International Gemological Institute Limited Q4 FY2025 Concall Summary

Key Takeaways

• Volume-led quarter, pricing drag fading: Volumes grew 27% YoY across all segments while revenue lagged due to a lab-grown pricing correction taken in Q1/Q2 last year; management expects revenue to match volume growth from Q3 onward as that base effect cycles out.
• Lab-grown pricing has stabilised: Certification prices have held flat for three quarters, and management argues manufacturers' thin 8–10% ROIs at current wholesale levels leave no room for further price drops.
• Jewelry certification is the next growth engine: The jewelry segment is expected to drive a significant proportion of growth in coming quarters, with lab-grown jewelry adoption in India flagged as a particular tailwind.
• Tariff risk is real but contained: 60% of revenue is domestic consumption and therefore insulated; management sees no softness in the first weeks of April but the 90-day US tariff pause and India-US FTA talks keep the outlook conditional.
• What to watch next quarter: Whether the Q2 volume trajectory holds through tariff uncertainty, the pace of Belgium's recovery versus the Netherlands group, and any sign that revenue growth is converging with volume growth as guided.

Volume & Revenue Dynamics

• Volume growth broad-based: 27% YoY volume increase spanned natural diamonds, lab-grown diamonds, jewelry and coloured stones, with natural and lab-grown loose stones each delivering over 30% revenue growth QoQ.
• Revenue lag is mechanical, not demand-driven: The pricing correction for lab-grown certification taken in April/May 2024 means YoY revenue comparisons understate real activity; management expects revenue and volume growth to mirror each other from Q3 once the correction is fully cycled.
• Average realised price rose to \$950: The increase was mix-driven, with a higher share of natural diamond loose stones and lab-grown loose stones versus the prior quarter.
• Jewelry segment base effect: Jewelry registered only single-digit revenue growth QoQ because the prior quarter had captured high festive demand in India; underlying demand for jewelry certification is rising.
• Seasonality pattern: Q2 should mirror Q1 in mix for both consolidated and India standalone; Q4 should carry a larger jewelry share.

Eashwar Iyer: "With the heavy capex and the opex model that these guys, the manufacturers operate with at the \$170, \$200 of wholesale prices for lab grown stones. We estimated that their ROIs is in the 8% to 10% range. So that gives us confidence for the fact that there is not much elbow room now available for them to therefore drop prices further."

Lab-Grown Diamond Landscape

• Pricing correction rationale: The industry saw wholesale lab-grown prices fall from Q4 2023 into Q1 2024; IGI aligned its certification fees in April/May 2024 and prices have been stable for the three quarters since.
• Stone sizes are rising: The mix is shifting from 30-point stones toward 2-carat-plus, which carries better realisation per stone since pricing is tied to carat weight.
• India is the manufacturing hub, the US is the consumption hub: 95% of diamonds are cut and polished in India; most lab-grown stones are exported to the US where consumer acceptance is materially higher, driving certification ramp-up there. India's lab-grown jewelry certification growth is for domestic end-consumption.
• Certification formats are price-neutral: Whether a retailer chooses a full diamond report, dossier or credit-card format, the underlying analysis is identical and pricing is linked to stone size, not format.

Geographic Performance

• International margin interventions: Strategic interventions made in each key geography; initial Q1 trends described as extremely positive, giving confidence in the strategic direction, though no quantified targets were provided.
• India growth divergence: Natural diamond growth in India was 51% versus 1% in the US, while India LGD was down 19% versus the US up 88%; management attributed this to higher US lab-grown acceptance but did not directly reconcile the divergence.

Tariff Exposure & Mitigation

• 60% domestic insulation: Half of certification is India-to-India, and China contributes ~10% of revenue on a China-to-China basis; tariffs on services carry less impact than on goods.
• Incremental cost is distributed: Any tariff-driven cost at the wholesale level is expected to be shared across the manufacturer, retailer and end consumer, with lab-grown's low wholesale value limiting the absolute impact.
• Near-term visibility is clear, forward visibility is not: The first two to three weeks of April showed no softness and performance was normal, but management acknowledged it is too early to assess whether the industry will accelerate cut-and-polished shipments into the US before the 90-day tariff window closes.

Tehmasp Printer: "So tariff on services are correspondingly impacting less. And the value of the lab-growns in the wholesale level is low. And probably the incremental cost to the retailer, and finally to the consumer would be I think distributed between the manufacturer, the retailer, and the end consumer."

Operations & Investment

• Rapid gemologist hiring: Over 130 gemologists recruited in India in Q1 2025, representing ~14% of overall employee strength, to meet volume growth and maintain turnaround times.
• Cost structure steady-state: The opex required for volume growth is primarily people cost; capex is minimal. Q1 absolute cost levels should represent the steady-state run rate barring inflation.
• Digital transformation underway: An initiative to enhance service quality and reduce turnaround time has been launched, though no specifics on investment size or timeline were disclosed.
• Investment posture unchanged: Recruitment continues with the stated priority of five-star customer service; cost optimisation and restructuring in some global offices contributed to the 24% QoQ PAT growth.

Eashwar Iyer: "We will continue to do what is right for the business because as we speak, recruitment on people, etcetera is continuing because the paramount importance for us as an organization is to ensure five star customer service."

Margins & Profitability

• PAT growth driven by operating leverage: PAT rose 24% QoQ on strong revenue performance, continued cost optimisation and restructuring in select global offices.
• PAT margin guided at 57–64% for the full year: Management expects volume throughput to offset continued investment in people and laboratory expansion, delivering an improvement on the prior year.
• International margin recovery is underway but unquantified: The Netherlands entity is already above 25% margin; Belgium is recovering from losses. Management cited strategic interventions and positive Q1 trends but gave no specific margin targets for either entity.

Eashwar Iyer: "While the Company is continuing to invest significantly in terms of building up or ramping up capabilities from a people and a laboratory expansion standpoint, we are confident that with the volume throughput that is coming through, we should therefore improve on whatever we delivered last year. So anything between 57 and 64 is what we think we will deliver from a PAT margin standpoint."

Guidance & Commitments

Key Metrics