IGI India Gets 'Overweight' From MS On Strong Potential In Lab-Grown Diamond Market

Morgan Stanley has initiated coverage on International Gemmological Institute India Ltd., offering an 'overweight' rating and highlighting the company’s promising position within the expanding lab-grown diamond market.

With a strong foothold in the diamond certification market, IGI stands out as the world’s second-largest certification and accreditation provider, holding a significant 33% global market share, according to the note. More notably, it dominates in lab-grown diamond sector and studded jewellery certification with market shares of 65% and 42%, respectively, in these segments.

As the global diamond industry faces shifts in consumer purchasing power, the emergence of lab-grown diamond offers an accessible alternative to traditionally mined diamonds. While the proof of concept for LGDs remains a work in progress, IGI’s expertise in certification places it in a strong position to benefit from this evolving trend, the brokerage pointed out.

With trust and credibility being paramount in the certification space, IGI’s established reputation, alongside that of the Gemmological Institute of America, creates significant barriers to entry, further solidifying its market leadership.

In addition, the diamond certification market is projected to grow 5-10% annually from 2024 to 2028, reaching 30-40 million certificates by 2028, up from 22-26 million currently. This growth is primarily driven by a 25% increase in lab-grown diamond certification, expanding the industry’s size to approximately $1 billion from $0.6 billion.

India accounts for around 65% of global certification volumes, positioning IGI to benefit significantly from the rise in certification demand, particularly in the LGD sector.

According to Morgan Stanley's note, IGI’s business model benefits from both the diamond cutting and polishing operations in India, where it holds 95% of the global market share.

While India is a major production hub, demand for lab-grown diamond is primarily driven by the US, where 80-90% of lab-grown diamond consumption is concentrated. Despite this, IGI’s LGD certification services have seen a significant uptick in volume, contributing to the company’s growth, said the brokerage.

Looking ahead, Morgan Stanley forecasts a robust 15% CAGR for IGI’s revenue and 20% CAGR for profit after tax through 2026, driven by expanding margins and increasing certification demand. The note also pointed at potential risks related to global economic cycles and the evolving role of lab-grown diamond in the jewellery market.