The news of a Diwali gift was incredible, but true.
A Surat-based billionaire diamond merchant, Savji Dholakia, gifted 400 apartments and 1,260 cars—totaling Rs. 51 crore—to his employees as Diwali bonuses.
The most incredible factor was the turnover of Dholakia’s firm. It reported Rs. 6,000 crore, whereas several other companies may have revenues much above that of the diamond merchant.
But then, there is yet another factor that skeptics are ignorant of or tend to overlook: the profitability of diamond business.
Surat in Gujarat is synonymous with diamonds. The port city handles 70 per cent of smaller diamonds in the world. ‘Surat cut’ has now become more popular than the Belgium cut, where like in other Western countries, bigger diamonds are cut and polished.
Surat is now the major trade center of small diamonds, earning it the sobriquet, ‘Diamond City'.
Unlike gold, the price of diamonds never depreciates, but goes up by 10 percent to 15 percent annually. In case of gold, its price fluctuates. The price of diamond, even if kept under lock and key for decades, appreciates.
Over the past decade, the price of diamond has skyrocketed, touching Rs. 70,000 for a carat, while a unit-cent sells at Rs. 7,000. Well-sized single-stones—or solitaires—could fetch up to Rs 10 lakh.
Kerala is known for its craze for gold. Even as the price of diamonds shot up, demand too grew proportionately. In the past, diamonds—that too ear studs or necklaces—were owned by the rich. Today, even the middle-class goes for full set of the precious stones, and marriages without diamonds have now become events of the past.
Though duplicate diamonds, known as American diamonds, are available in the market, the originals have a high demand.
Sensing the demand, major jewelers in Kerala, who once sold only gold, started separate sections for diamonds. Some even launched exclusive showrooms for diamonds. The precious stones now form 15 percent of the business in jewelry shops. It was earlier pegged at a modest 5 percent.
Malayali brides now prefer diamond-studded necklaces, each costing Rs. 3 lakh to Rs. 5 lakh. Each necklace would have three to five carats of the precious stones, with each carat costing close to Rs. 1 lakh, including the labor charge.
Additionally, the bride would be sporting at least two diamond-studded bangles. Though diamonds are purchased as gifts, it constitutes only 5 percent of the total diamond business in the state. The gifts, mostly ear studs or rings, will have diamonds weighing 20 to 50 cents.
Most jewelers offer 100 percent buyback option while exchanging diamonds. Even if they are buying it back, the seller will get 95 percent of its value, unlike the much-depreciating gold.
White diamonds contribute to 95 percent of the sales, though other colors, pink, champagne and black, too, are available in the market.
Traders like Dholakia import uncut diamonds and process them in Surat, before exporting them. Stones for the domestic market are dispatched to Mumbai, India’s diamond hub. Diamonds are then distributed across the country, including Kerala. Interestingly, platinum doesn’t have much demand in the state, perhaps because of its low resale value.
Post script: Meanwhile, the price of silver has increased. Being a poor cousin, it now costs 47,000 a kilogram. Silver is mostly bought to be worn around the waist as a girdle.