry.

No, I'm just -- earlier we said that, you know, this growth in Indian capacity is to serve the India market, but right now you're alluding to...?

No, I'll just clarify. I understand. I'll just clarify. What we mentioned is, the US has been the first adopter of lab -grown and they are the largest player as far as consumption of lab -grown diamonds is concerned. What we are alluding to is the fact that the Indian co nsumer will also come into this mix going forward. And some of the lab-grown jewelry growth that you are seeing is because of the retail explosion that is happening in India as far as selling of lab -grown jewelry is concerned. So while the US has been the place where lab-grown has taken off the first, we expect that trend to be emerging in India as well.

Right, got it. Thank you so much.

Thank you.

Thank you. The next question is from the line of Shravan Vora from Morgan Stanley. Please go ahead.

Hi, good evening to the management. Many congratulations on a good set of numbers. I actually wanted -- and I know you touched upon that when we were talking -- when you were guiding for the 15% top-line growth for the coming year, the two important segments you spoke about was continuing growth in LGD and natural diamonds. Could you briefly just talk about the drivers a little bit on those two for us?

Hi, Shravan. Good evening. I think obviously the key drivers for us from a natural diamond standpoint is getting more customers into our bouquet of -- who come and work with us. I think we have obviously created a separate vertical to focus on natural diamond. We have a business leader with tremendous experience in this field. So, I think the focus on natural diamond continues to be in terms of getting more customers into our basket, number one. And lab -grown, as we talked about, I think the capacity additions that has happened is what could be the -- and we haven't seen the full impact of all of the capacity that's getting added because these happen over a few months , etc, for the capacity to ramp up. So, we expect that to also kick in as we get along the road during this course of this year.

Just to add to what Eashwar said, see you have to understand that the manufacturing is all done in India, whether it is natural or lab-grown. And we are at the manufacturing end and our offices globally are at the retail end. So, when we receive all the information of what the retailer or the consumer wants in that geography, we transfer that information to the manufacturers in India, whether it is lab -grown as well as natural. And that is our unique advantage where we merge th e two geographies together and settle all their requirements. And that has given us the strength to vector up in our endeavor.

Right, got that. And just the second question from me, sir, is that ASPs in the last two quarters have actually don e quite well. How should we look at ASPs for the coming year? And just attached to that, you mentioned that you would continue to make investments and EBITDA growth of 20% is what you guided for? So, if you could just highlight some of the investments other than the marketing investments that you're making both in the US and India. So just those two , one is on ASP and the other what kind of investments we are making.

I think, Shravan, two important strategic pillars. One is the brand salience piece in terms of investments in building up the brand awareness etc, especially in line with getting the consumers to know the need and the importance for a third -party independent certification. I think that is the context in which we want to build that sort of communication directly with the consumers. I think that is an important strategic pillar for us. Number two is building capability in the US in terms of a structured sales organization, because there is significant potential in the US, cou pled with the fact that we have also acquired AGL. So, I think all of those things -- so our strategic -- so these are the two large strategic pillars in which the organization is working. Coming to the ASP question, I think we have discussed this in the p ast. There is a lot of discussion that happens on ASP. We believe that this is just a derivative. So long as we are able to deliver a 20% volume growth with a 15% to 16% revenue growth with a corresponding EBITDA growth, I think that should be what we should be focusing on. Because there are quarters in which the jewelry mix will go up and correspondingly the ASP drops. You know, so those things have been discussed over the last five, six quarters. I think we'll see how that goes. Normally the first quarter of the year, effectively, which is effectively the end of the year because of the change in the financial year. But this quarter Jan to March normally we see a ramp -up of lab -grown mix in the business, which slowly tapers down as we get along the year bec ause then we have the quarter three and the quarter four on Christmas and Diwali and etc, etc. So, I think we should just expect the same trend to continue. But again, from a management standpoint, our focus is in terms of volume, revenue, and EBITDA growth rather than too much of focus on ASP.

Got that, sir. Thanks a lot for that and all the best.

Thank you.

Thank you. The next question is from the line of Umang Shah from Banyan Tree Advisors PMS. Please go ahead.

Hi, sir, good evening. Thank you for the opportunity. Sir, first question was, in the previous quarter's presentation, we had given our market shares and in those natural diamonds loose, our market share was almost 55% to 65%. Sir, our understanding was that we are the second largest player in natural diamonds, not the largest ones in terms of certification. Can you just clarify this?

No, you're right actually, Umang. We are the second largest player as far as natural diamo nd is concerned from a global standpoint. India, I think we command a decent position in India. I think we must be close to leadership here in India. But again, we measure ourselves in terms of the global share because obviously the largest player in this segment is still the US. So, I think our endeavor therefore is to find ways and means to improve that market share from a global standpoint.

Would you be okay calling out our global market share in natural diamonds?

See, these are again estimates for us, Umang. There is -- so we expect -- we think that our market share in India probably is in surplus of 50%. Globally, I think we must be around the 20% to 25% range.

Sure. And sir, one more data point from that presentation was that almost 30% to 35% diamonds, both natural and loose, are uncertified. What could be the reasons for the same?

These are more for the smaller sizes and less relevant from the commercial value. All the high - end diamonds and larger sizes are generally certified and that is where the game is.

