International Gemmological Institute (India) provides services related to the certification and accreditation of natural diamonds, laboratory-grown diamonds, studded jewelry and colored stones as well as the offering of educational programs.

IGI is one of the most established and reputed certifiers in the global market. IGI India was the first international laboratory for diamond, studded jewelry, and colored stone certification. IGI India is responsible for operating the business under the "IGI" brand exclusively in India and Türkiye.

Currently, the Promoter, BCP Asia II TopCo, owns IGI Belgium and IGI Netherlands, along with their respective subsidiaries. These entities manage the IGI business operations outside of India and Türkiye. As part of the proposed restructuring, a portion of the Net Proceeds will be used to acquire 100% of the share capital of IGI Belgium and IGI Netherlands from the Promoter. Upon completion of this acquisition, the company will become the sole shareholder of IGI Belgium and IGI Netherlands and will take on responsibility for the global operations of the IGI business.

Key offerings include: (1) Comprehensive diamond grading, which involves issuing reports that assess the 4Cs (cut, color, clarity, and carat weight) of natural and laboratory-grown diamonds; (2) Evaluating the quality and authenticity of colored stones; (3) Grading and assessment of finished jewelry pieces; and (4) Conducting educational programs and courses.

To support laboratory-based services, IGI offers digital solutions through online platforms including own website and application programming interface (API), for customers to access their respective grading reports.

India is the world‘s largest center for cutting and polishing diamonds, accounting for approximately 95% of the global volume of polished diamonds in CY2023. IGI India is the largest independent certification and accreditation service provider in the country, holding approximately 50% market share in the number of certifications for diamonds, studded jewelry, and colored stones in CY2023.

IGI holds around 33% of the global market share in diamond, studded jewelry, and colored stone certifications for CY2023. For lab-grown diamonds, IGI leads with a 65% share. In studded jewelry certifications alone, IGI had a market share of about 42% in CY2023.

During the first 9 months of CY24, revenue from the certification of natural diamonds accounted for 17.9% of Pro Forma revenue, while laboratory-grown diamonds contributed 51.6%, studded jewelry and colored stones represented 27.3%, education made up 2.4%, and other categories accounted for 0.8%.

As of September 30, 2024, IGI India boasts the largest pan-India laboratory network for grading lab-grown diamonds. The Pre-Acquisition Group operated 19 IGI laboratories in India and 1 in Türkiye, offering certification services supported by 843 employees, including 316 gemologists. Post-acquisition IGI will have global network of 31 branches, which are equipped with IGI laboratories across 10 countries, and 18 schools of gemology across 6 countries.

As of September 30, 2024, IGI had over 7,500 customers located across 10 countries, including laboratory-grown diamonds growers, natural diamond and colored stone wholesalers, jewelry manufacturers and retailers.

Aims to expand presence in the natural diamond, studded jewelry and colored stone certification market.

Plans to increase footprint in existing markets and establish laboratories in new markets as demand for its services grows. Commissioning a new 214,159 square feet facility in Surat, India, which is expected to be completed in 2025.

Offer and its objects

The IPO comprises a fresh issue of equity shares worth up to Rs 1,475 crore and an offer for sale aggregating up to Rs 2,750 crore by existing shareholders.

The price band for the IPO is Rs 397 to Rs 417 per equity share of face value Rs 2 each.

The objectives of the fresh issue include Rs 1,300 crore for the acquisition of the IGI Belgium Group and IGI Netherlands Group from the promoter, with the remaining amount allocated for general corporate purposes.

BCP Asia II TopCo is the promotor. The promoters and promoter group hold an aggregate of 39,67,83,045 equity shares, aggregating to 100% of the pre-offer issued and paid-up equity share capital. Their post IPO shareholding is expected to be around 76.55%.

The issue, through the book-building process, will open on 13 December 2024 and will close on 17 December 2024.

