Blackstone polishes its diamond bet to perfection
25/09/2024 03:05
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Shritama Bose
MUMBAI, Sept 25 (Reuters Breakingviews) - Blackstone
BX.N is grabbing at some of the sparkle from India’s booming
equities market. Steve Schwarzman's investment firm plans to
list a certifier of diamonds at a valuation seven times what it
paid last year to buy the company from China's Fosun
International 0656.HK and Belgium's Lorie family. Listing the
business in the world's second-largest market for the rock makes
sense, and will bag the U.S. buyout firm a sparkling return.
International Gemmological Institute certifies one-third of
the world’s diamonds, studded jewellery and coloured stones,
according to its prospectus. Most of its clients are based in
the cutting and polishing hubs of Mumbai and neighbouring
Gujarat state, and nearly all of its top line originates in the
country.
Crucially, IGI will use almost a third of some $470 million
IPO proceeds to buy its units in the Netherlands and Belgium,
where IGI was founded in 1975, from Blackstone. After the rejig,
the private equity giant will remain the controlling shareholder
and the company will become an Indian-led entity. That helps IGI
list in the South Asian country and target a valuation of $4
billion, as Moneycontrol reported last month, citing an unnamed
source.
That headline figure looks polished, rather than punchy. It
equates to 68 times EBITDA for 2023. None of IGI’s peers - the
nonprofit Gemological Institute of America and Belgium’s HRD
Antwerp among them - have publicly traded shares. Indian bling
sellers Titan TITN.NS , backed by the Tata Group, and Kalyan
Jewellers KALN.NS , are adorned with multiples of 64 and 54
times EBITDA.
IGI is growing fast and is more profitable than both those
Indian companies. Its top line grew 30% in 2023, outpacing Titan
and just shy of Kalyan's 32% growth in the year to the end of
March. The diamond company's 37% net profit margin for 2023 is
five times that of Titan and more than 10 times Kalyan's.
Unlike certifiers, jewellers have a more diversified range
of products that could see them through periods of poor demand
for studded pieces and price downturns. And while India is
experiencing a surge in its love for diamonds, displacing China
as the top buyer of the natural variety, Indians have cared
little so far for the lab-grown variety of the gem, which
accounts for 60% of IGI’s revenue.
Nonetheless, with rosy projections laid out in IGI's
prospectus for a double-digit rise in jewellery consumption over
the next five years, Blackstone's polishing up of its diamond
bet appears well-timed.
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CONTEXT NEWS
Blackstone is eyeing a valuation of around $4 billion for
jewellery certifier International Gemmological Institute in a
Mumbai initial public offering, news website Moneycontrol
reported on Aug. 27, citing an unnamed source.
The offer will comprise new shares worth up to 12.5 billion
rupees ($149 million) and existing shares worth up to 27.5
billion rupees ($328 million), per the draft prospectus.
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Graphic: India's share of jewellery sales is rising https://reut.rs/4gqWsSQ
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(Editing by Una Galani and Ujjaini Dutta)
((For previous columns by the author, Reuters customers can
click on BOSE/ mailto:shritama.bose@thomsonreuters.com))