The Indian diamond industry grew into the global giant it is today in a mostly organic way, with no formal structure as such. However, by the turn of the century, it was clear that the now-mature Indian industry needed to be more organized and better regulated in keeping with global industry standards and practices.
Though it had built an informal system that worked well in Mumbai’s downtown Opera House area, the industry was still working in insecure conditions. Brokers would be out walking on public streets, going from one diamond office to another, with goods worth tens of thousands of dollars on their persons.
Industry leaders like S.G. Jhaveri of sightholder London Star had been pushing for the construction of a bourse for some time, but Jhaveri’s sudden death in 1991 put the enterprise on hold. Still, other industry leaders realized that a bourse was essential, and eventually, in 2010, the Bharat Diamond Bourse (BDB) opened for business on a 20-acre campus with 2 million square feet of built-up area. Today, the BDB boasts 4,000 members and some 2,500 offices for diamond firms.
BDB president Anoop Mehta of Mohit Diamonds has helmed the diamond exchange through a range of global issues, including the current Covid-19 pandemic. “It has been about 10 years since the Indian diamond industry relocated from Mumbai’s Opera House area to the Bharat Diamond Bourse,” he says. “Despite the initial reluctance before the move, people have since realized the huge benefits of having moved into a registered bourse.”
Security and convenience
Those benefits are many, according to Mehta. “To begin with, everybody is on one campus, and security has improved exponentially. The ease of doing business has also increased tremendously, with services like customs facilities, banks and secure couriers all available at one location. The overall efficiency of the Indian diamond industry has increased manifold since the relocation to the bourse. There is now an appreciation of how much better things are when it comes to doing business.”
Jitesh Shah, partner at manufacturer Star Rays, echoes that sentiment. “Opera House had space constraints, so the market grew over time in a group of buildings near each other in an unorganized way. Most of these buildings never had the right space or adequate infrastructure for an international diamond business hub. There was no way to restrict the entry of unauthorized people, which was a big security concern. Facilities that were essential for the smooth functioning of business, like banks, safe-lockers and customs services, were in different locations, leading to a lot of unproductive time as personnel scurried between them.”
The structured environment at the BDB has helped earn the Indian industry recognition as an international diamond hub, he continues. The bourse has also increased business opportunities, according to Shah, whose company specializes in solitaires. “We have a much better chance of connecting with customers — even someone who might be visiting the bourse for the first time.”
Indeed, says Mehta, the bourse has plugged the Indian diamond trade more firmly into the international arena. “The Indian industry has become more aware and has developed an organized response to global diamond industry issues. The bourse has arbitration rules, so matters can be quickly and satisfactorily resolved for both members and overseas buyers. The bourse also ensures that standards and norms are adhered to; new standards are very quickly implemented.”
Big boost for small operators
In particular, the move to the BDB has benefited India’s many small diamond operators, says dealer Mahendra Gandhi of Gandhi Enterprises. Gandhi is president of the Mumbai Diamond Merchants’ Association (MDMA), an industry group that represents small diamond dealers and brokers who have no infrastructure or premises of their own.
“We have three trading halls in the BDB that can accommodate hundreds of people,” he says. “These halls come with the associated facilities, [including] the right sort of lighting, equipment like electronic weighing scales, and more. This has enabled and enhanced the business abilities of all the small operators to an extent they could never have imagined when everyone was still at Opera House.” Because “everybody comes here to do business,” he continues, the opportunities for these smaller players have increased exponentially, including “a much greater chance of developing direct business relationships with even overseas clients.”
For membership, the MDMA charges INR 1,000 ($13.50) per year, which includes access to the three trading halls and “an insurance facility that pays out INR 300,000 ($4,042) in the case of a member’s death,” Gandhi says. “This payout has unfortunately been made a lot in these Covid-19 times. We were able to provide some sort of financial support to many families.”
Full disclosure
Diamond dealer Rohit Shah of P. Rohitkumar & Co. agrees that the BDB’s technology and other facilities have improved business, particularly when it comes to distinguishing lab-grown from mined diamonds.
Shah, who serves as vice president of the MDMA, specializes in natts — heavily included diamonds that are almost exclusively sold in the US market. Even in this relatively low-cost category, he says, “nobody wants any undisclosed mixing; they want only natural diamonds.” As such, the ability to test the stones and immediately confirm their natural origins for clients is a valuable asset. “Operating out of the BDB, we are able to provide them that assurance easily. I can even buy from very small operators and supplement my product offerings to my clients with full assurance.”
Even during the pandemic, he reports, US buyers have come to the BDB and bought with confidence.
Mehta affirms this. “We have a gem-testing lab on campus, and we push for full disclosure in all matters. This makes acceptance of decisions and rulings much better with everyone.”
Late last year, the BDB voted to lift a 2015 ban it had imposed on trading lab-grown goods at the diamond exchange.
“There’s nothing wrong with lab-grown diamonds,” stresses Mehta. “The issue was of people trading them without disclosure. So we [initially] banned them to make the point that they can’t be surreptitiously traded on the bourse campus. Once that was understood, we now have members dealing in lab-grown diamonds, which are fully disclosed.”
The Broker’s view
While the increase in security is an outstanding feature of the move to the BDB, the shift has also drastically reduced the street-level transactions that characterized the Opera House area, according to Vinay Parekh, a broker who has been in business many years.
“We now see most transactions at a more corporate level, in various offices,” Parekh says, adding that “the move to the BDB has also resulted in more certified goods being traded. The certification process has become that much easier. Where brokers and their clients had to carefully examine dozens of parcels in Opera House, we now have large numbers of transactions where only paperwork is scrutinized.”
Another change is that brokers no longer keep the goods in their possession while transactions are pending, he relates. “We used to routinely hold on to goods even overnight, keeping them in safety lockers that most brokers would lease. Now goods get promptly returned to their owners if a transaction doesn’t go through.”
In fact, it seems, the BDB has greatly diminished the need for brokers themselves. “It is becoming more difficult for brokers to transact business each day,” Parekh says ruefully.
Nonetheless, the thousands of small diamond businesses in the market remain a focus for the bourse. These provide even the big Indian firms with an incredible range of size, quality and price-point options.
“Small operators need to be kept in the loop on industry developments and issues worldwide,” says Mehta. “We are looking at publishing a newsletter with known global industry writers contributing to it. But even the small operators are very well informed and grounded on all the issues. Still, it is our job to make sure that all the information that is relevant to their businesses and future well-being is presented to them.”
On the horizon
With business at the BDB continuing to grow, the bourse’s biggest issue is the need to broaden its services and infrastructure.
“We are already working on a major expansion of customs services,” Mehta says. “We also need more space for public areas where people — especially the small operators — can meet and do business. Obviously, we have some space constraints, but we are looking at putting up another public hall.”
Indeed, such extra space is on Gandhi’s wish list. “Given the expansion in our membership, we could really do with more meeting and trading facilities,” he says.
Star Rays’ Jitesh Shah, meanwhile, would like to see a food court, additional and more affordable parking, and better in-bourse medical facilities — though he notes that the best heart hospital in the country is just across the street from the exchange.
Given the global industry’s experience with Covid-19, the future is clearly digital, and that factors into the BDB’s plans as well.
“We are looking at setting up a digital platform for the bourse,” says Mehta. “This is a work in progress. The industry is traditionally wary of open trading platforms, where all their details are on full view. Yet electronic platforms like RapNet are doing brisk business. We’ll grow a digital presence in line with the way our members’ attitudes to these systems evolve.”
Article from the Rapaport Magazine - September 2021. To subscribe click here.