Business as usual, assures Russia's Alrosa as Indian diamond trade frets

While almost 50% of the Indian industry's rough diamonds come from Africa, Alrosa is the second biggest source with 30-35% share

At a time when Indian banks are temporarily freezing fresh transactions of Russian entities, the Indian diamond industry is bracing itself for an impact on exports in the short run. This is despite the largest Russian rough diamonds supplier Alrosa assuring the industry that its business was "as usual" even as the company had necessary resources to "ensure normal operation in the current circumstances".

While Russia is nowhere among the top export destinations for cut and polished diamonds from India, of which Surat is the largest cluster comprising over 90 per cent of business, the country's Alrosa is one of the major rough diamonds suppliers.

According to Dinesh Navadia, Regional Chairman, Gujarat, Gems and Jewellery Export Promotion Council (GJEPC), almost 50 per cent of the Indian industry's rough diamonds come from the African continent. But Russia's Alrosa is the second biggest source with 30-35 per cent share, followed by the likes of Canada and Australia.

Now, with the Indian banks deciding to temporarily freeze fresh transactions with Russian institutions even as details of the US sanctions to Russia are awaited, the Indian diamond industry might see an impact in near future on its diamond exports.

"Ramping up of mines takes anywhere between six and eight months. Already the rough diamonds pipeline has got consumed after the economy opened up after the second wave of Delta variant as cut and polished diamonds and jewellery exports grew. While Alrosa has assured the industry and even the Indian government is looking for a solution amid temporary freezing of transactions, if this situation continues then we could see exports being impacted by 30 per cent in the next 2-3 months," said Anoop Mehta, president of Bharat Diamond Bourse (BDB), one of the largest diamond exchanges in the world situated in Mumbai.

GJEPC data shows that the overall gross exports of cut & polished diamonds grew by 61.49 per cent (61.94 per cent in rupee terms) to US$ 20057.49 million (Rs 149001.56 crore) for April 2021 - January 2022 as compared to US$ 12420.06 million (Rs 92008.1 crore) for the same period of previous year.

Whereas rough diamond imports stood at US$ 14833.65 million (Rs 1,10,264.03 crore) for April 2021-January 2022 period as against $8,043.33 million (Rs 59,344.77 crore), posting a growth of 84.42 per cent (85.8 per cent in rupee terms) for the same period of previous year.

On its part, Alrosa has written to all its stakeholders including the Indian diamond industry players such as BDB regarding US restrictions imposed on Alrosa last week while expressing its intentions to fulfill its obligations to its clients around the world.

Regarding its day-to-day operations, Alrosa said that its settlements with foreign partners continued as usual as there were no restrictions on the company's transactions in dollars, euros or other currencies.

"We have a diverse range of banking partners, which allows us to operate normally without any delays. To allay any concerns over debt and equity restrictions imposed on Alrosa, these do not apply to the operations or trading activities of our business... As per the personal designation of Alrosa's CEO in the US Treasury Department's Office of Foreign Assets Control (OFAC) SDN list, we also do not see any major risks. As for doing business with US entities, Alrosa's rights and obligations are fully executed by the management team with no legal implications to the company at the current stage," it said in its letter to BDB.

At 0.4 times of net debt to earnings before interest, tax, depreciation and amortization (Ebitda), Alrosa said that it currently has a low debt levels, virtually no short term debt, first significant down payment expected in 2024, and, has no need to raise additional capital on the financial markets in the foreseeable future.

"We would also note separately that the restrictions do not affect the company's public debt issued previously.... To sum up, we run our business as usual, and we have all the necessary resources to ensure normal operation in the current circumstances. We intend to fulfill all our obligations to our clients in any part of the world."

Meanwhile, Navadia stated that on the upside, Botswana, which houses some of the largest mines of leading players like DTC, is likely to ramp up production of rough diamonds which could ease the situation going forward.