Shining bright: The rise of lab-grown diamonds in India

Traditionally, gold has held a special place in Indian culture compared to diamond, and is often seen as a safer investment with strong resale value. However, the diamond market is undergoing a significant transformation, particularly with the rise of lab-grown diamonds, attracting younger, eco-conscious consumers.

Recent moves by major players like Tata Group’s Trent and Senco Gold and Diamond highlight this shift. While Trent’s new subsidiary, Pome, aims to tap into the growing demand for lab-grown diamonds, Senco Gold is expanding its reach by creating a separate subsidiary, SENNES Fashion. Senco is also reportedly in advanced discussions to acquire D2C lab-grown diamond player Melorra in a Rs 50 crore deal. 

These strategic moves reflect a growing recognition of the lab-grown diamond sector in India, which is still establishing itself compared to the American and European markets, where it has a stronger foothold. 

The Indian lab-grown diamond jewellery market is expected to grow from $299.9 million in 2023 to $1,192.3 million by 2033, at a CAGR of 14.8%, according to management consulting firm Technopak. 

How is it made?

Lab-grown diamonds, also known as man-made diamonds, are manufactured by replicating geological processes in a laboratory on a graphite chip or diamond seed. 

They are physically and chemically identical to mined diamonds, making it almost impossible to differentiate between the two without specialised equipment. 

After the diamonds are manufactured, a process that takes between 15 days to a month, it has to be cut and polished by hand, just like mined diamonds, by skilled artisans known as kaarigars. 

“China used to be a 70%-80% supplier of lab-grown diamonds historically. But from my understanding, almost 30%-40% of global lab-grown diamonds are now coming out of labs out of Gujarat in India,” notes Ankit Agarwal, Managing Partner at Alteria Capital, which counts Giva, Bluestone, Melorra, and recently funded Grown diamond company Aukera in its portfolio. 

While China manufactures diamonds using the High Pressure High Temperature (HPHT) technique, Indian labs manufacture these using the Chemical Vapor Deposition (CVD) technique, which is more economical than HPHT. 

Moreover, Surat’s reputation as a hub for cutting and polishing diamonds and the availability of skilled kaarigars at competitive wages not only attracts businesses but also helps keep manufacturing costs low.

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Affordable and democratized

The pricing of mined diamonds is often influenced by syndicates and cartels that maintain high prices by creating artificial scarcity. In contrast, lab-grown diamonds are subject to market forces of supply and demand, resulting in more competitive pricing.

“Because of technological advancements in the growing process of lab-grown diamonds and the global demand and supply scenario in the trade, the prices of lab-grown diamonds have seen a little fall in prices. Moreover, the margins at the manufacturing level have been curtailed a bit because of more competition,” clarifies Nipun Kochar, Founder and CEO at Jewelbox, a Shark Tank India fame lab-grown diamond jewellery maker. 

There is no further scope for prices to correct any further, anything beyond that will be just competitors trying to undercut each other, but that will be short term, clarifies Ishendra Agarwal, Founder, GIVA, a jewellery platform.

As per current prices, a 1-karat lab-grown diamond is priced in the range of Rs 75,000 to Rs 90,000, while mined diamonds with the same colour and clarity would be priced in the range of Rs 6-10 lakh, noted Aukera’s Mukhedkar. 

“Diamonds were earlier sold primarily as an investment. Now, consumers are waking up and instead of looking for resale value, they’re starting to consider the opportunity cost of investment in diamonds (especially grown vs mined), and that is therefore changing the entire narrative. A lot of people are just thinking of buying stunning looking luxury items, without being driven by how much the value will appreciate in future (almost like an iPhone),” says Darayus Mehta, Co-founder of True Diamonds, a D2C player in the lab-grown diamond space. 

Since lab-grown diamonds are almost 10 times cheaper compared to natural diamonds, customers are realising the high opportunity cost associated with mined diamonds. They can buy a lab-grown version and invest the remaining money and get better returns than hoping for appreciation in mined diamonds. 

