Top 3 Diamond & Jewellery Stocks that Could Benefit from Iran-Israel Conflict

Is a war on the cards soon?

Well, nobody has an answer to this question. I am talking about the current tensions taking place between Israel and Iran which has been in the limelight ever since Iran launched its largest missile attack on Israel.

But what's in it for India from these geopolitical events?

Some Indian companies have a presence or business connections in Israel. For some of these companies, the impact could be limited, while others may face more significant challenges.

One of the most prominent sectors that could gain from the Israel connection is the diamond sector.

The ongoing Iran-Israel conflict will likely benefit India's cut and polished diamond exports due to a decrease in Israeli shipments.

If the supply of cut and polished diamonds reduces from Israel to the world markets, India will be able to gain.

Israel and India are competitors in the global market for cut and polished diamonds. So, any drop in supplies from Israel would help Indian exporters.

The US and China are the major importing nations from India and Israel. Israel is the fifth largest exporter of cut and polished diamonds in the world, while India is the biggest.

The precious stones have witnessed a huge fall in prices lately. This is even as the country sits on a huge stockpile of diamonds. The supply of rough diamonds from Israel to India is also expected to be impacted. This would allow Indian exporters to bring down their inventory.

India's export value of cut and polished diamonds was US$ 15.9 billion (bn) in FY24. The export value of cut and polished diamonds fluctuates, but the financial year 2024 was the lowest value since 2009.

India's cut and polished diamond exports in FY24 plunged 27.5% from a year ago due to sluggish demand from the United States, China, and the United Arab Emirates. India's diamond exports were down 20% in the initial months of FY25 to about US$ 5.62 bn.

In the first seven months of this year, Israel's diamond exports have fallen by a third and if the geopolitical tension continues, it may fall further.

Let's look at a few companies in the diamond and jewellery segment that stand to profit from the Israel -Iran conflict.

1. Rajesh Exports

Rajesh Exports Ltd (REL) is a leading exporter of cut diamonds and polished in India. The company is a gold refiner, manufacturer, and exporter of gold products.

It is the only company in the world with a presence across the entire value chain of gold from refining to retailing, processing 35% of gold produced in the world.

The company is the only government-recognised five-star export house in the jewellery sector. It exports to more than 60 countries.

It also sells its products wholesale and retail in India and through its retail showrooms under the brand name Shubh Jewellers. REL along with its subsidiaries has set up various manufacturing facilities in India and other countries.

The company's topline decreased by 29.5% year-over-year (YoY), while profits plummeted by a staggering 96.1% YoY. In comparison to the previous quarter, the revenue declined by 34%, but profit saw a remarkable increase of 137.5%.

The company reported a decrease in Selling, General & Administrative (SG&A) expenses, which declined by 3.42% quarter-over-quarter (QoQ) and decreased by 22.3% YoY. This reduction in expenses indicates a tightening of operational costs amid declining revenues.

Rajesh Exports' operating income was up by 115% QoQ, though it decreased by 91.2% YoY.

The company has been entangled in various compliance-related issues, including instances of missing documents during earnings filings and tax-related controversies, coupled with declining revenues.

Despite the recent financial challenges, the company retains some market confidence.

The company has ambitious expansion plans in retail to increase its profitability, these plans require large-scale and meticulous execution capabilities.

Rajesh Exports is focused on increasing its exports to various international markets. Currently, the company aims to penetrate new markets, enhancing its global presence and sales.

The reduction in customs duty on gold from 15% to 6% in the union budget for 2024-25 will boost the gold demand in India.

The increase in gold demand will directly benefit gold-related companies. This helps improve the revenue and the financials of Rajesh Exports as well.

2. Asian Star Company Ltd (ASCL)

Incorporated in 1971, Asian Star Company Ltd is in the business of diamond cutting and polishing, jewellery manufacturing and retailing, and wind power generation.

Asian Star is a diamond jewellery manufacturer that started in Mumbai in 2000. They are known for their innovative designs, production, and craftsmanship.