Strengths

World’s second-largest independent certification and accreditation services provider, with a global market share of approximately 33%, based on the number of certifications for diamonds, studded jewelry, and colored stones conducted in CY2023.

Built strong customer relationships over the years. Serves more than 5 Indian growers of laboratory-grown diamonds with over Rs 100 crore of revenue for FY2023. Also served 9 out of the top 10 jewelry chains in India by revenue for FY2024.

IGI’s global education platform, the IGI Schools of Gemology, serves as a powerful tool for promoting the IGI brand while increasing awareness of the importance of certification within the diamond, studded jewelry, and colored stones industries.

Positioned to capitalize on the increasing demand for certification, fueled by the growing popularity of laboratory-grown diamonds, heightened consumer awareness, and the need for authenticity verification.

One of only three companies worldwide that provide a comprehensive range of services, including grading and classification for various types of stones. Provides certification services for each key stage in the value chain.

The promoter is an affiliate of funds managed/advised by affiliates of Blackstone. Benefits from the resources, relationships and experience of Blackstone.

Strengthening presence in established markets while also expanding into new markets.

IGI laboratories are located in close proximity to customers, reducing delivery times, ensuring faster and more efficient service, and enhancing customer satisfaction.

Weaknesses

Post-restructuring, IGI India will oversee and manage the global IGI business. It faces risks related to exchange rates, regulatory changes, and geopolitical factors.

Dependent on obtaining and maintaining certain approvals and licenses as part of normal operations. Failure to secure or retain them on time could negatively affect the business.

Received letter from the Ministry of Corporate Affairs, Government of India (MCA) alleging certain non-compliances under certain provisions of the Companies Act, 2013. Regulatory actions including fines, penalties may adversely affect business.

The India business is concentrated in Gujarat and Maharashtra, which accounted for 89.41% of pre-acquisition revenue in 9M CY2024. Any adverse developments in these regions could negatively affect the business.

There were certain instances of delays in payment of statutory dues. Future delays in payment of statutory dues could attract financial penalties.

IGI’s business is closely linked to consumer spending on luxury goods, so economic slowdowns or recessions could negatively affect its revenue.

The audit reports for calendar year ended 2023 included emphases of matter paragraph.

Valuation

In 9M CY2024, pro forma consolidated net sales increased by 74% to Rs 788.16 crore, compared to the restated sales in 9M CY2023. The OPM fell 1477 bps to 56.04%, leading to 37% increase in OP to Rs 441.71 crore. OI increased 476% to Rs 31.31 crore. Interest cost rose 290% to Rs 7.25 crore. Depreciation cost went up 214% to Rs 31.16 crore. PBT surged 38% to Rs 434.62 crore. Tax expenses were Rs 117.79 crore as compared with Rs 76.28 crore. Net profit soared 33% to Rs 316.83 crore.

In CY2023, pro forma consolidated net sales increased by 83% to Rs 898.01 crore, compared to the restated sales in CY2022. The OPM fell 1304 bps to 55.23%, leading to 48% increase in OP to Rs 496 crore. OI increased 40% to Rs 11.71 crore. Interest cost rose 296% to Rs 10.42 crore. Depreciation cost went up 263% to Rs 41.86 crore. PBT surged 38% to Rs 455.43 crore. Tax expenses were Rs 124.58 crore as compared with Rs 87.60 crore. Net profit soared 37% to Rs 330.85 crore.

The TTM EPS on post-issue equity works out to Rs 9.32. At the upper price band of Rs 417, P/E is 45. The OPM stood at 55.23% according to Pro Forma CY2023, and the ROE stood at 76.58% according to the restated CY2023.

The global jewelry market, which includes studded jewelry, is valued at approximately Rs 26,600 billion (US$320 billion) in CY2023 and is expected to grow at a CAGR of 3% to 6% through CY2028. As the studded jewelry market expands, the demand for certification is likely to increase as well.

There are no publicly listed entities in India or other foreign jurisdictions with a business of similar scope.