“In lab-grown, if you’re spending only 1/10th of an amount compared to mined diamond, then you’re actually buying it to just wear it and may not care so much about resale value. Resale value becomes a lot more important for a much higher ticket value purchase. Although, LGD players are also offering buyback options to their consumers,” says Alteria Capital’s Agarwal.

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Feel Good Factors: Sustainable and Ethical

In addition to their affordability, lab-grown diamonds also come with additional selling points such as being environmentally friendly and ethically sourced, that is without a blood diamond tag. 

Moreover, since the entire process of making a diamond is controlled to the last Celsius, it allows manufacturers greater control over the cut and colour of the finished product. Lab-grown diamonds come with more variation and sizes, and less wastage when compared to mined diamonds. 

“For lab-grown diamonds, everything is done to a prescription and every part of the manufacturing process is controlled. Therefore, the outcomes and sheer value you get is unimaginable. Add to that, is fair margins unlike mined diamonds,” highlights Lisa Mukhedkar, Co-founder of Aukera, a lab-grown diamond jewellery brand. 

Besides the usual cuts and colours, Aukera offers at least three different types of colour options like aqua blue, champagne, and pink sky for its diamonds along with a plethora of cuts. 

The festive season has been extremely glittery for lab-grown diamond players this year. Jewelbox sees a 300% rise in its festive season sales this year as compared to 2023.

GIVA Founder Agarwal says the company expects to get 20% of its revenues from lab-grown diamonds by the end of this year after piloting them just six months ago. The number is expected to be around 35% to 40% by the end of the next financial year. 

Rocky road ahead

Since mined diamonds are sold at huge markups on retail fronts, it is impossible to create an ecosystem that would allow cross-selling and keeping the same diamond in the loop like gold and other precious metals. 

While some of the prominent lab-grown diamond players like GIVA, Jewelbox, and Limelight offer buyback and exchange policies similar in quantum to those available on mined diamonds, it is unlikely to be a key differentiating factor. 

Pricing for lab-grown diamonds is decided purely by market forces, instead of any regulatory or international body. Brands will increasingly avoid talking about the per carat rate anymore and instead just focus on selling stunning jewellery, resulting in differential pricing across brands. Therefore, it will be tough to create an ecosystem that allows for exchange and buybacks between brands, notes Mehta.  

Players like GIVA are extremely bullish on the sector and plan to use 40 to 50% of the primary amount to hold inventory for lab-grown diamonds. It has raised a total of Rs 525 crore in its Series B round from Premji Invest, Epiq Capital, and Edelweiss Discover Fund, of which Rs 270 crore was from primary transactions.

The sector may seem lucrative for new-age players who don’t have skin in the mined diamond space, but it is much more difficult for legacy brands to carve a share here. 

“It could be tough for larger incumbent brands to do it in a major way because they may severely cannibalise their own product since most of the business revenue, and margins are coming from mined diamonds. However, there will be a market for both and grown diamonds will only expand the overall market with larger reach due to better affordability,” says Alteria Capital’s Agarwal. 

Players focusing specifically on lab-grown diamonds may have a significant advantage in this space in terms of building early trusted brand positioning, believes Alteria Capital’s Agarwal. 

Even among lab-grown diamond players, trust, style, and distribution are key for brands to perform well and pull customers in.

“It requires capital. You'll require strong capital to market. There is an inventory cost, there is a Capex cost, and it’s a very offline-driven market, which requires stores and heavy capital expenditure. So, whoever gets the initial thrust of capital support will have a significant advantage,” notes Agarwal. 

The Gems and Jewellery Export Promotion Council (GJEPC) has called on the government to implement strict regulations requiring traders to clearly indicate whether a diamond is natural or lab-grown in their marketing in order to eliminate confusion.

While some brands and upcoming players are seeing and marketing lab-grown diamonds as a competitive advantage, the industry is still in a nascent stage for clear terminology and standardised regulation. 

“What makes it a lab-grown diamond is that it is made of 100% carbon and is structurally and optically identical to a natural diamond. So, asking lab-grown diamonds to call themselves synthetic is ridiculous. Why should we call ourselves synthetic” says Mukhedkar of Aukera.