Got it, got it. And sir, in studded jewelry also you've mentioned that almost 60% to 70% is uncertified. Do we see that as an addressable market for us or not really?

This was in the previous quarter. Ye s, this was in the previous quarter's presentation, Slide number 30. This year not put in this year's -- this quarter's presentation. This was in the last quarter's presentation.

I think probably okay, I think this probably must be Tier 2, Tier 3 towns where probably certification is not as people are not as aware.

So, we are even taking action to also go into the second and the third-Tier cities.

Sure, sure. That is useful. And just final question...

No, one second. I think that from a natural diamond jewelry certification, I think our share in this segment would be around 60% to 70%. You are basically saying 70% is going uncertified, is it?

Yes, yes.

On LG. On LG, is it.

On LG, LG studded jewelry?

Studded jewelry, okay. Okay. Probably I think these are, as to Tehmasp's point, I think these are small size stones which finally end up in jewelry and there is no probably a commercial proposition to have this certified at the loose stone level.

Okay. And one more question was that this year we see that the subsidiaries are profitable, both the subsidiaries, and full year margins are around 8% net margins. We have India margins which are exceptionally high. Two, three years down the line, where do we see the EBITDA margins or net margins of the Belgium and the Netherlands entities?

See, Umang, I think we have to look at this business in its totality. I think to Tehmasp's -- what Tehmasp also mentioned, I think while India is the manufacturing hub or the back-office hub of the world as far as cutting and polishing is concerned, the markets are still in the US from a retail standpoint. So, there is an important strategic play for what the teams in the US and Europe actually bring to us. So, from that standpoint, I think that is the reason we talk of a "One IGI" concept. We leverage the strength of the retail markets in other parts of the globe with the manufacturing strength in India. So, most of the certification happens here in India. And to the point that was discussed during the financials, there is obviously a large commission payout that has happened to Dubai and US. So that's the way it pans out because customers get identified by our local teams who then end up in India for certification. So, I think let's look at it from a totality standpoint. Yes.

Fair point, sir. Thank you so much.

Thank you. The next question is from the line of Bharat from MC Research. Please go ahead.

Yes, sir. Thank you for the opportunity. Sir, my question is on the margin side. So, in your FY27 guidance, you've indicated revenue growth of 15% and EBITDA growth is slightly high at 20%. Just wanted to understand the levers for the same. That is my first question.

Again, Bharat, I think this is more of operating leverage. Our business model is pretty straightforward. Some of these incremental revenues actually flow into the bottom line , and that's the reason why we are guiding for a faster EBITD A growth versus revenue growth. So structurally the business gives us that sort of leverage.

Fair enough. And sir, you guided for 15% revenue growth. Just wanted to understand the key reasons for it, I mean the key levers for that. So, do you foresee an increased market share both in LGD and natural diamond, or is it more to do with increased geographical penetration? So, what would be the important driver for that level?

No, Bharat, I think the focus for us is all the four large segments and the fifth segment that's got added now is gemstones thanks to the AGL acquisition. So, each of these have to kick in and that's what the management's endeavor is. Whether it's 15%, 17% volume growth, we don't know, but these are just broad guidelines in terms of what we see is happening within this business. So, I think, ye s, last year we obviously over-delivered to whatever was the guidance. Let's see how this year pans out. It's just the first quarter.

Okay. And last question from my side is that LGD -- you talked about increased capacity in the LGD business. So, in which geography you're seeing increased capacity addition? Is it more on the US side or the Indian side, or do you see any other market, increasingly adopting the LGD? So that would be my last question.

Bharat, the manufacturing capacity is in India, in Surat. The marketing requirement is different, but the increase in capacity is all done generally in Surat in India.

Okay, understood. Thanks, and all the best.

Thank you. The next question is from the line of Shwetha from ithought PMS. Please go ahead.

Hi, sir. I just had one question regarding the LGD loose certifications. I just wanted to see if we're seeing any change in the format of the certificates that take place in the near to mid-term.

Shweta, we are committed to identify ing a gemstone or a diamond along with the 4Cs. Ours is an independent certifying body and we will not deviate from the traditional 4Cs certification. So, we are committed to keep our certification on lab -grown as well as on natural diamond according to the 4Cs that has been there for nearly a century.

In fact, the retailers enjoy this because everyone is so conversant with the 4Cs that any new nomenclature which doesn't really support the 4Cs is confusing.

Okay, understood, sir. And one more question is, d o we have any long-term contracts with any retailers or is it like an order basis?

No, we have contracts with the manufacturers, you know. So those are ongoing, yes, those are ongoing.

Okay. And these are volume-based, sir?

These are -- yes, these can be scaled on the volume, yes. You're right.

Okay. So, these are long-term contracts?

Yes.

Okay, sir. That's it. Thank you so much and all the best.

Thank you. As that was the last question for today, I would now hand the conference over to the management for closing comments. Over to you, sir.

Okay, I think thanks everyone. This has been quite participative. And in case for a shortage of time, we've been unable to address any of your queries, please reach out to us and we shall be happy to clarify on any other doubts , etc, that you may have. Thanks once again for everyone. We look forward to seeing you next quarter. Thanks.

Thank you very much for everyone.

Thank you. On behalf of International Gemological Institute Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.