ASCL procures rough diamonds at the group level and processes them into cut and polished diamonds in their manufacturing facility in Surat, Gujarat. The polished diamonds are then sold across the globe.

The company is focused on the cutting and polishing of diamonds (CPDs) small size diamonds (less than 1 carat) which are used in studded jewellery.

Additionally, the company's other segment includes wind energy generation. Asian Star offers a wide range of products including generic diamonds, certified diamonds, mine-origin program diamonds and special-cut diamonds.

Its clientele includes jewellery manufacturers, retail chains and e-commerce businesses in various regions globally, such as Asia, Europe, the United States, the Middle East, Australia and South Africa.

The company's exports account for 56% of the total revenues of the entity.

Besides its subsidiaries in Hong Kong and UAE, ASCL has 18 marketing arms spread across Asia, Europe and the USA.

The company's consolidated turnover stood at Rs 35.2 bn, compared to Rs 44.7 bn in the previous year mainly due to headwinds in the overall diamond industry.

The company has earned Rs 15 bn in foreign exchange by way of exports.

The company's mainstay diamond business, despite the challenges, generated revenues of Rs 28.9 bn, while its jewellery segment contributed Rs 6.2 bn.

Asian Star recently opened a 4,000 sq. ft. manufacturing unit in Surat to meet the growing demand for its jewellery business. The company aims to expand the unit to 15,000-20,000 sq. ft. in the next two years.

Going ahead, the company is planning curated jewellery events and collaboration with top international and Indian designers. Alongside, Asian Star is expanding its Seepz facility to 7,000 sq. ft. to create an innovation hub for international jewellery operations.

3. Mini Diamonds (India) Ltd

Incorporated in 1987, Mini Diamonds (India) is engaged in the business of manufacturing and trading diamonds.

The company deals in the manufacturing and trading of cut and polished diamonds and trading of rough diamonds. The company also deals in gold jewellery.

It operates in two segments: manufacturing and trading. It has a factory in Mumbai with cutting-edge technology and machinery to process its rough diamonds.

It exports to countries like the USA, Malaysia, Belgium, Germany, Hong Kong, Thailand, Dubai, Canada, and Israel.

MDIL on 19 August 2024, announced a partnership with A V PALACE DMCC, a diamond and jewellery enterprise based in Dubai. The collaboration aims to expand MDIL's lab-grown diamond jewellery segment in Dubai and adjacent regions.

In addition, Mini Diamonds India secured its first export order for 2,000 pieces of lab-grown diamond studded 14-karat gold jewellery from Parasmani Inc., a Canada-based wholesale jewellery company.

In FY24, the company has achieved a turnover of Rs 2.45 bn against Rs 1.69 bn during the previous financial year, a growth of 44.8% over the previous financial year. The company reported a net profit (after tax) of Rs 21.4 million (m) against Rs 5.6 m earned during the previous financial year, registering an increase in growth by 280.7%.

The company has also ventured into lab-grown diamonds to take advantage of growing demand and market space.

Going forward, the company has also planned to manufacture lab-grown jewellery with silver, gold, and other precious metals.

Conclusion

Diamond company stocks in India contribute significantly to growth by bolstering the country's export revenues.

India's position as a global leader in diamond processing enhances its trade balance and contributes to overall GDP growth.

Moreover, the industry supports millions of jobs across various sectors, including mining, manufacturing, and retail.

Diamond company stocks refer to shares of companies involved in the exploration, mining, cutting and selling of diamonds. These firms operate across the diamond supply chain, from extraction to retail.

Investing in diamond stocks offers exposure to the luxury goods market, but it's influenced by global demand and economic conditions.

Investing in diamond stocks can offer potential financial returns along with portfolio diversification. The diamond market can demonstrate unique characteristics compared to other commodities, making diamond stocks appealing to those seeking alternative investments within the broader natural resources sector.

Investing in diamond company stocks in India can offer potential growth due to the strong global demand for diamonds, especially in the luxury and jewellery markets.

However, risks include fluctuating diamond prices, geopolitical factors and economic downturns. Thorough research and diversification are essential to manage potential risks in this sector.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.